It has been the elusive terrain of many a software developer and hedge fund marketer, but giving investors and managers the ultimate hedge fund sourcing solution has been the dream revisited by many over the years and 2014 is no different.
It seems there are number of new initiatives being developed where investors can message, virtually meet and ultimately find that hedge fund manager with double-digit returns and low volatility. Traditionally conferences and capital introduction events have been the meeting place of minds and money, but it is difficult to gauge the success of large scale meetings where managers can have prearranged ‘one on one’ meetings with prospective clients. Another way has been word of mouth and relying on external advisers and consultants that have their own networks to source the next magic manager.
But the third way, taking networking to its next logical incarnation has an ‘If you build it they will come,’ vibe to it. And so the private network is born; one like FDN, which is already being used by consultants, family offices, endowments and pensions. Other networking-type services are emerging and are being created as conference organisers, including our very own HedgeFund Intelligence events, and Redington’s Mallow Street, relish the LinkedIn component of connecting attendees prior to and following large events.
Investors are not easily swayed by gimmicks though, leaving many managers wondering whether or not this private networking idea is something that will lead to more meetings or easier sourcing of potential clients. Investors may ponder if this technology is something best left to their investment consultant or if it should be used as a check on the managers that the investment consultant may bring to the table.
But is this streamlining of the investor/manager interaction to a series of emails, clicks and online document retrieval what regulators had in mind with the implementation of the JOBS Act? It is doubtful. The ability to virtually weed out managers based on asset size, geography, strategy and past performance seems to be a powerful tool that should be portable and at one’s finger tips, but the risk and the decision are still in the investor’s hands.
Then again it is easy to forget the information that can be analysed on the personal face-to-face level. We also look this month at due diligence in general and how more managers are becoming uniform in how their businesses are established and managed. For consultants such as NEPC, manager onsite visits are necessary to know more than what appears on a due diligence questionnaire.
So while there may be a hedge fund app heading to pension fund CIOs’ smartphones, hedge fund marketing may need to be more creative to draw the attention of a sophisticated and educated allocator. Success is determined by which allocators and managers decide to use the network as much as how allocations are made as a result of the network. For now, most institutions will want to meet a manager in person prior to investment.
Perhaps regulators now see information availability as a good line of defence against bad hedge fund actors. Then again there has yet to be a red flag app. Maybe that is something for the SEC to create.
