Kirsten Bischoff, Hedge Funds New York: As the hedge fund industry swells to accommodate institutional investors and pensions that have decided to increase their alternative allocations the standards for communicating strategy, strength of infrastructure, and long term outlook for funds and the businesses they are built on have risen tremendously. Opalesque spoke with a few people in hedge fund support services to find out how the asset raising aspect of growing a hedge fund business has changed, and how managers can best leverage support services to meet their business goals.
Acceleration Capital
Alexis Graham and Ian Tracy named their 3rd party marketing firm, Acceleration Capital Group LLC, for the critical period in a hedge fund's life when the fund is looking to reach an AUM size that makes it investable for a majority of institutions in the industry; the point when the hedge funds AUM size is no longer an investment constraint. These "acceleration capital" investors can range from seed vehicles to fund of funds to family offices to wealthy individuals, as well as larger institutional investors like pensions and endowments who are looking to increase allocations to the early stage space. "We view it as the people who want to be first and/or first to be second,'" Tracy explains. "The investors who look to provide a fund with acceleration capital are looking to invest in talented managers early to benefit from the manager's outperformance as well as to secure capacity as the fund grows. In some instances a seeder will provide the initial capital and acceleration capital will come in after so that the fund is on an AUM growth track (in addition to organic growth) that allows the manager to ultimately target additional investors and take in larger allocations."
Part of the industry evolution
The 10% rule that most institutional investors have in place, keeps assets from flowing down below a certain level of “mega funds”. “Most don’t want to write checks less than $10m,” Eamon Heavey, Director, Head of Americas Capital Introduction for Merrill Lynch’s prime brokerage commented. In fact, it is not unheard of for Heavey to have a manager say “don’t show me anyone that can’t take a $100m check.” For many fund managers, who have grown their assets steadily but perhaps incrementally and find themselves hovering around a certain number, securing acceleration capital can be instrumental in taking them to the next step, where they are large enough to get onto the radar screens of pensions and institutional investors. Heavey has built his team at Merrill based on a combination of talent, skill set, and rolodex specifically to assist the growing number of hedge fund managers who express a need for help in strategic planning to reach the next stage of targeted growth.
“The whole cap intro space has changed so much over the past 7 years that I have been active in it. The model in the early years was definitely to help t......................
Source:
Reaching the next asset raising goal - Part Two: targeting acceleration capital
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