Private Equity Skills

What Skills Students Should Learn for Private Equity

I’ve been traveling for the last three weeks and during the flights I have been going through some white papers that I’d been meaning to read.  One particularly interesting paper is by a professor at Stetson University titled “Understanding the Skills Needed for Careers in Private Equity Investing.”  The research identifies a major disconnect between general finance education and that needed for investing in private equity.

Although many professionals receive a general business school education and work one or two years at an investment bank or other finance firm, it would be great if an MBA included a more focused study on private equity to prepare graduates for a very unique field.  There are signs of a shift toward educating students on private equity is the Tuck School of Business’s Center for Private Equity and Entrepreneurship as well as the University of North Carolina’s Kenan-Flagler Private Equity Fund which is largely run by students.  I hope that more research is done to show how students and business schools would benefit from a curriculum with a strong focus on private equity.

It’s crucial that students at least have a basic understanding of how to value companies, structure a deal, complete accurate due diligence, manage a portfolio and negotiate with investors and keep them satisfied.  The price for on-the-job training for a venture capitalist could be millions of dollars from your investors, so it’s important to have a curriculum that addresses specific skills necessary for working in private equity.  The skills that private equity professionals should have beyond the existing MBA and finance degree curriculum are:

1. Being able to realistically value businesses in an illiquid start-up context 
2. Contractually structuring the investment
3. Maintaining an effective personal network to both ensure adequate deal flow, and also assist  portfolio companies in securing critical resources
4. Possess the negotiating skills associated with both purchasing and selling an investment
5. Be able to coordinating thorough and effective due diligence

If you have not developed these skills or your business school has not addressed these needs, the author prescribes ways to improve these crucial areas:

1. Do not rely on the “general business requirements” to meet these skills.  
2. Some of these skills are process skills, meaning that they are developed by practice – not merely through understanding the process.   
3. Due diligence is on virtually no one’s curriculum.  There are great books available and free resources online to give you at least a surface knowledge of this area. 
4. A course in private equity investing can be demonstrated to accomplish the purposes of the business capstone class, and might be offered in lieu of Strategic Management, for example.

To read the full white paper, see here.

See our private equity career guide for more information on what you need to succeed in private equity

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Tags: private equity career, advice, skills, white paper, investments, skills needed, valuation, education, tuck school of business, due diligence, strategy, structuring, price, learning, education in private equity, buyouts

Financial Advisor Marketing

Financial Advisor Marketing Differences Q & A

Today I received this question from a New York based hedge fund marketer.

Question:When marketing to financial advisors for your hedge fund, what necessary steps do you need to take dealing with these guys? Is it any different that dealing with family offices?

Answer: Marketing to financial advisors is much different than marketing to single and multi-family offices. Here are the main differences between the two that I have noticed:

• Family ffices have more established due diligence procedures, often involving consultants or internal analysts which do nothing but look at hedge funds or alternative investment products.
• Financial advisors have lower minimum asset levels for what they will consider investing. 90% of family offices only seriously consider investing in hedge funds with at least $75M-$100M, and many require $250-$300M or even $1B in assets under management.
• Family offices are more tight lipped. It will take more effort to develop a relationship, meet in person and get clear feedback on why or why a hedge fund is a good fit for what they are looking for.
• Family offices are harder to identify in the first place. Financial advisors are easier to find, there are more of them and they advertise more openly. Some family offices advertise but many stay below the radar and some purposefully don’t even have a website.
• While family offices service to high net worth investors almost exclusively many financial advisors work with a broad spectrum of client types – this might require more caution by them and your fund in marketing products to them. It might also mean sorting through more financial advisors to find one with several HNW clients.
• In my experience financial advisors seem much more sensitive and motivated by how they will earn a commission or income from the transaction whereas many family offices charge rich enough fees that this is less of an issue.
• While some financial advisors may take 16-24 months to really get “on board” with a relevant hedge fund manager, understand your investment process and possibly invest most will come to terms a bit before then. Family offices on the other hand often take 18-24 months just to complete their due diligence and committee meetings, it is a very long sales process.
• Both family offices and financial advisors require genuine relationship-building efforts and tenacity
• From a legal standpoint there may be other precautions your fund should take but I am not a legal expert so I can’t provide any guidance within that space.

