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re: Getting Past the Gate: Capital Introduction at Prime Brokerage Firms
Posted on 10/10/14 at 5:54 am to Doc Fenton
Posted on 10/10/14 at 5:54 am to Doc Fenton
Monday, December 29, 2014
IV. ASSEMBLING A MARKETING TEAM
A. Targeting Investors
B. Events
C. Road Shows
D. Databases
E. Industry Publications
ASIDE: So I'm doing a shite job of pulling this thread together at the end, but I suppose that's what happens when you take a new and complicated subject and try to pick up where you left off months ago. I'm pulling my hair out trying to find all these old links to interesting tidbits about people who still code in Fortran for algo trading, and various ways of hiding beta for hedge funds, and stuff like that. In the grand scheme of things, though, I guess none of it really matters too much, because the main point of all this was just to get the ball rolling in my mind with some actual organized thoughts on how I might start a hedge fund one day within the next 5 years or so. So no matter how well I try to do this, it will never be perfect enough, and real world knowledge will quickly blow to hell anything I try to construct here anyway, so with that said, it's high time for me to finish the fricking game, which brings us to our last section...
IV. ASSEMBLING A MARKETING TEAM
A. Targeting Investors
There is nothing fancy about this part. A startup hedge fund simply needs to (i) develop a prospective investor list, (ii) gain access to members of the list and prioritize prospects as part of a winnowing down process, and (iii) actually close and convert prospects into investors. Arguably, sub-sections (B)-(E) are all about (ii), and doing (iii) is simply a matter of channeling your inner Don Draper.
It all starts with a list though, the sources of which can be roughly divided into internal databases and external databases. Internal databases would just be a formal name to all your informal social contacts, although there is some schmoozing that can be done here to get introduced and linked to acquaintances of acquaintances. College alumni clubs, local chapters of charitable organizations, referrals from colleagues in the industry you went to school with, etc.
Obviously though, I wouldn't be creating this thread if I were an insider who could generate a decent insider's database of internal personal contacts, so my main focus is on external databases for fresh mavericks trying to break into the industry, and for that, we have specific firms that sell these lists: Brighton House LLC; Prequin Ltd.; Investor Source; etc.
(As for following up on leads and closing on investors, that might be more of a salesmanship topic better addressed by the great " OFFICIAL: Sales Professionals Strategy and Discussion Thread" thread of August 2013.)
B. Events
This is similar to the process by which internal databases are built, except here there are formal industry events where strangers mingle with strangers. My old boss went to this type of event for European private equity firms in Monaco last year, and I know there are lots of "Shark Tank" type stories of events where angel investors mingle with aspiring startup entrepreneurs.
Sub-categories of "events" for our purposes can be broken down into manager hosted events (like stock idea dinners, educational discussion events, manager discussion panels, etc.), industry sponsored events, and capital introduction. Obviously, the subject of capital introductions, a service provided courtesy of the major prime brokerage firms out there, is what prompted me to create this whole thread in the first place, but there are also some interesting industry sponsored events that occur around the U.S. where aspiring asset managers can mingle and look for potential investors: at the Milken Institute (in May in Los Angeles); at AlphaMetrix (in Miami); IMN, Alpha Hedge West (in September in San Francisco); Iro Sohn Conference (in May in New York City); etc.
C. Road Shows
This naturally brings us to road shows, which is the natural next step for those aspiring hedge fund managers lucky enough to get picked up by the capital introduction team of a major prime brokerage house, and which I suppose is very similar to (but less regulated than) the road show process that typical investment bankers conduct on behalf of their corporate clients that are doing new offerings of public securities. This is also, I suppose, where aspiring asset managers get grilled on their alpha generation strategies, risk metrics, office logistics, etc.
D. Databases
The databases for this sub-section are databases used for the purpose of reporting your performance metrics relative to peers in the hedge fund industry, which is part of the process of making an argument for your alpha and beta calculations to gauge how well you think you can perform relative to the levels of risk and market correlation with which you are engaged.
