Leveraged Loans

Sperling of THL Partners Talks Leveraged Loans

Scott Sperling, co-president at Thomas H. Lee Partners LP, believes that the credit markets are large enough and active enough to refinance current leveraged deals.  However, he remains “cautious” and “concerned” after the credit crisis and does not completely discount the estimated $430 billion of leveraged loans.  Many of these loans will be called in 2012-2014 but buyout firms will likely try to extend these bank maturities.  Sperling is optimistic about his buyout firm and others being able to restructure these loans, “the capacity exists within the market,” he says.  E-mail subscribers can view the following video here.

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Tags: private equity, scott sperling, scott sperling thl partners, thl partners boston private equity firm, boston private equity firms, leveraged buyout loans, leveraged loans, loans to private equity firms, loans

Directive on Alternative Fund Managers

Costs of EU’s Directive on Alternative Fund Managers

European hedge funds are facing tough regulation and stiff taxes from the UK and European Union.  Last month, the UK announced that it will begin taxing individuals earning more £150,000 (about $247,000) a year at a rate of 51%.  This decision led many hedge funds to leave the UK for more business-friendly countries, namely Switzerland.

Now, the European Union is considering a law that will effect not only private equity and hedge funds but also EU tax revenues.  The proposed rules are estimated to cost almost $3 billion in its first year and about $1.5 billion each following year.  The Directive on Alternative Investment Fund Managers seeks to regulate and impose capital requirements on funds managing more than 100 million euros.

A significant cost may fall on the hedge funds and private equity firms which will shoulder a major burden in compliance costs.  A recent survey estimates that compliance expenses will rise by about a third from the directive. 

London, home to at least 80 percent of Europe’s estimated $400 billion in hedge-fund assets and about 60 percent of Europe’s private-equity firms, may suffer as funds decide that leaving is easier than complying with new regulations, the survey authors said.

“Thousands of jobs and millions of pounds in tax revenues could be at stake,” according to a report by Mats Persson, research director at Open Europe. “There would be little incentive for fund managers to remain in the EU at all.” The survey showed 2 percent of investors in the funds support the proposal, while 46 percent oppose it.

Britain’s Financial Services Authority last week organized a one-day conference in London about the costs and consequences of the directive, which Paul Myners, the U.K. treasury minister called “flawed.” Poul Nyrup Rasmussen, the Danish former prime minister whose Socialist Party president introduced the legislation, said this month that the proposal may need “tightening.” source

Read about the UK Hedge Funds Tax

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Tags: Directive on Alternative Fund Managers, Directive on Alternative investment Fund Managers, eu hedge fund regulation, european union, hedge funds, private equity, uk tax laws, investments

Placement Agents Pay to Play

4 More Firms Settle in Placement Agent Pay to Play Scandal

The use of placement agents has come under fire following a public investigation into the practice and investigations into whether a pay-to-play scheme is used in attracting capital from pension funds.  The most recent development is that New York Attorney General Anthony Cuomo’s investigation into pay-to-play arrangements between the state’s pension fund and placement agents for private equity firms has forced four more firms to settle.  Reforming the current system has been met with some resistance especially from firms who argue that outlawing the use of placement agents puts smaller and new private equity firms at a significant disadvantage in raising capital.

The four private equity firms are: Access Capital Partners, Falconhead Capital, HM Capital Partners and Levine Leichtman Capital Partners.  Each has agreed to adopt the rules proposed by Mr. Cuomo barring the use of placement agents to attract funding from pension funds.  Additionally, each firm will pay a total $4.5 million in damages.  Carlyle Group and Riverstone Holdings already settled with the Attorney General. 

“With seven firms now having signed our code of conduct, momentum is building in the industry to make our code the national standard to eliminate pay-to-play in public pension funds across the country,” Cuomo said.

Six people have been indicted so far in the scandal at the New York State Common Retirement Fund. Two have pleaded guilty for their role in the scheme which paid kickbacks to a pair of top aides to former New York Comptroller Alan Hevesi, whose office oversees the Common Retirement Fund.

HM Capital and Falconhead both employed a firm run by a key Hevesi aide indicted in the scandal, Hank Morris, while Access and Levine Leichtman unknowingly hired firms that split fees with Morris. Access had hired Barrett Wissman, who has pleaded guilty for his role in the pay-to-play scheme, who in turn allegedly paid off Morris to win the firm business.  Source

Meanwhile, the SEC’s proposed guidelines that aim to clean up the pay-to-play system may have a very damaging effect on new and smaller private equity firms.  The current system (ethical, or not) enables small and newly launched private equity firms to net capital from investors that it otherwise probably would not have access to.  The big buyout shops are able to use name recognition and a proven track record to entice investors without the need of placement agents, although some big firms use them anyway.

