New Rules, Advertising, Fundraising Among Major Concerns At FINForums Summit

Sep 24 2012 | 2:25pm ET

With a host of major rule changes and continued fundraising difficulties, it's no surprise that the regulatory and capital-raising environments took center stage at the FINforums Annual Hedge Fund Summit in New York on Thursday.

Rothstein Kass partner Gary Kaminsky warned that the Securities and Exchange Commission is about to become much more aggressive in its enforcement and hedge funds need to be prepared. Sadis & Goldberg partner Ron Geffner, a former SEC attorney, advised funds to hire competent compliance officers—and if they can't afford a competent compliance officer, to outsource one.

The lifting of the ban on hedge fund advertising, with rules governing general soliciting expected in October, was greeted with cautious enthusiasm. Eric Lazear, head of operational due diligence at FQS Capital Partners, said the change will have a bigger impact on larger funds, which have budgets for marketing. Smaller firms, he said, are more concerned about filing their Form PFs. Mitch Ackles, head of Hedge Fund PR and president of the Hedge Fund Association, said hedge fund advertising would be more of an exercise in brand-building than in soliciting investment.

When it comes to raising capital, advertising ban or no advertising ban, fledgling managers will continue to turn to funds of funds and seeding firms. But before they do, said Rachel Minard of Minard Capital, they should ask themselves three questions: "Can you defend your conviction? Can you defend how you arrived at your conclusion? Can you tell the truth?" According to Minard, a manager's job is to explain the market inefficiency he or she plans to exploit and to show how that strategy fits into the potential investor's overall portfolio.

Michael Marcus of Prelude Capital advised emerging managers to build their networks organically, working their connections: "If you can't raise money from the people that already owe you, it's going to be a hard slog," he said. Alan Glatt of Protocol Capital Management, advised would-be hedge fund managers to ensure their marketing books are complete; incomplete CVs and incomplete risk management are a "big turnoff," he said. David Katz of Larch Lane Advisors says he views seeding like a marriage proposal, "We spend sometimes a year to two getting to know a manager before we seed them."

But PAAMCO's Anne-Gaelle Pouille had some words of encouragement for smaller funds: "We work a lot with managers who haven't formed their management company yet," she said. "[They] are highly experienced, but don't have track record." Moreover, she said, "We write tickets north of $100 million. We'll be 90% of manager's assets, we don't have a problem with that."

But the final word on attracting seeding capital goes to KStone Partners' Mark Kenyon who said the key to unlocking one of those "north of $100 million" tickets is still simple: “Perform well."

The FINforums Annual Hedge Fund Summit was sponsored by Rothstein Kass, Smarsh, NRS, Direct Access Partners and Grassi & Co.

John Seigenthaler, CEO of Seigenthaler PR-NY served as chairman and co-organizer of the event, along with Hedge Fund PR and FINalternatives.


In Depth

Will Liquid Alts’ Performance Sustain Future Asset Flows?

Aug 25 2014 | 10:34am ET

Liquid alternative investment funds saw the highest percentage of capital inflows...

Lifestyle

Hedgies, Economists and Musicians Mingle At Milkin Mixers In Hamptons

Aug 25 2014 | 6:00am ET

Leave it to Michael Milken to bring some gravitas and sweat to the Hamptons -- along...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.