“HOW FAST CAN I RAISE ASSETS?”
A dozen of so times each week, that’s among the top questions I get from new and smaller managers Understandably, every new and smaller manager/fund wants to raise assets as fast as possible! Unfortunately there is a BIG difference between having a “sense of urgency” and being in a “hurry”.
In a “Hurry”? Maybe It’s Time For “Urgency”…
Doing anything in a “hurry” is almost a guarantee to have to do it twice! and also if you’re in a hurry and buy cheap, get prepared to buy twice! Too often new and smaller managers in a “hurry” to raise assets FAST! engage in improvisational marketing activities: Buying lists, blasting emails and “pitching”. This kind of ad-hoc marketing behavior is inappropriate, inconsistent, inefficient and ineffective. While, the “marketing hurry flurry” feels and appears productive, it’s simply the illusion of REAL marketing and counterproductive. Essentially, most new and smaller managers/funds take the leap raising assets without being completely prepared for REAL marketing and as a result they make a ton of marketing mistakes, which tend to be financially costly and even fatal. They snatch defeat from the jaws of victory, get much more wrong than right and the more they get wrong, the greater the need to change but they keep doubling down on a bad trade.
Investing the time to get an acute understanding of ALL the issues that impact the ability to raise assets on a “manager/fund-specific basis”, to then think through and develop the “right” MARKETING PROCESS is mandatory to succeed raising assets. Let me be clear, I’m in no way suggesting “analysis paralysis” The choice comes down to investing the time to do things right or making mistakes and then taking the time to do things over. With that said, the key aspect of success raising assets is the MARKETING PROCESS.
81% of new and smaller managers do not have a marketing process.
The Plain Answer: The pervasive and erroneous belief by almost every new and smaller manager/fund that investment performance is the sole or primary criteria to raise assets.
Volumes of research show that no amount of pedigree, professional competence, “pitching”, personality or investment performance replaces or supersedes “TRUST”: THE most crucial ingredient in the allocation decision. However, the usual approach by new and smaller managers/funds is “continually ‘pitching performance or a product’ almost in a used-car salesperson fashion”. Such a “competency-based” and/or “performance-based” marketing approach implies that anyone with cash is the manager’s/fund’s target investor, and therefore each and every investor is treated (“engaged”) similarly. This type of behavior fails to meet the challenge of raising assets in what is now a hyper-stringent, highly-idiosyncratic and overly-skeptical allocation climate for all funds, which now includes an overly-invasive and expansive due diligence process producing much longer sales cycles, averaging 8-11 months from initial meeting to actual investment
Sustained success in ANY endeavor requires process and skills combined with disciplined consistent execution. Those are the common traits of successful professional traders and investors. The hard facts are most new and smaller managers/funds are in a “hurry” to raise assets, they continually participate in lots of “ad-hoc marketing activity” and have no “marketing process”. The culmination of that approach: Failure to raise any significant assets beyond personal capital, family and a few friends.
What is the tactical action point?
Success raising assets for a new or smaller manager/fund requires a MARKETING PROCESS. The work is real. The need is dire. But don’t be in a “hurry”. Being in a “hurry” means skipping the details. Conversely, “urgency” means implementing and consistently executing a MARKETING PROCESS from careful and deep consideration of ALL the details necessary to professionally engage on a prospect-specific basis with patience, persistence and perseverance. Candidly, the people and teams that have success raising assets have that approach. It sounds simple, but like most things, it’s difficult in practice and execution. Managers/funds that “rush out” raising assets without a MARKETING PROCESS have probably made a lot of mistakes and experience head-scratching frustration despite solid or even exceptional investment performance. The absence of a MARKETING PROCESS makes the incredibly difficult challenge of raising assets for a new or sub-institutional manager/fund that much harder or next to impossible. There is no secret sauce raising assets, it’s not about performance, pedigree, product, personality or “pitching”, those are lead generation mechanisms in the MARKETING PROCESS. The reality is raising assets requires “smart” work, commitment and consistent execution of the MARKETING PROCESS to achieve the essential ingredients in the allocation decision:
TRUST and “ACTIONABLE CONVICTION”
We will come through this TOGETHER.
As always, I hope you find this helpful.
Johnson & Company
Direct: (512) 786-1569 or [email protected]
“Marketing Alpha” For Sub-Institutional Hedge Funds.