Without using such agents, small and new funds will have a tougher time raising money, critics say. While large, established firms are well known enough to simply contact a pension fund directly, smaller funds without a brand or history have a far tougher job getting heard.  “I think the proposal’s a bit draconian, particularly on banning placement agents,” said Steven Kaplan, a professor of finance at the University of Chicago.

Supporters of the placement agent industry — which includes brand name firms such as Credit Suisse’s (CSGN.VX) placement agent unit and Blackstone Group’s (BX.N) Park Hill Group — argue that their role has no similarity with political fixers, and they should not be tarred with the same brush.  Source

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Tags: placement agents, new york, rules, anthony cuomo, attorney general, private equity, buyouts, placement agents pension funds, new york pension probe, placement of pension funds, pay to play scandal

Private Equity Real Estate Tips

Private Equity Real Estate Tips for Success

One of the most common requests I receive from readers is to cover private equity real estate in more detail. There is a great deal of information on real estate and private equity but very little on private equity real estate funds. I am working to fill this void so if you have any white papers, articles, videos or personal insight please contact me at Theo@peblogger.com I came across this document on private equity real estate funds. The author, Deloitte, prescribes five areas to focus on to achieve success in private equity real estate.

Attracting capital

• Build and sustain an exceptional investment yield track record.
• Build and maintain an eminent and well-regarded team of advisors, including bankers, accountants, lawyers, and other specialists.
• Obtain access to qualified investors.
• Make sure that satisfied and loyal investors receive timely and effective communications, including financial and tax reports.
• Establish, promote, and protect a brand that exudes quality, skill, and integrity.

Sourcing and qualifying investment opportunities

• Do the right things to make people want to do business with you: Demonstrate that you understand the important issues, you conduct due diligence effectively and efficiently, and you have credibility to close.
• Build an extensive network of joint venture partners who are trustworthy and skillful.

Fund and investment structuring

• Structure investments that are suitable, attractive, and efficient for domestic individuals, tax exempt institutions, and a variety of foreign investor profiles.
• Establish best practice fee structures that align your interests with those of your investors.
• Determine the right degree of leverage on investments and for the fund overall.
• Structure investments to minimize federal, state, and foreign income, and asset & transfer tax costs, thereby providing optimal after-tax yield to investors and you.

Investor reporting and operational excellence

• Develop and operate properties efficiently and effectively.
• Build and retain a skilled team at the advisor level.
• Comply with all financial and tax regulatory matters in a timely fashion.

Exit strategies

• If desired, effectively recycle capital within a fund.
• Correctly gauge ideal timing for closing a fund and starting a new one with the same investor group.

Source

The preceding advice is from Deloitte and is not necessarily suggestions from this website, please see a qualified legal consultant.

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Tags: private equity, real estate, private equity real estate, private equity real estate funds, firms, buyout real estate, private equity funds, real estate funds

Government & Private Equity

When Government Policies Effect Private Equity

In the aftermath of the financial crisis, federal and state legislators and regulators have been considering ways to monitor the private equity, venture capital and hedge fund industries. I just spent a week in Washington, D.C. and streets and buildings around the Capital were crowded with lobbyists and policy-makers working to push legislation through. While all these bills do not specifically concern private equity firms, many affect their portfolio companies and the industries they compete in.

With President Obama in the White House and the Democratic majority in Congress, private equity firms are bracing for major changes in areas outside of finance such as labor unions, health care, economic policy and energy. Changes on any of these fronts will inevitably effect some private equity firms and the companies they are invested in, according to panelists at a recent Private Equity Analyst Conference.

In economic policy, the recovery of the financial system and the stimulus packages are important in reviving consumption in portfolio companies from retail to manufacturers. The drastic revamping of the health care industry could have significant effects on the medical and bio firms that venture capital firms hold. The energy sector may benefit from a Democratic government hoping to “go green” and give some of these environmental startups a chance. With Obama and Congress taking on so many issues in the last few months, private equity firms and venture capitalists are unsure of what to expect.

“Policy does impact the bottom line of portfolio companies,” said Mark Heesen, president of the National Venture Capital Association. He added that venture investors have been moving more heavily to doing deals in life sciences and clean technology, both areas that are heavily regulated.

Private-equity firms are also intently focused on broad financial system reform, even the portions of it that don’t appear directly related to their business. Bryan Corbett, a principal with the Carlyle Group, mentioned as one example the impact that higher reserve requirements at banks are likely to have on private-equity firms.