Permanent Link: Financial Advisor Marketing

Tags: Financial Advisor Marketing, Marketing to Financial Advisors, Marketing to Family Offices, Multi-Family Office Marketing, Financial Advisor Marketing Plan, Financial Advisor Marketing Ideas, Financial Advisor Marketing Strategies, Financial Advisor Marketing Systems, Marketing for Financial Advisors

Financial Advisor Marketing

Financial Advisor Marketing Differences Q & A

Today I received this question from a New York based hedge fund marketer.

Question:When marketing to financial advisors for your hedge fund, what necessary steps do you need to take dealing with these guys? Is it any different that dealing with family offices?

Answer: Marketing to financial advisors is much different than marketing to single and multi-family offices. Here are the main differences between the two that I have noticed:

• Family ffices have more established due diligence procedures, often involving consultants or internal analysts which do nothing but look at hedge funds or alternative investment products.
• Financial advisors have lower minimum asset levels for what they will consider investing. 90% of family offices only seriously consider investing in hedge funds with at least $75M-$100M, and many require $250-$300M or even $1B in assets under management.
• Family offices are more tight lipped. It will take more effort to develop a relationship, meet in person and get clear feedback on why or why a hedge fund is a good fit for what they are looking for.
• Family offices are harder to identify in the first place. Financial advisors are easier to find, there are more of them and they advertise more openly. Some family offices advertise but many stay below the radar and some purposefully don’t even have a website.
• While family offices service to high net worth investors almost exclusively many financial advisors work with a broad spectrum of client types – this might require more caution by them and your fund in marketing products to them. It might also mean sorting through more financial advisors to find one with several HNW clients.
• In my experience financial advisors seem much more sensitive and motivated by how they will earn a commission or income from the transaction whereas many family offices charge rich enough fees that this is less of an issue.
• While some financial advisors may take 16-24 months to really get “on board” with a relevant hedge fund manager, understand your investment process and possibly invest most will come to terms a bit before then. Family offices on the other hand often take 18-24 months just to complete their due diligence and committee meetings, it is a very long sales process.
• Both family offices and financial advisors require genuine relationship-building efforts and tenacity
• From a legal standpoint there may be other precautions your fund should take but I am not a legal expert so I can’t provide any guidance within that space.

I recently published a blog post which provided more tips on marketing hedge funds to financial advisors here: Marketing Hedge Funds to Financial Advisors and I have 30 additional articles within the Hedge Fund Marketing Guide section of my blog.

Finally, I run small websites on both third party marketing and family offices which may be of use.

- Richard

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Articles related to Financial Advisor Marketing:

1. Marketing Hedge Funds to Financial Advisors
2. Hedge Fund Public Relations
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4. Hedge Fund Jobs
5. Hedge Fund Managers
6. Sales Motivation
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8. Financial Public Relations
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Permanent Link: Financial Advisor Marketing

Tags: Financial Advisor Marketing, Marketing to Financial Advisors, Marketing to Family Offices, Multi-Family Office Marketing, Financial Advisor Marketing Plan, Financial Advisor Marketing Ideas, Financial Advisor Marketing Strategies, Financial Advisor Marketing Systems, Marketing for Financial Advisors

Hedge Funds Job

Getting Your Foot In The Door

I’m constantly getting asked: “How do I get my foot in the door and get my first hedge funds job?” Everybody wants to get in, especially ex-mortgage people. The perception is of astronomical pay, glamor, Hickey Freeman suits, Ferragamo shoes. Here are 3 tips to wedge your foot in that door…

1) Work for free. Industry switching usually means taking a cut in pay. To get your foot in the door, be willing to start commission-only or at a very low pay rate. Once you prove yourself valuable there will be plenty of opportunity.

2) Improve your pedigree. While there may be a few people involved with hedge funds who didn’t graduate from a good college – they are either unusually experienced or unusually brilliant. For most of us, pedigree matters. Consider going back for an MBA at a “name school”. Full-time programs are more fashionable than executive programs if you’re making an industry switch. Consider industry-specific training program and designations such as the CAIA, CHA, CPA or CFA.

