feature pitching amazonaws com
feature pitching
Pitching to potential investors can make or break a deal, and with competition for new capital as fierce as ever, HFMWeek spoke to investors, consultants and hedge funds to find out how to prepare, execute and follow-up the perfect pitch By kirstie brewer
P
erfect pitches are few and far between. So say the seasoned investors and industry experts HFMWeek has spoken to. In an ultra competitive market with countless hedge funds vying for limited investment mandates, a well-executed pitch, thoughtfully tailored to the investor, can be the difference between clinching a mandate and losing out on one. Obvious perhaps, but something which a significant number of hedge fund managers are guilty of overlooking. “If you are a boutique hedge fund or company with limited resources, it’s very easy to fall into the one-size-fitsall mentality,” says Nicola Marinelli, portfolio manager at Glendevon King Asset Management, a fixed-income boutique with $163m in assets under management. “There may be only one or two people dedicated to marketing so pitching is a very big exercise. However, from our experience this approach doesn’t work, particularly with family offices as their requirements tend to be very specific.” It is also increasingly true that investors, particularly of the institutional stripe, make investment decisions driven by the recommendations of consultants. But even if this is the case, as Guy Saintfiet of Aon Hewitt admits; “it is always comforting for the investor to hear it again from the horse’s mouth”. And for start-ups and small funds, or those who don’t feature on the buy lists of advisory 6 -12 oc t 2011
firms, opportunities are limited and the power of pitching should not be underestimated. Despite a volatile summer, fraught with plummeting markets and gloomy forecasts, the past few months have so far not seen huge redemption requests and, according to the latest HFR data, estimated net asset flows reached $32bn in Q1; a sign that investors are prepared to weather the storm because they fully understand the risks. It follows that a successful pitch must befit this increasingly sophisticated and market-savvy breed of investor. All too often, it seems, hedge funds succumb to the ease of a scattergun approach; the sort that the $105.3bn Texas Teachers Retirement System (TRS) warned against at this year’s Gaim conference in Monaco, as reported by HFMWeek.com. TRS portfolio manager, W Russell Guinn, revealed that around a third of the pension’s investments come from targeted pitches; further proof that winning big business can hinge around a carefully tailored delivery. In search of the perfect pitch, HFMWeek called on the experiences and expertise of some key industry players and asked them to explain, in their own words, what turns investors on, and off. Their answers reveal that in the current climate, every type of investor, whether institutional or high-net-worth, broadly looks for the same fundamental components in a pitch. h f m w e e k . c o m 17
feature pitching
before
Establish what is expected
what decisions have already been made? Hedge funds can sometimes go wrong on the preparation side. They should prepare better and understand exactly what is expected of the pitch. It’s much more important to highlight what your strengths and weaknesses are than to give a detailed insight into the strategy. If you are up for a strategy-specific pitch, the investor will have already decided to allocate to that strategy, so avoid sounding like your peers and talking about the same thing.” Guy Saintfiet, UK Head of Liquid Alternatives, Aon Hewitt
bring the right team members Investors want to get a feel for who is running their money, so don’t just bring the marketer Post-2008, it is much more critical for investors to see, from an early stage, that the noninvestment side of the business is doing well; for new launches in particular, one or two founders (usually from the investment side) as well as representatives from the non-investment side (COO) should attend a pitch.” Anita Nemes, global head of cap intro, Deutsche Bank
Investors are generally wary of having too much time with the lead person because that implies they’re having lots of time spent not managing money. It is a question of good time management – if the head project manager can come in for a portion of the meeting to answer questions that should satisfy the investor.” Alastair Smith, marketing partner, Harmonic Capital
We like to see the depth of the team and pitchers must demonstrate a willingness for you to meet the team; particularly analysts. During the pitch, reference should be made to the analysts and other core team members as everybody goes on holiday or is off sick at some point so it is important for the investor to know that the whole team is strong.” A multi-billion dollar institutional investor
Prioritise substance over style
when preparing pitch materials and data Investors would prefer a 40-page pitch to a ten-page glossy; they want real and detailed trade examples and hard data rather than impressive looking performance graphs with no exact breakdown of figures. It can be hard to differentiate between one pitch and another otherwise – real substance is key.” Phillip Chapple, executive director, KB Associates
during Know your investor and pitch at the right level