Speakers were also concerned about the regulation that is specifically targeting the private-equity industry, especially legislation that would require all private-equity and venture capital managers to register with the Securities and Exchange Commission, and new proposed rules that might ban the use of placement agents in soliciting capital from public pension funds. Source

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Tags: private equity, private equity policy, venture capital, government policy, venture capital association, concerns, government regulation of private equity, government regulation buyouts

Private Equity Networking Events

5 Tips for Networking at Private Equity Events

If you’re looking to enter the private equity industry either working directly for a buyout firm or as a service provider to one, networking events and conferences are a great way to get your foot in the door. On September 17th, private equity professionals can enjoy breakfast in New York City with one of Blackstone Group’s founders, Peter G. Peterson. For more information on this event, see this article or e-mail aengel@argyleforum.com. And for those interested in the hedge fund industry such as fund service providers, Hedge Fund Premium is hosting a free event for members in Chicago. For more information see this website. Whether you are attending these events or not, this article will give you some advice on attending networking events and investment conferences.

Many professionals fail to take advantage of these opportunities, even those who attend. Here are 5 tips that should prepare you for attending a networking event or conference:

1. Don’t Be Shy: it’s a good start to attend a private equity event but you do not gain anything if you do not talk to other attendees, speakers and sponsors. The event is only valuable if you make it valuable, so network and socialize with those around you.
2. Don’t Scare People Off: Another mistake is to be too forward when approaching managers or service providers, especially those looking to land a job in private equity. Instead of sharing insights and thoughts on the industry, many young professionals will focus entirely on their own needs (a job) and ignore those managers or executives that are not currently hiring. This is the wrong mentality. Assuming you have been following the industry and paid good attention to the speaker, you will have a good starting point for initiating a conversation. Ask questions when appropriate and listen when the other person is speaking. If you are looking for a job, don’t start a conversation with that problem. Those who work in the industry are not paying to hear someone complain about not working in private equity. But you should mention it if the timing is appropriate.
3. Get Your Name Out There: If you cannot find a hiring firm or no firms are interested in your product or service, don’t despair, get your name out there. It may just be an inconvenient moment or the person you are talking with is not the right person at the firm; for example, if you are marketing your auditing service to a principle in charge of evaluating deals, he may not be interested. Give him your business card regardless, in a quarter the firm may be looking for a new auditor and still have your card. Even if you do not directly land a client through this method, it boosts your firm or your own name recognition. If you’re looking for a job (from analyst to executives) give your card out, when the firm is eventually hiring they will probably have your name on file.
4. Prepare an Elevator Pitch: It may not sound great, but you are a product that needs to be sold. Therefore you need to have a great elevator pitch that comes out effortlessly. Whether you are looking to network, marketing to investors or job seeking, a solid elevator pitch is necessary. Be concise and include only essential information. To learn more about crafting a great elevator pitch see these articles, Developing an Elevator Pitch and Elevator Pitch Essentials (also the title of a helpful book on the subject).
5. Look and Act like a Professional: Even though you are not at work when you’re attending an event or conference, act like you are. You are meeting potential clients and partners, so you essentially are working. Wear a suit and if it’s hot, as many crowded events are, at least make the initial effort and take off your coat once you sit down. Your mother was right, first impressions are very important. So, look your best (haircut, shave and a suit) or no one will take you seriously. It’s better to be overdressed than underdressed. Remember your manners, especially if it is catered event and use language that you would be comfortable using in the office.

Information on a September 17th private equity event in NYC
Tips for writing a solid elevator pitch here.

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Tags: 5 tips for networking, five networking tips, advice to network, private equity, buyout events, private equity events, hedge fund networking, events finance, conference networking

Private Equity Service Provider Jobs

Private Equity Service Provider Jobs

I receive many e-mails each month from professionals interested in working in private equity. They are hardly ever searching for a position outside of a private equity firm, as a service provider. This is not really surprising considering the great compensation and benefits from working for a private equity firm, but a service provider career can be just as rewarding. You miss out on some great job opportunities by strictly limiting your career search to the typical positions within a buyout firm such as analyst, associate or junior portfolio manager.

While some service provider jobs may seem less glorious than working directly for a private equity firm, there are great career opportunities for someone who has experience in fields that may not fit exactly into private equity. For example, an accountant may have an interest in private equity but has no experience in raising capital, investor relations, finding and executing deals or any other part of the buyout process. While he may have a tough time finding employment in a private equity, he could be taken on as a specialized alternative assets auditor. This offers competitive compensation and a chance to work one on one with buyout firms because service providers work with multi-million dollar and even billion dollar clients.

