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Raising money for a fund post launch isn’t rocket science – it’s just another process you need to go through with a methodological approach. Being successful requires know-how, resources, and deep dedication.
Your fund is launched but you want to grow your AuM further. How do you go about it?
At the Emerging Manager Summit 2023, hosted by HFM Weekly in New York, a panel of fund managers discussed their experience with raising funds post launch.
Here are the eight pertinent strategies you can use to make your own post-launch fundraising a success.
In our recent article on “Positioning and marketing your fund – a primer“, we touched on the need to tell and present your story.
One sub-aspect of that is to develop an elevator pitch and ensure that you deliver it perfectly.
Keep in mind that the people you are marketing to have to tell your story to their own people. Everyone has limited time and bandwidth, which is why you have to arm them with something that is
easy to repeat
What is the ONE sentence you have prepared to tell other people about your fund?
If you don’t have that elevator pitch ready, you’ll lose many opportunities to competitors who do.
Do NOT make the common mistake of beginning by saying: “I am experienced…” or “My track record is…“.
Everyone else does that and you will not stand out of the crowd. Always remember that to allocators, most funds are like apples and pears.
Explain to allocators how you are helping them.
Present yourself along the lines of “I will help you with…“
Your message must be focussed not just on what makes you great, but how you help them.
For example, explain to them in one sentence how you add value to their asset allocation when the market crashes.
It needs to be so clear and simple that a kindergartener could understand it. Only then will they be able to repeat it to their colleagues.
A simple message about your value add is critical.
Allocators will do pre-screens before they meet you.
Do the same. Research where they are at:
Are they risk averse?
Do they care about ESG or do they think of it as marketing guff?
What are their short-term and long-term priorities?
They will have already seen your deck and all the rational reasons you presented therein. In the meeting, take off your IQ hat and put on your EQ hat. Do more asking and put on your listening ears. Once again, that will make you distinct from most of the other fund managers they meet (the majority of whom will talk in monologues and be weak on the EQ side in general).
What are the challenges this person is facing? Find out about their pressure points. Then you can explain to them how you can be a solutions provider – as per the previous point.
If you properly research them ahead of a meeting, you’ll be much more likely to get your second meeting.
Your post launch fundraising will be easier if it’s obvious that you are obsessed with your field. If you are obsessed with something, then people will instinctively notice that what you do has some potency behind it.
That’s hugely attractive on a human level and it builds your credibility.
It also helps to establish why you are a solutions provider. If you are obsessed with a particular field, then allocators can leave it to you to do the investing in this area.
Everyone wants to look good in the eyes of their colleagues and clients.
Is there something you can provide them that enables them to brag about your fund?
If you do, also consider how you can leverage that in your writing (see point 5 in our article about fund marketing). Be clever about how you do this, and always tie it all back to your overall branding.
This is a little-known psychological twist, but extremely powerful if applied properly.
Are cap intro teams and third-party fund marketers worth the effort and resources? It’s a debate that splits the fund manager world.
To raise assets, you need to have relationships. A placement agent, third-party marketing firm or cap intro team will have spent years or even decades building such relationships. Using someone who has done that already can be powerful. In the context of being an emerging manager, what are (realistically) your chances to build such a network yourself? Most likely, it would take you forever to build these relationships yourself.
Also, think about your fund appealing to different geographies. Cap intro teams can help you reach places where you don’t have any coverage.
The bottom line is that getting outside help for your fundraising is one way to scale your business quickly. In the US, 27% of emerging managers work with a placement agent of some sort. There are probably a lot more who would like to do it, but don’t know how to go about it or don’t have the resources to sign up such professional help.
How do you pick the right placement agent and how much should you pay them? That is a subject unto itself that we will cover in a separate article.
Finding the initial investment for a fund is a particular challenge.
However, there are investors who are specialised in providing seed funding for funds. They will ask for a stake in your economics in return, such as equity in your firm or a percentage of your future revenue or performance fees. You’ll have to weigh what your priorities are. Do you want to grow faster and are willing to give away some equity or revenue to achieve that, or do you want to go the slower route? Also, you need to shop around for the best deals since there are wildly varying offers available.
The world of seeding deals for funds is very, very opaque. On another occasion, we’ll shed light on it (subscribe to our blog to be notified about new articles).
Everything in life is about timing, and so is raising money for your fund post launch.
Be prepared that many meetings, whilst positive overall, will not happen at the perfect time. An allocator will be interested in your fund, but doesn’t want to (or can’t) invest at this time.
However, at a later time, your fund will be “in the way of the trade“, as they say.
In your work with allocators, be relationship focussed at all times, rather than to focus on quick sales. The allocator who doesn’t want to buy from you today, might buy from you tomorrow!
Raising money for a fund post launch isn’t rocket science – it’s just another process you need to go through with a methodological approach. Being successful requires know-how, resources, and deep dedication. Sarnia Asset Management helps portfolio managers with taking some of that weight off their shoulders. For portfolio managers who launch funds with us, we take care of many of these areas – and we’ll be able to do so at scale. If you are interested in discussing this further, please reach out to us.
Disclaimer: This blog is intended for informational purposes only. This blog is not intended to invite, induce or encourage any persons to engage in any investment activities and is not a solicitation or an offer to buy or sell any stock, investment product or other financial instruments. If in doubt, please seek financial advice from an independent financial adviser. Sarnia Asset Management is licensed by the Guernsey Financial Services Commission (GFSC). Past performance is not an indication of future returns. Investments carry risk, including the risk that you will not recover the sum that you invested.
By Swen Lorenz
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