How to market a Hedge Fund after crisis

The right pedigree, strategy and track record is no longer a guaranteed recipe for success in raising or retaining of assets. More so than ever both hedge fund startups and established hedge funds are distinguishing themselves from similar strategies by marketing not only their track record and pedigree but also their operational, portfolio and regulatory infrastructure.

Funds that fail to address the growing concern over fraud, mismanagement, operational and regulatory risk may miss out on the opportunity to attract the billions of dollars of capital that has left the industry and may well be reallocated after 2008 financial crisis. Like it or not the perception of the new world investor is that infrastructure and performance are directly connected.

To be well positioned after the crisis, hedge funds must address an investor’s growing concern over operational and regulatory risk. This new level of scrutiny will increase the importance of effective and documented operational and regulatory risk management. Responding to a potential investor’s increasing desire for full transparency will be paramount.

Even if a fund’s AUM is small it can still improve its marketing position with investors in a cost effective manner by communicating a clear, transparent and customized plan to strategically mitigate risk as assets grow. Noted below are just some of the minimum “high risk” areas a successful hedge fund should focus on no matter its size or strategy:

Portfolio management, investment guidelines, trade allocation, trade errors, best execution;

independent and verifiable valuation policies and procedures, and for illiquid securities, strong consideration to the creation of a valuation committee;

personal trading policies and procedures, processes and controls; contingency planning and business continuity.