Here there are a plethora of databases given, so I will just dump the list:
* Autumn Gold
* Barclay Hedge, Ltd
* Bloomberg L.P.
* Cogent Investment Research, LLC
* Credit Suisse | Tremont
* EurekaHedge, Ltd
* Evestment | HFN
* Greenwich Alternative Investments
* The Hammerstone Group
* HedgeCo.net
* HedgeFund Intelligence
* Hedge Connection
* Hedge Fund Research, Inc.
* Lipper TASS
* Morningstar Altvest
* Stark & Company
E. Industry Publications
This means industry publications where you create the content, not stuff from others that you use or read. Now of course you will want to get published in well known sources that others in the industry already know about, but the focus here is on getting the main players at your startup hedge fund to introduce themselves to the inside club of professionals here, writing white papers (you'll see a few of these often, in a wider sense, every day on RealClearMarkets.com), giving "meet the manager" types of interviews to trade publications, and offering global viewpoints, perhaps getting a positive placement in an article in the major media (WSJ or Bloomberg, for instance), or something like that. Part of this is just classical PR stuff that you might hire a firm for, and part of this is just hammering out your own unique vision into something that catches on with others that you might consider your peers. This is the sort of stuff that plays to my weaknesses, so I can't say that I know much about it, but it does seem like an interesting art. Maybe I'd like to have a publicist one day.
IV. ASSEMBLING A MARKETING TEAM
A. Targeting Investors
B. Events
C. Road Shows
D. Databases
E. Industry Publications
ASIDE: So I'm doing a shite job of pulling this thread together at the end, but I suppose that's what happens when you take a new and complicated subject and try to pick up where you left off months ago. I'm pulling my hair out trying to find all these old links to interesting tidbits about people who still code in Fortran for algo trading, and various ways of hiding beta for hedge funds, and stuff like that. In the grand scheme of things, though, I guess none of it really matters too much, because the main point of all this was just to get the ball rolling in my mind with some actual organized thoughts on how I might start a hedge fund one day within the next 5 years or so. So no matter how well I try to do this, it will never be perfect enough, and real world knowledge will quickly blow to hell anything I try to construct here anyway, so with that said, it's high time for me to finish the fricking game, which brings us to our last section...
IV. ASSEMBLING A MARKETING TEAM
A. Targeting Investors
There is nothing fancy about this part. A startup hedge fund simply needs to (i) develop a prospective investor list, (ii) gain access to members of the list and prioritize prospects as part of a winnowing down process, and (iii) actually close and convert prospects into investors. Arguably, sub-sections (B)-(E) are all about (ii), and doing (iii) is simply a matter of channeling your inner Don Draper.
It all starts with a list though, the sources of which can be roughly divided into internal databases and external databases. Internal databases would just be a formal name to all your informal social contacts, although there is some schmoozing that can be done here to get introduced and linked to acquaintances of acquaintances. College alumni clubs, local chapters of charitable organizations, referrals from colleagues in the industry you went to school with, etc.
Obviously though, I wouldn't be creating this thread if I were an insider who could generate a decent insider's database of internal personal contacts, so my main focus is on external databases for fresh mavericks trying to break into the industry, and for that, we have specific firms that sell these lists: Brighton House LLC; Prequin Ltd.; Investor Source; etc.
(As for following up on leads and closing on investors, that might be more of a salesmanship topic better addressed by the great " OFFICIAL: Sales Professionals Strategy and Discussion Thread" thread of August 2013.)
B. Events
This is similar to the process by which internal databases are built, except here there are formal industry events where strangers mingle with strangers. My old boss went to this type of event for European private equity firms in Monaco last year, and I know there are lots of "Shark Tank" type stories of events where angel investors mingle with aspiring startup entrepreneurs.
