The Ultimate Hedge Fund Salesperson - 3PM - Third Party ...

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The Ultimate Hedge FundSalespersonThe UHFS Scorecard . . .Professional quality marketing materialsCompetitive positioning of productConsistent prioritization of likely buyersRelationship building with consultantsFluency in asset allocation discussionsInvitations to finals presentationsEfficient use of conference circuithedge fund salesperson comes in and gives a complimentto her boss, then his fund will likely get more attention,” heobserved. Mr. Barrett correctly points out that some hedgefund salespeople are worried about sharing the credit withothers, but maintaining positive relations with prime brokersand maximizing a fund’s asset gathering reach is clearlya better path to success.Picking the Right UHFS for Your FundIn hiring the right hedge fund salesperson, a managershould first delve into the relative strength of the candidate’sdistribution channel experience and determine if thisis a good match for his fund. This should be followedquickly by judging their ability to clearly explain complexinvestment strategies. Listed below is a selection of the likelysuspect investor categories which your UHFS will beincluding in his/her expense report. Of course, the appropriatesales channels and client targets depend on yourfund’s strategy, lifecycle point and ultimate growth goal.Stepping Up to the Institutional Game“Selling hedge fund products to institutions has a longfuse,” confessed one salesman at an established New Yorkhedge fund of funds business. He added that “this is notwriting tickets on a daily basis and the salesperson shouldbe able to articulate that to the boss.” Joe Gieger managingdirector and head of U.S. institutional sales for Global AssetManagement agreed that “the typical institutional salescycle is 12-18 months.” In his opinion, “many hedge fundsalespeople are too transaction oriented – it’s not a quickproduct sell, it’s a relationship sell.”more than just cold callingEfficient distribution channel strategyMaximize capital introduction supportOne leading endowment fundmanager believes that the mostsuccessful hedge fund marketersare able to “articulate the valueadded from the firm’s uniqueinvestment edge, team strengths,risk management capabilitiesand alignment of interests withtheir investors.” This endowmentmanager further advisessalespeople to “always tell thetruth – no need to ring alarmbells on your weaker points but be honest in the spirit andletter of representation.” This would include any significantinformation the investor would want before making a decision.An ability to clearly read the buyer’s decision cyclealong with his or her manager selection criteria are otherkey ingredients in the recipe for institutional asset gatheringsuccess.In the game of managing assets on behalf of institutionalinvestors, the initial pitch is only the beginning of the relationshipand the responsibility. “The first step in the salesprocess is detailed research so that you understand yourcustomer,” cautions Michael Tobin, managing director ofU.S. institutional sales for VegaPlus Capital Partners. “In thefirst meeting, you should not try to sell your product, buttalk about investing in general and explain how your productmight fit into their portfolio,” said Mr. Tobin. The UHFSdoes not try to force a “one call close,” but proceeds tobuild credibility through consistent contact and providingpertinent information which will benefit the investor.Coach portfolio managers for presentationsProfessional client communicationAsset retention during medicore performanceHonest representation of return expectationsCommunicate investor preferencesDistribution Channel OptionsHigh-Net-Worth IndividualsFamily OfficesFunds of FundsFoundations & EndowmentsCorporate Plan SponsorsPublic FundsTaft-Hartley (Union) FundsWirehouses and Private BankPlatformsStructured Product PlatformsInsurance CompaniesEuropean BanksAsian and Other OverseasInvestors
The Ultimate Hedge FundSalespersonDon’t Forget Client ServiceWhile quickly getting assets in the door may be thelifeblood of most emerging hedge fund managers, the UHFSjob description includes sales, marketing, client serviceand other relationship management functions which help toeither increase or retain assets. According to GAM USA’s JoeGieger, “many hedge fund managers have been handlingclient service in a reactive manner, just responding toincoming calls and sending out a brief quarterly report.”He added that “the better (and bigger) managers havemoved to a proactive approach by offering detailed and frequentcommunication whether performance is up or downand anticipating investor questions before being asked.”“We view our head of client relations as a key strategicpartner within the firm,” said Tom Hirschfeld, chief operatingofficer of Halcyon Management Company. “A timely andaccurate flow of information is crucial as is listening towhat clients are saying,” he added. The main message isthat consistent and professional communication will be recognizedand rewarded.Don’t Shoot the Messenger….Institutional StandardsA large part of building credibility with investors involvesthe UHFS advising management as to what the fund must doto meet institutional standards. Cracking the code with U.S.institutions starts with gaining the respect of the gatekeepers.Leading pension consultants such as Russell, Callanand Cambridge Associates, really do care about businessinfrastructure and risk management, so listen closely toyour UHFS when they report back from the field. Most consultantsalso maintain their own database of managers andyour salesperson should make sure your fund(s) are representedat all appropriate firms. At a minimum, a salespersonshould prepare an internal due diligence questionnairebefore setting up institutional meetings – this is now commonand most investors expect it, especially funds of funds.The Key to Long Term SuccessIt’s not a quick and easy game, but the right salespersoncan yield satisfying results and minimize redemptions inlean times. Clinton Group’s Harlan Simon sums it up bysaying: “It is important to develop a rapport with investorsduring the process of bringing them into your fund.Investors who are most likely to stay are often those whopulled the most information from the salesperson duringthe due diligence process. Fast money is a mixed blessingin that it is often fast in, fast out.”In the past, the hardest obstacle when launching a hedgefund was finding the one remaining mountain peak or Greekgod still available for your fund’s name. Now with so manyentrants in the race, raising assets above the $100 millionhurdle before patience and working capital run out is thereal test of survival. Plenty of hedge fund managers learnedthe hard way that to achieve and then maintain a criticalmass of assets, it really does pay to hire an experienced,professional client executive. Hedge fund sales and marketingexecutives should not be viewed as just providing a temporarybridge to reach a particular asset target. The realsurvivors in the hedge fund shakeout will be those whoposition their UHFS as a partner of the firm so that their $2billion mountain of assets doesn’t melt down to an insignificantpuddle. ■Frank Carr is founder and managing partner of CentennialPartners LLC, a Stamford, CT boutique search firm specializingin the hedge fund industry. Prior to entering the executivesearch field, Mr. Carr had been the CFO of a Connecticutbasedhedge fund and had started his career as a commoditiesbanker at Citibank.www.cenpartners.comFrank J. Carr, Managing PartnerCentennial Partners LLCOne Landmark Square, Suite 525, Stamford, CT 06901(203) 487-6171 office, (203) 249-7244 mobile(212) 572-6310 NY Officefcarr@cenpartners.comReprinted with permission from the MFA Reporter January/February 2006 issue.
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