Lunatics in charge of the AsylumFebruary 3, 2015
Starting off in an independent business at the turn of the Century saw a totally different landscape to now. As an industry the boutique fund management world, in all its forms, has gone from being a cottage industry for friends and family to one that is looking to attract institutional capital and relationships.
I read a paper published by Wilson Willis at the weekend entitled “What investors want from Hedge Funds”. I was struck by the frankness of the opinions of the investors who participated in the round table and the comments that they made. It was very soon apparent that the central core messages of the paper could be applied to any Investment Management Business in any form.
So what are some of the key take conclusions from the article and from experience?
Talented Fund Managers don’t necessarily make great Business Managers. The skill of a fund manager is to analyse and think down in their sector. Years of being trained to do this will not necessarily instil the skills to look up and think about where a business is going.
So from the start plan the development of a strong business skeleton that can react to the growth of the organisation. Be prepared to delegate functions not only in title but also in control. Bring in those that are also willing to share and delegate as the business grows.
The best marketing pitches don’t win mandates but performance and building relationships do. No one will be right all of the time but a full explanation of why you are currently out of tune with the market will go a long way to ensuring continuing support. Don’t try and inform everyone yourself but delegate to those who will for you.
Have confidence to use outside advisors who may see bottle necks and pinch points from the outside which may not have been reached. For instance I learnt many years ago to talk to your Bank about a future funding problem even though it might be 6-9 months off Its amazing how they then work with you. People don’t like business “surprises”.
If you are looking to attract outside funds plan to be totally transparent to those that are invested and less so to those who are just shopping. It is quite often you hear a tit bit being given to a potential new client which will not be known to an investor. Why?
Be transparent with everyone in the organisation as you want the same message to come from everyone. That will give the organisation its strength and character.
Lucky lunatics do exist so make sure you don’t invest in the asylum. Make sure that you not only understand what you are investing in but also the business risk of the organisation. Advice at an early stage is very cheap against being involved in a downward spiral of illiquidity and unable to get your money back for many years.