Sub-categories of "events" for our purposes can be broken down into manager hosted events (like stock idea dinners, educational discussion events, manager discussion panels, etc.), industry sponsored events, and capital introduction. Obviously, the subject of capital introductions, a service provided courtesy of the major prime brokerage firms out there, is what prompted me to create this whole thread in the first place, but there are also some interesting industry sponsored events that occur around the U.S. where aspiring asset managers can mingle and look for potential investors: at the Milken Institute (in May in Los Angeles); at AlphaMetrix (in Miami); IMN, Alpha Hedge West (in September in San Francisco); Iro Sohn Conference (in May in New York City); etc.
C. Road Shows
This naturally brings us to road shows, which is the natural next step for those aspiring hedge fund managers lucky enough to get picked up by the capital introduction team of a major prime brokerage house, and which I suppose is very similar to (but less regulated than) the road show process that typical investment bankers conduct on behalf of their corporate clients that are doing new offerings of public securities. This is also, I suppose, where aspiring asset managers get grilled on their alpha generation strategies, risk metrics, office logistics, etc.
D. Databases
The databases for this sub-section are databases used for the purpose of reporting your performance metrics relative to peers in the hedge fund industry, which is part of the process of making an argument for your alpha and beta calculations to gauge how well you think you can perform relative to the levels of risk and market correlation with which you are engaged.
Here there are a plethora of databases given, so I will just dump the list:
* Autumn Gold
* Barclay Hedge, Ltd
* Bloomberg L.P.
* Cogent Investment Research, LLC
* Credit Suisse | Tremont
* EurekaHedge, Ltd
* Evestment | HFN
* Greenwich Alternative Investments
* The Hammerstone Group
* HedgeCo.net
* HedgeFund Intelligence
* Hedge Connection
* Hedge Fund Research, Inc.
* Lipper TASS
* Morningstar Altvest
* Stark & Company
E. Industry Publications
This means industry publications where you create the content, not stuff from others that you use or read. Now of course you will want to get published in well known sources that others in the industry already know about, but the focus here is on getting the main players at your startup hedge fund to introduce themselves to the inside club of professionals here, writing white papers (you'll see a few of these often, in a wider sense, every day on RealClearMarkets.com), giving "meet the manager" types of interviews to trade publications, and offering global viewpoints, perhaps getting a positive placement in an article in the major media (WSJ or Bloomberg, for instance), or something like that. Part of this is just classical PR stuff that you might hire a firm for, and part of this is just hammering out your own unique vision into something that catches on with others that you might consider your peers. This is the sort of stuff that plays to my weaknesses, so I can't say that I know much about it, but it does seem like an interesting art. Maybe I'd like to have a publicist one day.
This post was edited on 12/31/14 at 7:22 pm
2
Posted on 10/10/14 at 5:54 am to Doc Fenton
Wednesday, December 31, 2014
I've come a long way in the past year. I remember in mid-December 2013, when it first started to dawn on me that the living expenses stipend from my super awesome elite thesis sponsorship was not going to come through for me as I had anticipated, and I was totally crestfallen. I scrambled frantically for a way to find another part-time job, but things were just not breaking my way, and so I had to accept temporary defeat and take the first job I could get in Houston before moving onto the next city. I remember talking about the situation to someone back when everything was going down, and somehow my imagination started to take over, and it kept bringing me back to the famous quote Gen. MacArthur made as he escaped from the Philippines in 1942.
"The President of the United States ordered me to break through the Japanese lines and proceed from Corregidor to Australia for the purpose, as I understand it, of organizing the American offensive against Japan, a primary objective of which is the relief of the Philippines. I came through and I shall return." -- General Douglas MacArthur, March 21, 1942 ( LINK from Melbourne)
And return he did, on October 20, 1944.
Will I ever return to Switzerland to get my blue chip M.Sc. quant degree? I don't know.
