Date: Tuesday, March 2, 2010 Author: HedgeTracker.com
For Hedge Fund and Fund of Hedge Fund managers seeking to raise
capital, how important is it to develop and maintain an institutional
grade Investor Relations infrastructure?
Since the start of the hedge fund industry, the primary source of
capital came from direct investors (High-Net Worth individuals) and a
select number of private platforms (Family Offices and Fund of Hedge
Fund managers). Most recently the hedge fund industry has experienced a
significant shift in its primary investor base. It has become more
common and acceptable for emerging Hedge Fund managers to seek initial
working capital from direct investors, primarily seed capital firms.
Direct investors have also taken a back seat to the institutional
platform which is comprised of: Endowments, Foundations, Institutional
Consultants and Public Pension Plans. A survey conducted by SEI in
January 2010 stated that the “…institutional investment community
account for about 72% of all hedge fund assets, including funds of
hedge funds”. * Since the recent market crash and the shift in the
investor base, Hedge Funds and Fund of Hedge Fund managers are being
forced to re‐evaluate their current operational infrastructure as a
result of meeting the increasing demands of the institutional investor.
One of the biggest demands from the institutional platform is
transparency‐ the amount of information a Hedge Fund or Fund of Hedge
Fund is “required” to provide to an investor as it pertains to their
portfolio holdings. This exchange of information is rather frequent in
the long‐only space where the roots of institutional platforms
allocations were originally planted. If alternative asset managers are
going to be successful in raising capital from this particular investor
base they will be required to develop and maintain an institutional
grade Investor Relations (IR) infrastructure. IR infrastructure has
become an integral part of the manager selection process. According to
the SEI survey, “… client service is on par with past performance as a
factor in manager selection”.