Attorneys, third-party and fund-of-fund marketers, fund administration and IT technology service providers can also work in the private equity industry. By taking the less traveled route, career professionals can land high-paying and rewarding jobs in private equity.

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Tags: Private equity, private equity service provider, private equity service provider jobs, private equity services, private equity careers, private equity jobs

Top 5 Hedge Fund Website Rankings

Based on the Alexa Traffic Ranking Tool here are the top 5 Hedge Fund Website Rankings:

1. HedgeFundBlogger.com, Alexa: 122,000
2. HedgeCo.net, Alexa: 140,000
3. Albourne Village: 240,000
4. HedgeWorld: 455,000
5. HedgeFund.net: 539,000

One way to judge popularity of a website is through it’s Alexa Traffic Ranking, the smaller the ranking the more traffic the website gets. Websites like Amazon.com and Google have rankings of #7 and #1 while typical blogs rank anywhere from #50,000 to #900,000.

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Hedge Funds 101 Video

Below is a video on hedge funds. While parts of the video are good, generalizations are made about the industry which I do not believe are true. All hedge fund managers do not “hedge” and many are not “adventurous.” Hope this is helpful. Also, there are many more rules that hedge funds typically must follow, this video makes the process sound more simple than it really is.

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Private Equity Blogger.com Resource

If you are looking to learn more about Private Equity as an investment, career or for prospects for your small business please refer to PrivateEquityBlogger.com. This is a blog ran by the H Media Group and it contains over 500 unique articles, videos, interviews, book reviews and Q & A pieces on private equity. Here are links to their top 50 resources:

1. Private Equity Jobs and Careers
2. Private Equity Videos
3. Alternative Investment Jobs
4. Private Equity Tracker Tool
5. Service Providers
   
6. Private Equity Book
7. Private Equity Associate
8. Private Equity Industry
9. Private Equity Directory Listings
10. Hedge Fund List
11. Private Equity and Hedge Funds
12. Private Equity MBA
13. Private Equity Real Estate List
14. Private Equity Conference
15. Private Equity Real Estate
16. Private Equity Forum
17. Access PEBlogger.com Archives
18. Resume writing
19. Private equity partner
20. Venture Capital Associate
21. Private Equity Positions
22. Private Equity Job Database
23. 3i Group PLC
24. Admiral Capital Group
25. Apollo Management
26. AXA Private Equity
27. Baring Private Equity
28. The Carlyle Group
29. Goldman Sachs Capital Partners
30. Leonard Green & Partners
31. KKR Private Equity
32. The Future of Venture Capital
33. Private Equity in Africa
34. Angel Investing Video Part 1
35. Angel Investing Video Part 2
36. Angel Investing Video Part 3
37. Private Equity in China
38. Venture Capital Bloggers Video
39. Raising Venture Capital Video
40. Private Equity Boom
41. Private Equity Real Estate Video
42. Middle East World Economic Forum Discussing Private Equity 2007
43. General Partner Fees
44. Independent Directors for Private Equity Funds
45. Private Equity in Brazil
46. Private Equity Activity 2009
47. FDIC Private Equity
48. Mechanical Trading Systems by Richard Weissman
49. Sri Lanka Investments
50. Michael Jackson Private Equity

Tags: private equity, private equity industry, private equity blog, blog on private equity, private equity articles, private equity resources, private equity book, private equity author

Private Equity Blogger.com Resource

If you are looking to learn more about Private Equity as an investment, career or for prospects for your small business please refer to PrivateEquityBlogger.com. This is a blog ran by the H Media Group and it contains over 500 unique articles, videos, interviews, book reviews and Q & A pieces on private equity. Here are links to their top 50 resources:

1. Private Equity Jobs and Careers
2. Private Equity Videos
3. Alternative Investment Jobs
4. Private Equity Tracker Tool
5. Service Providers
   
