How We Changed the Paradigm

Brighton House Associates (BHA) is a data research company focused on the alternative investor market. Government regulations disallow the use of traditional lead generation and direct marketing techniques in the alternative investment fund industry. As a result, fund managers are forced into a “blind” sales environment when raising assets. After a manager’s friends and family network is exhausted, one option for raising money from investors is to outsource the effort. Enter expensive third-party marketers whose efforts and focus are hard to quantify. Other options include mass-marketing campaigns that include cold calling prospects from unqualified databases, targeted e-mail campaigns, costly marketing trips, and numerous conferences. Managers are fortunate if these efforts result in a 1-2 percent success rate.

Until now, alternative investment fund marketing efforts have been strictly manager focused. An alternative investment fund would have an internal or external marketer contact and pitch any investor that would take the phone call or answer an e-mail. BHA has changed the marketing paradigm by making the process investor focused.

Rather than attempting to pursue every investor within reach on behalf of a manager, BHA documents investors’ interests and sources managers that are an exact match to investors’ mandates. Investors work with BHA because they know that if they provide us with the details of their search-type of fund by strategy, asset size, and so on-BHA will funnel managers to them that are an exact fit for their profiles.

Today, investors are being inundated with calls and e-mails from a plethora of managers; paradoxically, only a small percentage of these are a fit to investors’ current search mandates. BHA performed a large amount of due diligence with the investor community to design a platform that not only helps managers target investors, but also helps investors hear from the managers with whom they actually wanted to engage. When speaking to investors, BHA often hears that even though they subscribe to various industry databases-some investors even use expensive investment consultants-many are still having trouble finding managers that fit their search criteria. In many cases, investors have told BHA that they often take up to 20 meetings to find a single manager that fits their criteria. The time drain before investors can even begin the process of due diligence is daunting. In addition, many investors understand that successful manager selection has as much to do with manager talent as it does with being in the right strategy, sector, or geographical region at the right time. Therefore, it is paramount to investors to have access to every potential alternative investment fund manager that fits their search mandates.

What We Are Not

BHA is not an alternative investment fund marketer. When speaking to investors, the identities, names, locations, and personnel of our clients are held in the strictest confidence. We approach investors with no agenda and do not pitch or sell funds. BHA does not accept any commissions or success fees. BHA does unbiased, neutral research on investor mandates that clients can use to more efficiently target investors; we do not enter into the sales process in any way.

The management of BHA has years of fund marketing experience and understands the difficulties of marketing alternative investment funds. In fact, the company was formed to help alleviate many of the challenges mentioned above in the current marketing paradigm. The source of the problems inherent in marketing alternative investment funds is the inability of managers to effectively target investors that are a match for the managers’ funds. Because of our marketing background, BHA understands that if managers spend their marketing efforts focused only on investors with mandates that are a fit, the managers’ success rates will be much higher.

The BHA Service

To solve the problem of how to efficiently and effectively research the global alternative investment fund investor market, BHA had to build the largest, most comprehensive database of alternative investment fund investors. Also, so that our clients’ spent their time most effectively, there had to be some qualifying characteristics for investors to be included in the database. BHA set a minimum level of $25 million invested in alternative investment fund strategies to make sure that the investors in the database were large enough to be able to make regular, consistent allocations to alternative investment funds.

The first 8,000 investor names were generated from relationships the management of BHA developed during its 7 years in marketing in the industry. From there, we actively traded with fund marketers to gain new investor information. In addition, BHA has ongoing subscriptions to over 15 different sources of investor data, including institutional investor databases, trade magazines, RFP alerts, and online news feeds. Lastly, to round out BHA’s investor coverage, we maintain strong relationships with major conference organizers to gain access to the attendee lists of various industry conferences.

Today, BHA’s investor database numbers 35,000 contacts and is one of the most comprehensive sources in the world for information on alternative investors. The database is globally diverse, with 40 percent of the constituents based in North America, 40 percent based in Europe, and 20 percent from the rest of the world. The database is made up of 17 investor categories, from foundations and family offices to pensions and endowments.

To bring the database to life, BHA employs 20 research analysts who profile investors on a daily basis. Every week the analysts make 3,000 or more phone calls to investors in the database. This results in 250-300 conversations with investors. From those 250-300 conversations, 80-100 investors (32-40 percent) agree to be profiled by our research analysts. A profile is a mini-due diligence questionnaire that outlines the type of fund the investor is seeking by strategy, asset size, minimum length of track record, historical volatility and performance, and any sector or geographical focus. This daily research is what allows BHA’s clients to efficiently target potential investors with marketing campaigns.

