| June 23, 2016
| September 8, 2015
Disclaimer: I am not a lawyer. These are just general observations from my non-lawyerly experience. For actual legal advice you should consult your counsel; ironically the same counsel that I will now suggest could be sucking blood out of your organization like a tsetse fly. But either way, don’t listen to me and listen to your lawyer (or a lawyer) instead.
| September 4, 2015
It’s natural to focus on the ‘big questions’ when interviewing a manager, and one of the most popular requests is “Tell me about your BIGGEST position.” Upon hearing this request the manager usually responds with a beautifully rehearsed story about their highest conviction idea and why it’s the perfect opportunity.
I want to thank Tom Brakke of @researchpuzzler who brought to my attention a much better question which is likely to have a much larger impact:
| September 3, 2015
Hedge fund marketing is a tricky sport, and there are some pitfalls to be aware of when meeting with investors. Here are 5 of the worst types of meetings that hedge fund managers experience and how to interpret or avoid them.
| September 3, 2015
How often do you encounter a perfectly good product that is advertised as something it’s not? RedBull doesn’t actually give you wings and Axe Body Spray doesn’t make women break into your house. What these advertisement methods share is appeal to their target audience.
The academic definition of ‘arbitrage’ is a method of making money on price differentials where a risk-free profit can be earned.
| September 1, 2015
A key question that comes up in most due-diligence meetings is the oft dreaded “what is your edge?” The answer is often the difference between an allocation and going home with nothing. From my meetings with many managers I’ve found that most answers boil down to several cliches. Be sure to avoid these common answers that will turn off an experienced hedge fund investor:
| June 22, 2015
From an investor’s perspective some of the best responses we’ve heard include:
“We’re the largest private recipient of IPO syndicate in our region.” This was from a manager who has great relationships with major banks in his region and pretty much just flips IPOs for fairly absurd returns. This is entirely a relationship edge.
| May 19, 2015
#9. Neglecting PR Opportunities — Despite the JOBs Act and the loosening of ‘mass solicitation’ rules, most hedge funds are still so terrified of the SEC that they will do anything in their power to ignore perfectly legal PR opps. Ray Dalio, founder of Bridgewater Associates, was recently featured on the cover of Absolute-Return Magazine, giving an exclusive interview. If done correctly (ie: legally), TV appearances, magazine articles, and speeches can be a great boost to credibility.
| July 15, 2014
Investors likely get 75+ hedge fund investor letters per month. How do you get your letter to the top of the stack?
Fortunately, it’s not as hard as you might think. Your competition is severely deficient in 2 key areas:
Years ago I had the pleasure of sitting in the shortest meeting of my life between a hedge fund manager and an investor. The manager represented a well-known algorithmic trading firm. After the standard awkward quant-manager introduction and shmoozing effort, the investor began asking questions about the investment process. The manager gave several vague answers, much to the frustration of the investor.