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Time is Money - Raising Capital

Whilst 2020 was certainly a tumultuous year for everyone, it was a positive year for the hedge fund sector. In fact, global hedge fund assets reached a record $3.6 trillion in 2020 and reports suggest that this positive trajectory will continue into 2021, and this will be the year that hedge fund AUM will reach its highest point in over a decade. Most believe the growth will largely come from institutional investors moving away from low yield, fixed income investments to hedge fund strategies with higher expected returns, as well as strategies that are not linked to capital markets’ performance.

Competition is high

However, whilst there is a lot of capital out there, the sector is still incredibly competitive and managers will need to focus all their efforts, working hard to stay ahead. Especially as new fund launches have reached their highest level in three years and liquidations are slowing down. Everyone will be clamouring for the same capital.

Institutional investors are demanding

Raising capital is tough, especially as an emerging or start-up manager. You’ve got to prove your worth and that takes time and effort. Institutional investors have meticulous processes to follow and will need the necessary answers to get buy in from their own investment committee.

Principals wear many hats

As principal you will be pulled in lots of directions and raising capital is just one of those. Operations and admin can take a lot of time away from asset raising activity and, essential as those activities are, they don’t drive revenue growth.

Outsource to free up time for asset raising

Of course you are capable of doing those administrative and operational tasks but is your time not better spent utilising your skills and doing something more you enjoy? Freeing up some of that time could allow you to focus your energy on asset raising. If you could outsource some tasks that don’t (really) require you to do them, to someone you could trust, could your time be better spent? Just 10 hours a month saved on reporting, evaluating new systems or overseeing your service providers could be an extra 10 hours spent having calls or meetings with potential investors.

New investors mean additional fees

If just one of those meetings results in additional investment into your fund, let’s say $10m and that generates a 1% management fee, you could be earning an additional $100k PA. The 10 hours you’ve spent asset raising and not looking at operations or doing some boring admin is suddenly worth a whopping $10k per hour.  That is a pretty good ROI.  And that’s just one new client win. What if those 10 hours a month generated a new $10m investment every month? Pretty soon your total AUM will skyrocket and those 10 hours a month will become invaluable. I appreciate this is an extreme example, but you get the point; time is money!

Talk to us about how we can help you free up your time for activities that will make a difference to your firm’s profitability.

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