After an investor is profiled by a BHA research analyst, there are two ways a client can access the profile or lead. First, each client is assigned a dedicated research analyst who is responsible for finding a minimum of 2-4 fresh and accurate leads per week. During a client’s first week with BHA, its dedicated research analyst begins to profile the client’s fund(s) through a series of interviews. The same due diligence questionnaire that is used to profile an investor is used to create a profile of the client’s fund(s). When the profile is completed, the research analyst begins to call the investors in the database every day, interviewing investors using a questionnaire designed around the client’s profile. In addition, questions designed to elicit leads for a client’s fund can be added to the questionnaire that all of BHA’s analysts use, thus allowing the client to leverage the prospecting efforts of a team of 20 investor research professionals.

Typically, BHA research analysts provide each client with a minimum of 2 leads per week. In many cases, the leads provided are profiled within the previous 24 hours. The data profiles contain timely information about investors. The profiles elucidate the investors’ current mandates and describe the type of fund that would fulfill that mandate.

BHA analysts also help clients source investor leads through dedicated investor research in such areas as:

Business Trips. An analyst can identify all the possible investors in any given geographical area. Clients inform their dedicated analyst when a trip is planned and the analyst targets, qualifies, and interviews investors at the destination.

List Vetting. Clients can send internal databases of contacts to their BHA analysts who will cross-reference the databases with BHA’s live database of investor mandates. This instantly updates the clients’ databases with BHA’s fresh investor profiles. Any investors in the clients’ databases for which BHA does not have profile information will be called and interviewed.

Conference Attendee Lists. Many BHA clients attend a variety of conferences throughout the year. Clients can send conference attendee lists to their analysts who will call and screen investors, determining which ones have an active interest in the clients’ funds.

Investor Category Resource Lists. At times, clients need to target investors in certain categories or with a particular asset size. BHA analysts can compile investor lists based on categories or size, and then qualify them based on their interest in clients’ funds.

The second way BHA clients can access leads is through our proprietary Web-based platform. BHA designed, from the ground up, a Web-based system that uses powerful lead generation and matching technology to help clients automatically identify investors. Since the company was launched in February 2007, BHA’s team of research analysts has profiled over 11,000 contacts and moved these investor profiles from the back-end database of 35,000 into a front-end database that clients can access.

BHA’s lead generation platform was designed to help clients sort, search, and target investors in the front-end database. Not only can clients do high-level queries into the database, but BHA has designed tools that help clients create online profiles detailing their funds’ strategy, style, sector or geographical exposure, AUM, and track record. Clients can input this information into “lead boxes” on the Web-based platform that captures investor profiles, in real-time, as they are entered into the database. Clients can create detailed profiles of their funds. Then, if an investor profiled by one of the 20 research analysts matches clients’ funds, the investor’s information is “automatically” forwarded to the clients’ home pages.

Creating a Compelling Business Model

BHA devised a business model based on an annual data research service. BHA charges an annual user license, per fund, of $37,500 that includes a dedicated research analyst and full access to the online lead generation platform. Furthermore, a manager can begin the BHA service with a 12-week trial subscription for $10,000. At the end of the trial, the manager can elect to subscribe for the rest of the year for an additional $27,500. The value proposition is easy entry and exit to the service, no long-term commitment to try the service, no success fees associated with the service, and a low-cost, outsourced lead generation and marketing support vehicle that nets out to about $3,000.00 a month-a bargain by alternative investment fund industry standards.

Using a qualitative research approach mixed with quantitative matching and profiling technology, BHA helps clients efficiently target investors. The way that BHA measures success is the accuracy of the information that clients use to target investors and the actions the information generates. Currently, BHA clients report a minimum success rate of 20 percent from the investor leads garnered from BHA. The success rate is determined by whether an investor lead results in either dialogue, information exchange, or a conference call or meeting. On the upper end of the spectrum, BHA clients with exceptional funds, great marketing personnel, and good sales capabilities report up to an 80 percent success rate with investor leads.

Currently, BHA serves over 150 clients and employs 35 professionals in its Boston office. BHA clients range from emerging managers to multibillion-dollar funds in the hedge fund, private equity, and real estate industries.