6. Private Equity Book
7. Private Equity Associate
8. Private Equity Industry
9. Private Equity Directory Listings
10. Hedge Fund List
11. Private Equity and Hedge Funds
12. Private Equity MBA
13. Private Equity Real Estate List
14. Private Equity Conference
15. Private Equity Real Estate
16. Private Equity Forum
17. Access PEBlogger.com Archives
18. Resume writing
19. Private equity partner
20. Venture Capital Associate
21. Private Equity Positions
22. Private Equity Job Database
23. 3i Group PLC
24. Admiral Capital Group
25. Apollo Management
26. AXA Private Equity
27. Baring Private Equity
28. The Carlyle Group
29. Goldman Sachs Capital Partners
30. Leonard Green & Partners
31. KKR Private Equity
32. The Future of Venture Capital
33. Private Equity in Africa
34. Angel Investing Video Part 1
35. Angel Investing Video Part 2
36. Angel Investing Video Part 3
37. Private Equity in China
38. Venture Capital Bloggers Video
39. Raising Venture Capital Video
40. Private Equity Boom
41. Private Equity Real Estate Video
42. Middle East World Economic Forum Discussing Private Equity 2007
43. General Partner Fees
44. Independent Directors for Private Equity Funds
45. Private Equity in Brazil
46. Private Equity Activity 2009
47. FDIC Private Equity
48. Mechanical Trading Systems by Richard Weissman
49. Sri Lanka Investments
50. Michael Jackson Private Equity

Tags: private equity, private equity industry, private equity blog, blog on private equity, private equity articles, private equity resources, private equity book, private equity author

Below please find a list of top 20 Family Office and Alternative Investment websites which are ran by the H Media Group and others in the industry:

1. Family Offices Group
2. Hedge Fund Blogger.com
3. Albourne Village
4. Third Party Marketing .com
5. Magnum Fund Articles
6. Family Office Database
7. Harvard Hedge Funds Guide
8. Hedge Fund Startup Guru.com
9. The Wealth Report by the WSJ
10. Private Equity Blogger.com
11. NY Times Dealbook – on Hedge Funds
12. Fund Administration .org
13. Fintag’s Hedge Fund News Site
14. Prime Brokerage Guide.com
15. SEC Website on Hedge Funds
16. Hedge Fund Certification.com
17. Google News on Hedge Funds

Tags: family office, family offices, alternative investments, hedge fund, hedge funds, private equity, wealth management, financial planning, investing, investor resources, top 10, top 5, top 20

Hedge Fund Infrastructure Investments

While we don’t usually publish videos put out by industry service providers, below is a very professional interview-based video created by Advent Software. Within this video they talk about hedge fund infrastructure, investing in improving operations, and the pay-off periods of doing so. Click here to view the embedded video below.

View over 100 videos on hedge funds within our Hedge Fund Video Library.

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Private Equity Blogger.com Archives

This article below was first published on HedgeFundStartupGuru.com. Last week I moderated a panel discussion in new york on capital raising and how starting a fund is really starting a small business. The discussions were great and while everyone knows that capital is hard to raise some good tips and investor feedback came out of the event. We hope to do more of these in the future, stay tuned for Hedge Fund Group (HFG) event announcements for Chicago next month and Moscow, Russia this September. Below please find an article on hedge funds tar

The gyrating financial markets have proven difficult for even the most experienced alternative-investment managers to navigate over the last year, but startup hedge funds and commodity trading advisors now confront an even tougher challenge: convincing investors to entrust them with their money.

In the wake of 2008 – the hedge fund industry’s worst year on record – fledgling funds face gun-shy investors and tougher competition for the assets that are available, amid a fickle market that has made it tough to put up the numbers that made hedge funds famous. Adding to the problem are the effects of … source

For related resources please see HedgeFundStartupGuru.com, ThirdPartyMarketing.com and our own Hedge Fund Marketing & Sales Guide and Hedge Fund Startup Guides.

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Venture Capital Forum

Audio from the Venture Capital Forum

Dan Primack of PeHUB the audio from a venture capital forum that he moderated a couple months ago. The conference is invite-only for technology entrepreneurs and investors. Panelists included: Brad Feld (Foundry Group), Josh Kopelma (First Round Capital), Jo Tango (Kepha Partners) and Eric Hjerpe (now with Kepha, but an official free agent at the time).

The panelists shared some interesting insights such as telling which firm they’d join if their’s didn’t exist, Josh comparing troubled portfolio companies to train fires and Brad’s argument that the survival of venture capital as an asset class is mostly irrelevant to his business.

Here is link to the audio for Venture Capital Forum Audio

Tags: venture capital forum, venture capital conference, private equity forum, private equity conference, private equity

Family Office Capital Raising Advice

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Family Office Capital Raising Advice

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

Family Office Capital Raising Advice

I often get asked how a fund should effectively work with a family office to slowly grow a relationship and be considered for an allocation. Many funds are interested in raising capital from family office wealth management firms because just a hand full of successful relationships may significantly raise the total assets under management for the firm.