It took MacArthur 31 months to return to the Philippines, but he was an arrogant prima donna, and sometimes it's best in life to simply walk through the right open doors and take whatever opportunities arise. Somehow I did manage to talk my way into landing a job as a quant at a top bank in the U.S., and perhaps with my career starting to take off, maybe I will find a way to shift into the hedge fund world without needing an actual quant finance degree, and never look back. Or maybe I'll just stay put for once in my life and learn to be content without always looking for the next place to jump. Honestly, I have no idea where I'll be in a year, but at the same time, things are looking up, and there are a lot of different possibilities out there. I think I'm too worn down from the last 4 years or so of my life to call any of these possibilities "exciting" anymore, because I know now that everything is a grind, but I'm glad to have them nonetheless, and I think that it was my praying and going to mass every week that helped me most during the hard times to help me get where I am now. As things stand my life is still wide open, and new people and career options keep getting dangled in front of me every other week, and for that I should be thankful--feeling a little frayed and burned out maybe, but definitely still thankful.
If I can say anything about the process of creating this thread, it's that I am more at peace with my efforts up to this point in my life. Whatever happens, happens. I'm just glad to be where I am right now, and although the topic of hedge funds is starting to get a little old, unexciting, and boring to me now, maybe that's a good sign. If I'm going to transform myself from being a slacking dilettante to being a legitimate professional, "taking the romance out" of my field is definitely a necessary first step. Mission accomplished.
I've come a long way in the past year. I remember in mid-December 2013, when it first started to dawn on me that the living expenses stipend from my super awesome elite thesis sponsorship was not going to come through for me as I had anticipated, and I was totally crestfallen. I scrambled frantically for a way to find another part-time job, but things were just not breaking my way, and so I had to accept temporary defeat and take the first job I could get in Houston before moving onto the next city. I remember talking about the situation to someone back when everything was going down, and somehow my imagination started to take over, and it kept bringing me back to the famous quote Gen. MacArthur made as he escaped from the Philippines in 1942.
"The President of the United States ordered me to break through the Japanese lines and proceed from Corregidor to Australia for the purpose, as I understand it, of organizing the American offensive against Japan, a primary objective of which is the relief of the Philippines. I came through and I shall return." -- General Douglas MacArthur, March 21, 1942 ( LINK from Melbourne)
And return he did, on October 20, 1944.
Will I ever return to Switzerland to get my blue chip M.Sc. quant degree? I don't know.
It took MacArthur 31 months to return to the Philippines, but he was an arrogant prima donna, and sometimes it's best in life to simply walk through the right open doors and take whatever opportunities arise. Somehow I did manage to talk my way into landing a job as a quant at a top bank in the U.S., and perhaps with my career starting to take off, maybe I will find a way to shift into the hedge fund world without needing an actual quant finance degree, and never look back. Or maybe I'll just stay put for once in my life and learn to be content without always looking for the next place to jump. Honestly, I have no idea where I'll be in a year, but at the same time, things are looking up, and there are a lot of different possibilities out there. I think I'm too worn down from the last 4 years or so of my life to call any of these possibilities "exciting" anymore, because I know now that everything is a grind, but I'm glad to have them nonetheless, and I think that it was my praying and going to mass every week that helped me most during the hard times to help me get where I am now. As things stand my life is still wide open, and new people and career options keep getting dangled in front of me every other week, and for that I should be thankful--feeling a little frayed and burned out maybe, but definitely still thankful.
If I can say anything about the process of creating this thread, it's that I am more at peace with my efforts up to this point in my life. Whatever happens, happens. I'm just glad to be where I am right now, and although the topic of hedge funds is starting to get a little old, unexciting, and boring to me now, maybe that's a good sign. If I'm going to transform myself from being a slacking dilettante to being a legitimate professional, "taking the romance out" of my field is definitely a necessary first step. Mission accomplished.