3) Have friends on the inside. Getting hired off the street into a hedge fund, even for an entry-level job, is pretty hard. Getting hired at a hedge fund where one of your good friends works is not so hard. Keith Ferrazzi’s book “Never Eat Alone” is a new classic. Read it and then read it again.

Remember that the financial market is pretty tough right now. A lot of folks are sitting on the sidelines with their money and hedge funds, like everyone else, are trying to run lean and mean. Top performers with track record, pedigree, and “know how” are prized. Random people who washed out of other industries are in LOW demand. To get your foot in the door you’ll need to go the extra mile. That’s not what everyone wants to hear, but it’s the truth.

Marc Goormastic of Goormastic Executive Search

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Tags: Hedge Funds Job, Hedge Funds Jobs, Fund of Hedge Funds Jobs, Hedge fund of funds jobs

Marketing Internship

Third Party Marketing Internship

If you are looking for an internship within the area of third party marketing or hedge fund marketing please send me an email. We have room for two additional non-paid interns who would like to get their feet wet in this area and build a strong foundation of knowledge to start a career on. To apply please send an email to Richard@HedgeFundGroup.org.

Permanent Link: Third Party Marketing Internship

Tags: Third Party Marketing Internship, Hedge Fund Marketing Internship, Hedge Fund Sales Internship, 3PM Internship, Hedge Fund Capital Raising Internship

Hedge Fund Recruiting

Hedge Fund Recruiting – 3 Secret Handshakes

When I first glance at your info, there are clues right off the bat that tip me to either keep reading or hit the “delete” key. You might call these “secret handshakes” because top recruiters and hiring managers know them but they’re rarely discussed. Getting these right doesn’t guarantee you the job. It’s table stakes at the highest levels of competition. Here are 3 hallmarks of “A” players who know the “secret handshakes”:

1. Be Concise. Great people at great companies are concise. They have to be because they’re busy and their time is worth a lot of money. When I see resumes and emails with blathering I know the person just doesn’t get it. Ditto with phone and in-person interviews. A failure to be concise makes you look insecure, inconsiderate, and weak. Cut to the chase.

2. Be Discrete. Great people keep confidences and err on the side of understatement. They avoid gossip and they avoid trashing people or organizations. When ethics demand whistleblowing, they handle it professionally. That means revealing the problem through the proper channels to the proper authorities with no “leaking” and no drama creation. Discrete people are balanced when revealing their own past mistakes – giving adequate disclosure without getting too personal or graphic.

3. Focus On Results, Not Activities. Great people are results-driven. They get excited talking about what they have gotten done. Great people know that preparation, planning, meetings, and process-mapping are meaningless by themselves. Nothing happens until something happens. If the resume details accomplishments and achievements then my interest grows. If a resume limps along with gems like “managed relationships with 200 broker-dealer offices in 4 states” and “oversaw department of 20 people”, I start wondering whether you just like to run up the phone bill and sit on a pile of overhead.

If your resume suggests conciseness, discretion, and results-orientation then content begins to matter. Without these three things, it really doesn’t matter that you went to Stanford or worked at Citadel. Resumes don’t always give a clue to all three “secret handshakes” and that’s okay. No news is good news. But if your resume shows these things, it’s a leg up against the competition. Savvy recruiters gather info on these traits in the phone screen and the in-person interviews, so keep them in mind at all times. These 3 “secret handshakes” are key emotional intelligence competencies: they are common to almost all true “A” players.

- Marc

Permanent Link: Hedge Fund Recruiting
Tags: Hedge Fund Recruiting, Recruiting for Hedge Funds, Alternative Investment Recruiting, Fund of Hedge Fund Recruiting, Hedge Fund of Funds Recruiting

Hong Kong Hedge Funds

Guide to Hedge Funds in Hong Kong

Here is a short collection of articles on the Hedge Fund Industry in Hong Kong.

I am always looking for more valuable online tools and resources to add to these geographical hedge fund guides. If you have a white paper or PowerPoint that I can include here please send me an email and I will post it to this hedge fund blog for everyone’s benefit.

