Hedge funds used to compete for the world’s largest institutional investors, but now that there are more than 10,000 in the market they find themselves competing for capital at all levels. Making matters even more difficult, more than 70 percent of investors said that personal contacts are a major consideration when choosing a fund, according to a recent Advent Software, Inc. (NASDAQ:ADVS) survey. That means hedge fund managers looking to expand beyond their existing circle need to make sure their pitch can bring in new blood.
Investors dislike boring hedge fund pitches
It shouldn’t be a surprise that investors told Advent Software, Inc. (NASDAQ:ADVS) they don’t like long, boring presentations from people who “lack charisma,” but according to the survey this is a real problem. At its core, marketing is always about the other person, and the frustrations expressed in this survey show that hedge fund managers (or whoever is giving the pitch) don’t get this.
Many of the most well-known hedge fund managers in the world engage in philanthropy, and in doing so, they often reveal their favorite hedge funds through a review of their foundation's public filings. Bill Ackman's Pershing Square Foundation invested in several hedge funds during the fiscal years that ended in September 2019 and September 2020.
Hedge funds pitch mistakes
According to the survey, the biggest mistake made during a pitch was that it failed to differentiate the fund’s strategy. Often, this is a sign that the real differences that exist are too vague or conceptual, when clients should be told exactly how the fund strategy helps them achieve their investment goals. “Not know enough about us,” was another common problem which amounts to nearly the same thing.
Even the duration and level of detail in a presentation depends on the client. Family offices see many more presentations than pension funds, and they tend to decide whether they want to go forward in the first half hour, if not the first ten minutes. Pension funds, being more institutional in nature, won’t make a decision until after the presentation is over regardless of length and generally want more information in the first meeting. Using the same presentation for both types of investors means failing with at least one of them.
Starting from scratch for every pitch meeting isn’t realistic either, but developing multiple presentations for different types of investors and then spending time learning about a potential investor before the meeting can help make the connection necessary to bring more capital to your fund.