Family Office Definition: A family office is a wealth and financial management firm setup to protect and grow the assets of single wealth family or group of families and wealthy individuals. Typical multi-family office clients have $30M or more in assets each, while many single family offices manage well over $250M in assets. The services provided by many family offices includes tax preparation and planning, wealth transfers, portfolio management, budgeting, real estate management, and insurance services. Many family offices exist because they offer a full spectrum of services which ensure that the client’s total financial picture is taken into consideration before decisions are made.

Tips on how to work with family offices:

• Many family offices are called daily by asset managers looking to build relationships, try to be local, different, more professional or more organized while meeting or working with family offices.
• Focus on providing details on your team, competitive advantage and risk management process, a 7+ year track record or better will set you apart from many.
• Similar to many other types of investors, Capital preservation and consistency usually will take precedence over volatile high returns.
• High performance returns alone does not gain you any ground with a family office, in fact too high of returns may simply appear as risky and typically the most inexperienced fund mangaers concentrate their relationship development efforts on touting their high performance returns.
• There are over 2,000 family offices in the United States alone, if you have gained some traction within this space it would be wise to allocate 30% of your time to this distribution channel and assign someone to help grow assets within this space. There are so many family offices to grow relationships with that anything less than a concerted effort using a dedicated professional and database of family offices may not be worth it.
• Communicate through multiple channels. Sometimes sending a folder on your company, a well thought out but very concise email and then a phone call can be most effective while building a new relationship. Using these other marketing tools instead of just simply blasting out emails or calling everyone can make for a more productive relationship.
• Do not call a family office that you would like to work with on a daily basis, they are relatively small organizations and do not have the time to work with groups which do not provide them with the professional consideration and space to reply in time to incoming requests. While I raised capital from wealth management firms and family offices we would touch base and follow up with these firms every week and a half, this way we try to stay on top of their minds without bugging them too much.

For a database of family office contacts please see FamilyOfficesDatabase.com, for a free-to-access collection of articles on family offices please see FamilyOfficesGroup.com.

Related to Family Office Capital Raising Advice

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3. 5 Unique Hedge Fund Marketing Tactics (3 of 5)
4. Marketing to Institutional Investors
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Tags: Capital Raising, Raising Capital from Family Offices, family office family offices, wealth management, financial advisors, hedge fund, hedge funds, private equity, alternative investments

5 Unique Hedge Fund Marketing Tactics (3 of 5)

This is part 3 of 5 within a series on unique hedge fund marketing tactics that managers should investigate further while working to raise capital for their funds. Before taking any of these actions please consult with your compliance and legal counsel for confirmation that you are able to use these methods to market your specific fund.

Forget about contacting more investors. Yes, it may seem illogical to forget about contacting new investors while attempting to raise capital, but this may be what you need to do to meet your business goals. Many of the hedge funds I speak to want to be connected with investors, they want lists of family offices, seed capital providers or HNW wealth management firms. While accessing more investor contact details may be a useful resource and improve your marketing efforts it is often not the real constraint which is holding your business back.

No business is perfect, every business has some constraint which if removed would help the business more than anything else. Sometimes this constraint is portfolio management expertise, sometimes it is marketing materials, and many times it is lack of institutionalized processes and tools. Very seldom do I meet with hedge funds which if provided with a long list of 1,000 investors would explode in assets under management.

Most hedge funds do not take the time to right down all of their current business problems or symptoms and ask the why questions needed to identify the root constraint within their business model. A good tool that I have seen used by half a dozen management consulting gurus is the “4 Why Process.” If you ask why something is happening 4 times you will get to the root cause of the problem.

• Initial Problem/Symptom: Why don’t we manage $100M in assets yet? Why?
• Potential Answer: We are not raising capital from wealth management firms as you had hoped. Why?
• Potential Answer: Our marketing materials have not been brought up to part with the competitions, they are light and our investment process is poorly described. Why?
• Potential Answer: We now that you should be paying a consultant or in-house marketer to help with both marketing materials and generating relationships but you have not hired one. Why?
• Potential Answer: We do not have the profits available to hire a full time marketer but we get around to creating a system to share equity, grow relationships with third party marketers or build a marketing related advisory board.

The point of this exercise is to identify what the bottleneck is that is slowing down your growth. A hedge fund can be seen a 20 link chain, you must have all 20 strong links in place to keep the business growing long-term. If 19 links can carry the weight of a $300M fund but one link is only up to par for a $10M fund than you will limit your growth and you may never or only very slowly grow into a $300M fund. The biggest return for your investment of time and money will be to focus on that one broken or sub-par link within your operations, marketing, trading or internal business processes, anything else would be a relative waste of money or energy.