Don’t take for granted that trustees understand the basics, all too often we see fund managers jump right into portfolio construction and risk management and things of that nature without starting with the very basics. Do it without talking down to trustees, in a very simple educational way and in doing so, you really empower the trustees to understand the merits of your strategy.” Liad Meidar, managing partner, Gatemore Capital Management It is a difficult balance between getting the message across and not becoming too technical. It’s important for a manager to show skill, but sometimes that skill is represented in jargon and that makes it difficult for less-experienced trustees to really understand. Do your homework; check what the level of experience is of the audience beforehand and pitch accordingly.” Guy Saintfiet, UK Head of Liquid Alternatives, Aon Hewitt 18 h f m w e e k . co m
what investors want to know, according to Phillip Chapple, executive director, KB Associates
Very often managers ask me what is ‘in vogue’; they ask what investors want strategy-wise and question whether they are positioning themselves effectively. It is extremely critical to sell what you have, and not try to fine-tune your fundamental product to what the investor wants. For example, if a manager has a merger arbitrage fund that does solely merger arbitrage, it’s not worthwhile calling it an event fund because event is in vogue – the investors will figure it out.” Anita Nemes, global head of capital introduction, Deutsche Bank
You really should be careful to tell the audience what you think it is that makes you special; you don’t want them to come to incorrect conclusions and you want to be able to guide them. There are many macro managers and long/ short equity managers out there so explain what’s different about you and why you might be interesting to them.” Alastair Smith, marketing partner, Harmonic CapitaL
6 -12 oc t 2011
What is the alpha proposition? How do you generate returns; is it your experience, your contacts? Give background and examples
Demonstrate that all the risk is in the strategy and not in the infrastructure this is the main area that investor due diligence is focused on
Stress testing
Value proposition explain what makes you stand out from the competition but be faithful to the fundamentals of the product
Get your story across quickly, you don’t have more than a few seconds to grab the investor’s attention so try and be concise. It is important to differentiate the fund and the team managing it, there are too many people trotting out the same platitudes.” gemma Godfrey, chairman of the investment committee, Credo Capital
The four pillars of the perfect pitch
assist investors on assessing how the product will behave in relation to the investor’s existing portfolio
Be transparent
acknowledge mistakes but don’t be defensive
It’s a non-starter not to be transparent, investors find out everything and the depth of the due diligence is such that you may as well start with all your cards on the table. At the same time, it is important not to be defensive and there is no need to dwell too long on mistakes. Explain what happened and how you learned from it and move on.” Anita Nemes, global head of capital introduction, Deutsche Bank 6 -12 oc t 2011
Identify and explain the main risks beneath the strategy investors want managers to describe the risks in their own words plus how they measure, monitor and mitigate them
after
Approach the follow-up process with care strike the right balance
Committing to investment is a slow burner and is about building a relationship. I give investors time to respond and then reach out. It is a mistake to go in with the approach of asking, ‘are you in or are you out?’ Ask if the investor needs any additional information and welcome feedback and suggestions – it acknowledges you respect and value their opinion.” Rahul Moodgal, partner - investor relations and business development, Parvus Asset Management It’s very important to maintain a smooth process and consistently follow up on all pitches. It’s common in smaller entities to overlook some of the steps and therefore even lose out on good prospects: every client likes to be followed and groomed.” Nicola Marinelli, portfolio manager, Glendevon King Asset Management
Obvious but overlooked a few other pitching tips to ensure you don't fall at the first hurdle
• Don’t be late • Leave time for questions and remember it’s a two-way process • Always show net profits not gross figures • Make eye contact with everyone you
are pitching to, not just one individual • Don’t come in smelling of alcohol or cigarettes after a boozy lunch (problem voiced off the record to HFMWeek)
Who else invests in the fund? Institutional investors are probably the safest pair of hands and have a big reputational risk. They are heavy on corporate governance and will want fellow investors who are willing to withstand volatility and not be putting pressure on the fund after their first down month. There is therefore safety in numbers with other long-term investors, so if there are other institutional investors already in the fund, it would be a good idea to make this clear” Large institutional investor
Manage Expectations
use conservative figures and avoid surprises Manage expectation; under promise and over deliver. It is better to be told, we are aiming for a 7% return and the fund returns 10% than say we are aiming for a 15% return. Avoid investor surprises which would motivate redemptions, were they to invest.” Gemma Godfrey, Chairman of the Investment Committee, Credo Capital h f m w e e k . c o m 19
