AIMA: Identify opportunities to punch above your weight
11 October 2018 London
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Identify opportunities to punch above your weight, the Alternative Investment Management Association (AIMA) has advised emerging managers in their latest report, ‘Making It Big’.
The research identified six key factors for emerging managers to focus on when growing their business. They revealed that the funds that successfully surpass the $100 million assets under management (AUM) barrier open themselves up to a greater field of opportunities.
These opportunities include the chance to receive capital investment whilst seeing an increase in the array of allocators who can invest in them.
AIMA also found that 29 percent of firms in the $100 to $500 million AUM value range have used seed capital in their flagship fund.
Aligning investor and manager interests was also listed as one of the key factors, and 100 percent of allocator responses said that it was essential that managers invest their own money in the fund.
According to AIMA, deploying an effective market strategy is another key area of focus. The association noted that meeting a fund’s key founding partners and portfolio manager, and maintaining that access during and after the investment process, was of critical importance to investors.
Meanwhile, AIMA also advised underwriting the business for the immediate future. The possibility for a fund to break even with $86 million AUM was a unique finding of last year’s Alive and Kicking research. This overall average figure remains relatively static at $85 million in the new results.
Additionally, the association noted that it was important to know when to build a permanent team, the COO function appeared to be an inherently important internal role during the launch and growth phases, being the least outsourced by all sizes of a fund.
Jack Inglis, AIMA CEO, commented: “This roadmap for the aspiring billion-dollar fund manager is an invaluable resource. It reveals the importance of effective marketing, aligning your business with your investors and maintaining efficient working capital levels.”
Sean Capstick, head of prime brokerage, Global Prime Partners, said: “The hedge fund industry has enjoyed rude health over the past year with strong performance driving allocator confidence despite a pervasive narrative of investor-driven fee pressure.”
Our research reveals it is still possible to launch a hedge fund and be successful in this climate, but there is a lot more that emerging managers can do to grow AUM.”
“Key to ‘Making it Big’ is a flexible fee structure and strong marketing strategy. While the smallest managers are happy to offer fee reductions in exchange for significant investments, emerging managers are generally and understandably reluctant to forego fees.”
He added: “Contributing to a substantial marketing resource is often a chicken and egg scenario for smaller managers, who may find they cannot justify the in-house expertise that larger competitors wouldn’t go without.”
“There are a number of outsourcing options for smaller managers that recognise the importance of marketing to business growth, but many should consider hiring this experience internally at an earlier stage to ensure they can reach and exceed critical mass.”
The research identified six key factors for emerging managers to focus on when growing their business. They revealed that the funds that successfully surpass the $100 million assets under management (AUM) barrier open themselves up to a greater field of opportunities.
These opportunities include the chance to receive capital investment whilst seeing an increase in the array of allocators who can invest in them.
AIMA also found that 29 percent of firms in the $100 to $500 million AUM value range have used seed capital in their flagship fund.
Aligning investor and manager interests was also listed as one of the key factors, and 100 percent of allocator responses said that it was essential that managers invest their own money in the fund.
According to AIMA, deploying an effective market strategy is another key area of focus. The association noted that meeting a fund’s key founding partners and portfolio manager, and maintaining that access during and after the investment process, was of critical importance to investors.
Meanwhile, AIMA also advised underwriting the business for the immediate future. The possibility for a fund to break even with $86 million AUM was a unique finding of last year’s Alive and Kicking research. This overall average figure remains relatively static at $85 million in the new results.
Additionally, the association noted that it was important to know when to build a permanent team, the COO function appeared to be an inherently important internal role during the launch and growth phases, being the least outsourced by all sizes of a fund.
Jack Inglis, AIMA CEO, commented: “This roadmap for the aspiring billion-dollar fund manager is an invaluable resource. It reveals the importance of effective marketing, aligning your business with your investors and maintaining efficient working capital levels.”
Sean Capstick, head of prime brokerage, Global Prime Partners, said: “The hedge fund industry has enjoyed rude health over the past year with strong performance driving allocator confidence despite a pervasive narrative of investor-driven fee pressure.”
Our research reveals it is still possible to launch a hedge fund and be successful in this climate, but there is a lot more that emerging managers can do to grow AUM.”
“Key to ‘Making it Big’ is a flexible fee structure and strong marketing strategy. While the smallest managers are happy to offer fee reductions in exchange for significant investments, emerging managers are generally and understandably reluctant to forego fees.”
He added: “Contributing to a substantial marketing resource is often a chicken and egg scenario for smaller managers, who may find they cannot justify the in-house expertise that larger competitors wouldn’t go without.”
“There are a number of outsourcing options for smaller managers that recognise the importance of marketing to business growth, but many should consider hiring this experience internally at an earlier stage to ensure they can reach and exceed critical mass.”
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