This is a unique marketing technique because it is a reminder that the smartest thing you could do for your marketing and sales campaign may have nothing to do with picking up a phone or buying a database of investors. Before spending more money or valuable time try to consider the following 2 tips for improving your ability to attract investors:

Use the “4 Why Tool” to drill down deeper into the top 5 problems that you see your fund facing right now. Often times 3-5 problems will often be symptoms of a single root cause which can be directly addressed.

Ask others including your advisory board, current investors, potential investors and co-workers what is holding your fund back. Do not settle with two word surface answers and try to identify what 3-5 action steps your fund could take this quarter to improve how you are positioned and address the #1 limiting factor in your business.

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Tags: Hedge fund marketing, capital raising, fund marketing, third party marketing, hedge fund, hedge funds, private equity, alternative investments, marketing, sales, fundraising

5 Unique Fund Marketing Tactics (3 of 5)

This is part 3 of 5 within a series on unique hedge fund marketing tactics that managers should investigate further while working to raise capital for their funds. Before taking any of these actions please consult with your compliance and legal counsel for confirmation that you are able to use these methods to market your specific fund.

Forget about contacting more investors. Yes, it may seem illogical to forget about contacting new investors while attempting to raise capital, but this may be what you need to do to meet your business goals. Many of the hedge funds I speak to want to be connected with investors, they want lists of family offices, seed capital providers or HNW wealth management firms. While accessing more investor contact details may be a useful resource and improve your marketing efforts it is often not the real constraint which is holding your business back.

No business is perfect, every business has some constraint which if removed would help the business more than anything else. Sometimes this constraint is portfolio management expertise, sometimes it is marketing materials, and many times it is lack of institutionalized processes and tools. Very seldom do I meet with hedge funds which if provided with a long list of 1,000 investors would explode in assets under management.

Most hedge funds do not take the time to write down all of their current business problems or symptoms and ask the why questions needed to identify the root constraint within their business model. A good tool that I have seen used by half a dozen management consulting gurus is the “4 Why Process.” If you ask why something is happening 4 times you will get to the root cause of the problem.

• Initial Problem/Symptom: Why don’t we manage $100M in assets yet? Why?
• Potential Answer: We are not raising capital from wealth management firms as you had hoped. Why?
• Potential Answer: Our marketing materials have not been brought up to part with the competitions, they are light and our investment process is poorly described. Why?
• Potential Answer: We know that you should be paying a consultant or in-house marketer to help with both marketing materials and generating relationships but you have not hired one. Why?
• Potential Answer: We do not have the profits available to hire a full time marketer but we get around to creating a system to share equity, grow relationships with third party marketers or build a marketing related advisory board.

The point of this exercise is to identify what the bottleneck is that is slowing down your growth. A hedge fund can be seen a 20 link chain, you must have all 20 strong links in place to keep the business growing long-term. If 19 links can carry the weight of a $300M fund but one link is only up to par for a $10M fund than you will limit your growth and you may never or only very slowly grow into a $300M fund. The biggest return for your investment of time and money will be to focus on that one broken or sub-par link within your operations, marketing, trading or internal business processes, anything else would be a relative waste of money or energy.

This is a unique marketing technique because it is a reminder that the smartest thing you could do for your marketing and sales campaign may have nothing to do with picking up a phone or buying a database of investors. Before spending more money or valuable time try to consider the following 2 tips for improving your ability to attract investors:

Use the “4 Why Tool” to drill down deeper into the top 5 problems that you see your fund facing right now. Often times 3-5 problems will often be symptoms of a single root cause which can be directly addressed.

Ask others including your advisory board, current investors, potential investors and co-workers what is holding your fund back. Do not settle with two word surface answers and try to identify what 3-5 action steps your fund could take this quarter to improve how you are positioned and address the #1 limiting factor in your business.

For Part 1 and 2 of this series please see the links directly below:

1. 5 Unique Hedge Fund Marketing Tactics (1 of 5)
2. 5 Unique Hedge Fund Marketing Tactics (2 of 5)

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Hedge Fund Speeches

I am preparing for two speeches this week, one at the Marcus Evans Fund of Hedge Funds conferences in Boca Raton on June 15th and one for the TAAAP Hedge Fund Startup Panel in New York City on June 18th. In doing so I am trying to come up with the most common or critical questions that $1M-$900M hedge fund managers have on hedge fund marketing and hedge fund startups.