Pitching to potential investors can make or break a deal, and with competition for new capital as fierce as ever, HFMWeek spoke to investors, consultants and hedge funds to find out how to prepare, execute and follow-up the perfect pitch By kirstie brewer
P
erfect pitches are few and far between. So say the seasoned investors and industry experts HFMWeek has spoken to. In an ultra competitive market with countless hedge funds vying for limited investment mandates, a well-executed pitch, thoughtfully tailored to the investor, can be the difference between clinching a mandate and losing out on one. Obvious perhaps, but something which a significant number of hedge fund managers are guilty of overlooking. “If you are a boutique hedge fund or company with limited resources, it’s very easy to fall into the one-size-fitsall mentality,” says Nicola Marinelli, portfolio manager at Glendevon King Asset Management, a fixed-income boutique with $163m in assets under management. “There may be only one or two people dedicated to marketing so pitching is a very big exercise. However, from our experience this approach doesn’t work, particularly with family offices as their requirements tend to be very specific.” It is also increasingly true that investors, particularly of the institutional stripe, make investment decisions driven by the recommendations of consultants. But even if this is the case, as Guy Saintfiet of Aon Hewitt admits; “it is always comforting for the investor to hear it again from the horse’s mouth”. And for start-ups and small funds, or those who don’t feature on the buy lists of advisory 6 -12 oc t 2011
firms, opportunities are limited and the power of pitching should not be underestimated. Despite a volatile summer, fraught with plummeting markets and gloomy forecasts, the past few months have so far not seen huge redemption requests and, according to the latest HFR data, estimated net asset flows reached $32bn in Q1; a sign that investors are prepared to weather the storm because they fully understand the risks. It follows that a successful pitch must befit this increasingly sophisticated and market-savvy breed of investor. All too often, it seems, hedge funds succumb to the ease of a scattergun approach; the sort that the $105.3bn Texas Teachers Retirement System (TRS) warned against at this year’s Gaim conference in Monaco, as reported by HFMWeek.com. TRS portfolio manager, W Russell Guinn, revealed that around a third of the pension’s investments come from targeted pitches; further proof that winning big business can hinge around a carefully tailored delivery. In search of the perfect pitch, HFMWeek called on the experiences and expertise of some key industry players and asked them to explain, in their own words, what turns investors on, and off. Their answers reveal that in the current climate, every type of investor, whether institutional or high-net-worth, broadly looks for the same fundamental components in a pitch. h f m w e e k . c o m 17
feature pitching
before
Establish what is expected
what decisions have already been made? Hedge funds can sometimes go wrong on the preparation side. They should prepare better and understand exactly what is expected of the pitch. It’s much more important to highlight what your strengths and weaknesses are than to give a detailed insight into the strategy. If you are up for a strategy-specific pitch, the investor will have already decided to allocate to that strategy, so avoid sounding like your peers and talking about the same thing.” Guy Saintfiet, UK Head of Liquid Alternatives, Aon Hewitt
bring the right team members Investors want to get a feel for who is running their money, so don’t just bring the marketer Post-2008, it is much more critical for investors to see, from an early stage, that the noninvestment side of the business is doing well; for new launches in particular, one or two founders (usually from the investment side) as well as representatives from the non-investment side (COO) should attend a pitch.” Anita Nemes, global head of cap intro, Deutsche Bank
Investors are generally wary of having too much time with the lead person because that implies they’re having lots of time spent not managing money. It is a question of good time management – if the head project manager can come in for a portion of the meeting to answer questions that should satisfy the investor.” Alastair Smith, marketing partner, Harmonic Capital
We like to see the depth of the team and pitchers must demonstrate a willingness for you to meet the team; particularly analysts. During the pitch, reference should be made to the analysts and other core team members as everybody goes on holiday or is off sick at some point so it is important for the investor to know that the whole team is strong.” A multi-billion dollar institutional investor
Prioritise substance over style
when preparing pitch materials and data Investors would prefer a 40-page pitch to a ten-page glossy; they want real and detailed trade examples and hard data rather than impressive looking performance graphs with no exact breakdown of figures. It can be hard to differentiate between one pitch and another otherwise – real substance is key.” Phillip Chapple, executive director, KB Associates
during Know your investor and pitch at the right level
