Thoughts from Stuart Alexander on the challenge of identifying the next big fund manager – and what makes a manager successful, from strategy to marketing.
The other day I met up with a couple of Distribution grandees, Steve Sullivan at Capital Strategies and, later on in the day, Luke Reeves at LGBR. Two firms that we work with on behalf of two of our funds, Calamos and Semper. During the course of the conversations, the challenge of identifying the next “unicorn” or star team came up, as well as the question of when a fund manager approaches you, how you work out whether to work with them? It’s never easy to spot them, we concluded, but it’s amazing when you do.
When GemCap started in 2009 we too were a third-party marketing firm with our sole business focusing on raising assets for fund managers, and we enjoyed some notable success as well as a fair share of failures. Identifying the winners was never easy and at times the decision wasn’t always the best one. Back in January 2009 a small and totally unheard-of business called TwentyFour Asset Management approached us to seek our help in getting themselves into the funds business. They wanted to launch a closed-ended and Cayman listed structure to sell into the UK intermediary market. We quickly told them the structure and domicile was not going to work in a post financial crisis world where transparency and liquidity were the buzzwords of the day. We quickly convinced them that a UCITS Fund with daily liquidity was going to be the structure that would work for them and they thankfully agreed. When I first met Ben Hayward and Mark Holman, Partners at TwentyFour Asset Management, as well as the rest of the team, I was immediately impressed with their knowledge but then again, it was their job – so no real surprises. However, the decision to work with them was based on some fundamental and very basic traits that meant we knew we could work with them. Their passion and energy were there for everyone to see. They presented the asset class, RMBS, in an evangelical way but also with education at the core of the proposition. They recognised that the market was still smarting about RMBS but they realised the market was confused between US and European RMBS. After all, RMBS was synonymous with the collapse in credit markets globally. So, the education and training for the potential investors began in earnest and before too long we had quite a following, and the rest, as they say, is history. Ben and Mark have continued to grow their business and we are delighted to be part of their history.
But why did we choose them over the others who were knocking on our door at that time? What caused us to put our faith in them? I will let them tell you why they chose us…
The reality is never simple, as ultimately the final decision to take on TwentyFour Asset Management was based on a combination of factors and probably the biggest factor of all was “gut”. As is the case with many decisions, it was backed up with some pretty solid factors. Namely: track record, experience, articulation of the story, commitment to getting the story out there, passion and above all a differentiator that would resonate with investors. Mark and Ben were very keen to be the noisy neighbours in the city and they went about with great professionalism. Content was prolific and relevant. They provided regular updates both online and face to face. Group meetings started with 4-6 people; they now have 4-6 hundred people!
So, what do we say to potential managers and how do we decide if they are the next big one? We always start with the distribution strategy and what are they going to do to raise assets. If the strategy is non-existent, then the conversation is a short one. If they are keen to get out there and engage their sales operatives, either in house or through a third party marketing (“TPM”) firm, then our interest is raised. From there, we start to explore the commitment to go on the road, do webinars and, in the modern world, virtual meetings. Also, the creation of updates for websites and social media, which we believe are imperative in the modern online world.
The marketplace doesn’t want longwinded documents that tell you what you already know – they want to see opinion-forming pieces with updates that are relevant. They need to engage with lots of info, but not to the point that it is boring to a new observer. It’s not easy to build a story at times but with a little bit of practice they can get there. Remember: your mission is to inform, educate and to a certain extent entertain the audience. Above all, make the updates regular, as once you start you need to continually engage to gain more regular followers and retain your existing audience. Own the space, become the authority – or at least someone who the market will refer to and in particular the so-called “influencers” in our market. There are several out there. The likes of Mark Dampier, Jon ‘JB’ Becket, Richard Philbin and Bella Caridade-Ferreira in the UK all have great content and comment on many aspects of the industry. If they like what you post, then they may feature it on their next update. Also follow journalists and see what they are writing about. When they are looking for content, they will seek you out. If we see all of this, or at least a willingness to embrace the ‘marketing’ of themselves, then TPMs are more likely to get more interest and, as a result, find investors.
When it comes down to it, the values of your business will align to a certain extent with the investors and with those who are promoting you. It is not always about money, although clearly if a TPM doesn’t think they can raise any assets then it doesn’t matter about your values but the commercials. Having said that, they may help you but in a different guise if they see it as a slow burn and will monitor the performance etc..
In short, get busy and dive into promotion with as much enthusiasm as possible, for as I have said many times before: ‘If you build it, they won’t come’. You’ve got to go and get them!