This post was edited on 1/5/15 at 8:27 pm
Posted on 10/10/14 at 5:54 am to Doc Fenton
Wednesday, December 31, 2014
I also think not only of whether I will return to finish my degree, but also about whether I will return here and start posting again on a regular basis. I would have to think the answer would be "yes," simply because I have so many unfinished projects here that I've been itching to complete, but simply haven't had the free time the last few years.
There was the global monetary history series I started; the Cardinal Dulles "Theology of Faith" series I started (before religion became verbotten on the Poli Talk board); the Simon vs. Ehrlich thread I promised Rex but never delivered on; the Harvey Mansfield study of masculinity and gender issues thread I started; the 25-year All-LSU football teams I started doing; etc., etc., etc.
Plus, there are a bunch of new project threads that I am always wanting to start on here. I remember some of the best discussions I've ever had have been threads involving debates on philosophy, atheism, metaphysics, monetary policy & theory, LSU bunting strategy, ancient & medieval history, existentialism, predestination, quantum entanglement, black hole thermodynamics and entropy, Cold War foreign policy, neoconservative foreign policy, etc.
So maybe I'll just show up in February and start throwing up : geauxtigers : signs in clutch LSU baseball game situations. I don't know. I have mixed feelings obviously, and it reminds me of this scene from Good Will Hunting that kept going through my mind earlier this fall when I was thinking about someone else, but maybe the person who really needed to get away was me. I guess that's called "projection." Not that I'm exactly going on a tear right now with my life as a prodigious genius or anything like that, but just because I can feel that my imagination keeps taking me toward bigger and better things.
EDIT: Monday, January 5, 2015
I read this article today and couldn't help but post it here as a last update: " Hedge Fund Robots."
I remember talking with the guys from London at Winton Capital who came for a campus visit last year. They were totally smug about their intellectual prowess and elite caliber of their firm, but I suppose maybe they had a good reason to be.
I also think not only of whether I will return to finish my degree, but also about whether I will return here and start posting again on a regular basis. I would have to think the answer would be "yes," simply because I have so many unfinished projects here that I've been itching to complete, but simply haven't had the free time the last few years.
There was the global monetary history series I started; the Cardinal Dulles "Theology of Faith" series I started (before religion became verbotten on the Poli Talk board); the Simon vs. Ehrlich thread I promised Rex but never delivered on; the Harvey Mansfield study of masculinity and gender issues thread I started; the 25-year All-LSU football teams I started doing; etc., etc., etc.
Plus, there are a bunch of new project threads that I am always wanting to start on here. I remember some of the best discussions I've ever had have been threads involving debates on philosophy, atheism, metaphysics, monetary policy & theory, LSU bunting strategy, ancient & medieval history, existentialism, predestination, quantum entanglement, black hole thermodynamics and entropy, Cold War foreign policy, neoconservative foreign policy, etc.
So maybe I'll just show up in February and start throwing up : geauxtigers : signs in clutch LSU baseball game situations. I don't know. I have mixed feelings obviously, and it reminds me of this scene from Good Will Hunting that kept going through my mind earlier this fall when I was thinking about someone else, but maybe the person who really needed to get away was me. I guess that's called "projection." Not that I'm exactly going on a tear right now with my life as a prodigious genius or anything like that, but just because I can feel that my imagination keeps taking me toward bigger and better things.
EDIT: Monday, January 5, 2015
I read this article today and couldn't help but post it here as a last update: " Hedge Fund Robots."
quote:
The hedge fund robots are winning again.
That's a key lesson from 2014, when computer algorithm-led investing produced stellar returns, beating most gut-driven human managers and dramatically recovering most of their losses from 2011, 2012 and 2013.
... Funds run by Two Sigma, Winton Capital, Campbell and others also gained double digits.
I remember talking with the guys from London at Winton Capital who came for a campus visit last year. They were totally smug about their intellectual prowess and elite caliber of their firm, but I suppose maybe they had a good reason to be.
This post was edited on 1/5/15 at 8:33 pm
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