Don’t take for granted that trustees understand the basics, all too often we see fund managers jump right into portfolio construction and risk management and things of that nature without starting with the very basics. Do it without talking down to trustees, in a very simple educational way and in doing so, you really empower the trustees to understand the merits of your strategy.” Liad Meidar, managing partner, Gatemore Capital Management It is a difficult balance between getting the message across and not becoming too technical. It’s important for a manager to show skill, but sometimes that skill is represented in jargon and that makes it difficult for less-experienced trustees to really understand. Do your homework; check what the level of experience is of the audience beforehand and pitch accordingly.” Guy Saintfiet, UK Head of Liquid Alternatives, Aon Hewitt 18 h f m w e e k . co m
what investors want to know, according to Phillip Chapple, executive director, KB Associates
Very often managers ask me what is ‘in vogue’; they ask what investors want strategy-wise and question whether they are positioning themselves effectively. It is extremely critical to sell what you have, and not try to fine-tune your fundamental product to what the investor wants. For example, if a manager has a merger arbitrage fund that does solely merger arbitrage, it’s not worthwhile calling it an event fund because event is in vogue – the investors will figure it out.” Anita Nemes, global head of capital introduction, Deutsche Bank
You really should be careful to tell the audience what you think it is that makes you special; you don’t want them to come to incorrect conclusions and you want to be able to guide them. There are many macro managers and long/ short equity managers out there so explain what’s different about you and why you might be interesting to them.” Alastair Smith, marketing partner, Harmonic CapitaL
6 -12 oc t 2011
What is the alpha proposition? How do you generate returns; is it your experience, your contacts? Give background and examples
Demonstrate that all the risk is in the strategy and not in the infrastructure this is the main area that investor due diligence is focused on
Stress testing
Value proposition explain what makes you stand out from the competition but be faithful to the fundamentals of the product
Get your story across quickly, you don’t have more than a few seconds to grab the investor’s attention so try and be concise. It is important to differentiate the fund and the team managing it, there are too many people trotting out the same platitudes.” gemma Godfrey, chairman of the investment committee, Credo Capital
The four pillars of the perfect pitch
assist investors on assessing how the product will behave in relation to the investor’s existing portfolio
Be transparent
acknowledge mistakes but don’t be defensive
It’s a non-starter not to be transparent, investors find out everything and the depth of the due diligence is such that you may as well start with all your cards on the table. At the same time, it is important not to be defensive and there is no need to dwell too long on mistakes. Explain what happened and how you learned from it and move on.” Anita Nemes, global head of capital introduction, Deutsche Bank 6 -12 oc t 2011
Identify and explain the main risks beneath the strategy investors want managers to describe the risks in their own words plus how they measure, monitor and mitigate them
after
Approach the follow-up process with care strike the right balance
Committing to investment is a slow burner and is about building a relationship. I give investors time to respond and then reach out. It is a mistake to go in with the approach of asking, ‘are you in or are you out?’ Ask if the investor needs any additional information and welcome feedback and suggestions – it acknowledges you respect and value their opinion.” Rahul Moodgal, partner - investor relations and business development, Parvus Asset Management It’s very important to maintain a smooth process and consistently follow up on all pitches. It’s common in smaller entities to overlook some of the steps and therefore even lose out on good prospects: every client likes to be followed and groomed.” Nicola Marinelli, portfolio manager, Glendevon King Asset Management
Obvious but overlooked a few other pitching tips to ensure you don't fall at the first hurdle
• Don’t be late • Leave time for questions and remember it’s a two-way process • Always show net profits not gross figures • Make eye contact with everyone you
are pitching to, not just one individual • Don’t come in smelling of alcohol or cigarettes after a boozy lunch (problem voiced off the record to HFMWeek)
Who else invests in the fund? Institutional investors are probably the safest pair of hands and have a big reputational risk. They are heavy on corporate governance and will want fellow investors who are willing to withstand volatility and not be putting pressure on the fund after their first down month. There is therefore safety in numbers with other long-term investors, so if there are other institutional investors already in the fund, it would be a good idea to make this clear” Large institutional investor
Manage Expectations
use conservative figures and avoid surprises Manage expectation; under promise and over deliver. It is better to be told, we are aiming for a 7% return and the fund returns 10% than say we are aiming for a 15% return. Avoid investor surprises which would motivate redemptions, were they to invest.” Gemma Godfrey, Chairman of the Investment Committee, Credo Capital h f m w e e k . c o m 19