I have posted a few of the most common questions I have received below, but are there 3-5 pieces of information, advice or questions which you wish would be covered at one of these two events? Is there something you would like to hear talked about more within the areas of either hedge fund marketing, raising capital or starting a new fund?

If you do have a few points which we should be covering at these events please email your comments in to Richard@HedgeFundGroup.org. Below are some of the common questions I receive which will be covered at these two events:

• What is the best way to approach raising capital from wealth management firms and financial advisors?

• How should we look to work with family office wealth management firms?

• Investors want long track records and $100M+ in assets before investing but we cannot get there until a few try us out and help us get up to that size, what do we do?

• Do you know how to obtain seed capital for our hedge fund?

• What channels of investors should we invest our time in pursuing at different asset levels?

• How can I tell one prime brokerage firm from the rest? We are a small fund and we don’t want to work with four different prime brokerage firms at once.

• How can we get the attention of third party marketers and larger third party marketing firms to help us raise capital? Most that we speak to want $80-$100M and a 5 year plus track record before they will help us, but at that point we probably will not need their help.

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Private Equity Bank

As Banks Fail, Private Equity Picks Up the Pieces

Banks have been failing at a quickening pace with already more failures this year than all of 2008, and that was a rough year too. Although private equity firms can take on a bigger stake in banks than they once were allowed by regulators, many small banks are being bought up by private equity groups. It’s not just small banks either, for example the Carlyle Group and Lightyear Capital are close to finishing a deal for Silverton Bank, a $4.1 billion failed bank in Georgia.

It seems the floodgates have opened with the loosening of regulation on private equity firms buying stakes in banks and the “piles” of uninvested capital. As Josh Lerner of Harvard Business School put it, “the logjam has broken.” Another factor in the uptick of private equity investment in banks is the increase in bank failures (see Economist graph below) that give private equity firms a lot of options to work with. Normally, one could expect the larger banks to rescue the small lenders from collapse but those big banks are mostly too capital-constrained to oblige. And even those who may have the equity to buy up the smaller banks, like JPMorgan Chase have taken federal money and have to use their recent returns to pay back taxpayers.

Private equity firms have jumped on the opportunity. The Economist explains the strategy, “to snap up a small bank, healthy or not, and turn it into a vehicle to scoop up failed local rivals.” However, there are significant obstacles for private equity firms. One is simply the risk involved in purchasing and investing in failing banks. Many of these banks still hold toxic commercial-property loans that are going bad at a disturbing rate. “American banks’ loan-loss reserves are falling ever further behind actual losses and now cover just 70% of the total, according to Moody’s, a rating agency.” But private equity firms are adapting by investing only once the bank has been seized and negotiating that the government carries most of the burden in loss-sharing agreements.

Perhaps the biggest barrier is the legal restrictions barring private equity firms (or any “non-financial” entity) from carrying out a takeover of a bank. Unless a firm wants to become a bank-holding company and assume the extra regulation it requires, a private equity group must settle for a maximum stake of 33%. But through “club” deals, private equity firms can cooperate to purchase a bank, as long as regulators see to it that the firms aren’t working together after the deal.

Regulators have laxed some restrictions on private equity firms investing in banks–probably out of necessity as the number of failing banks continues to rise.

…regulators have reluctantly ceded some ground to the barbarians at the banks’ gates. They can now, for instance, appoint more directors without this being deemed to constitute control. Clubs of investors are being pre-cleared so they can pick up bank charters quickly when opportunities arise. The Office of the Comptroller of the Currency, which regulates nationally chartered banks, has even developed a “shelf charter”, which such groups can secure in advance of deals. It has already handed out two. The Federal Deposit Insurance Corporation, which handles failed banks and is expected to release new guidelines on private-equity investment soon, has also softened its stance. Sheila Bair, its chairman, believes buy-out firms should be considered eligible bidders if they show they can run a bank prudently and are “good corporate citizens”.

Whether the Federal Reserve, which holds the opinion that only firms monitored as banks should control a bank, will loosen its stance or not remains to be seen. But it is clear that private equity is gaining a larger stake in the future of banking.

Source

Tags: Private equity, private equity regulation, private equity timothy geithner, private equity monitor, private equity economy, private equity economist

Hedge Fund Upates

Below is a video on recent hedge fund developments including the closing of two Boston-based hedge funds and the re-opening of a Equity/Bond hedge fund in Europe. To view this video via our daily hedge fund email newsletter please click here.

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Recent Hedge Fund Developments

Here are a series of recent videos released on developments within the hedge fund industry. If you are viewing this video through our daily hedge fund email newsletter please click here now to watch the embedded videos below.

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