1. Hong Kong named as the center of Asian hedge fund activity.
2. Job guide for Hedge Funds in Hong Kong: http://jobs.efinancialcareers.hk/Hedge_Funds/China-Hong_Kong.htm
3. Here is a short article we recently published on Hong Kong’s SFC: Hong Kong Securities and Futures Commission SFC
4. Business Week article about the growing hedge fund mania in Asia: http://www.businessweek.com/magazine/content/04_51/b3913155_mz035.htm
5. Interesting release from the Hong Kong Investment Funds Association: http://www.hkifa.org.hk/eng/newsevents_kpr_071502.aspx
6. Information regarding Opalesque Hong Kong Roundtable (Opalesque is the world’s largest subscription-based publisher covering the alternative investment industry) http://www.free-press-release.com/news/200805/1209968392.html
7. Interesting source about the marketing of hedge funds in Hong Kong: http://www.aar.com.au/pubs/asia/fohkdec02.htm
8. News regarding Nezu Asia Limited, a Hong Kong hedge fund with over $1 billion in assets: http://www.advancedtrading.com/showArticle.jhtml?articleID=207801819
9. “Hong Kong Hedge Fund in Disarray”: http://www.thestreet.com/_tscana/markets/willswarts/10166266.html
10. Hong Kong simplifies the licensing of hedge funds: http://uk.reuters.com/article/marketsNewsUS/idUKPEK15602120070611
11. Hedge funds flock to Hong Kong: http://banking.hktdc.com/suc-e481.htm
12. “Retail hedge funds in Hong Kong and Singapore”: http://www.aima.org/uploads/Deacons70.pdf
13. How to start a hedge fund in Hong Kong: http://www.mondaq.com/article.asp?articleid=59672
14. Hong Kong will not relax hedge fund rules: http://www.iht.com/articles/2006/11/07/bloomberg/bxbrief.php
15. Hedge Fund jobs in Hong Kong: http://jobs.efinancialcareers.hk/Hedge_Funds.htm
16. Good overview of hedge fund regulations in Hong Kong & China: http://www.pillsburylaw.com/content/portal/publications/2008/5/20085618535546/Complinet_04-15-08.pdf
17. Interesting article about the Hong Kong hedge fund Hindsight: http://www.asianinvestor.net/article.aspx?CIaNID=78956
18. Survey confirming dramatic growth of Hong Kong hedge fund industry: http://www.sfc.hk/sfcPressRelease/EN/sfcOpenDocServlet?docno=06PR221
19. New York Times article about hedge funds in Asia and U.S: http://query.nytimes.com/gst/fullpage.html?res=9503E5DE1139F93AA1575AC0A96E958260
20. Hedge fund expands into Hong Kong to increase global reach: http://www.investhk.gov.hk/PageControl/ShowDynamic2962.html?act=newsdetail&newsid=1571

- Richard

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Permanent Link: Hedge Fund Hong Kong

Tags: Hedge Fund Hong Kong, Hong Kong Hedge Funds, Hedge Funds in Hong Kong, Hedge Fund in Hong Kong, Hedge Fund Conference in Hong Kong, Hedge Fund Jobs in Hong Kong, Kowloon,

Hedge Fund Operational Risk

Hedge Funds – Operation Risk Assessments

As the hedge fund industry. matures and manages more assets, investors have developed more thorough due diligence practices. In this white paper cited below investors are warned to scrutinize the operational structure of a fund, as the author believes that some hedge funds are poorly managed with a small staff relative to the massive assets under management.

This white paper recommends a rigorous operational due diligence review that covers the manager’s overall fund structure, back office structure, valuation and independent oversight. The guide looks at several key considerations for hedge fund investors: the experience of the operations personnel, compliance, internal operations, portfolio pricing and the quality of the service providers. There is good news on operational infrastructure, in that middle office functionality has improved with the addition of more major outsourcing providers. Yet a thorough operational due diligence review is still very necessary for hedge fund investors. I thought this resource might be useful to many fund of fund professionals and investors.

Resource: Whitepaper on Hedge Fund Operational Risk & Transparency

- Richard

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Permanent Link: Hedge Funds Operational Risks

Tags: Hedge Funds Operational Risks, Operational Risks of Hedge Funds, Operational Riskiness of Hedge Fund Investing, Operational risk assessment for hedge fund investments