Opinion

Hedge Funds Need Elite Distribution Teams to Compete 0 November 5, 2014

Frank Carr

is a managing director at MJE Advisors, an investment industry executive search firm.

It’s never been more important for hedge funds to have seasoned sales professionals who

can bring in new clients and grow assets. Firms without a best-in-class distribution team

may quickly fall behind in this competitive environment.

The increasing sophistication of institutional hedge fund buyers and the challenge of

differentiating an offering among mature fund providers makes the sales professional’s job

more demanding than ever.

Additionally, the industry faces some near-term headwinds, as assets under management

dropped by 1.5% globally, to $3 trillion, during the month of September, its biggest drop

since the second quarter of 2012, according to eVestment. CalPERS’s September decision

to withdraw from hedge funds due to product complexity and fees has also increased public

debates about the long-term value of these strategies.

Given the volatile environment, firms must not only hire the very best people, they must

have refined and organized sales processes. This is especially crucial when one considers

the long sales cycle to closing institutional allocations and how the process requires a blend

of persistence and patience to reach a successful conclusion.

Ultimately, the best sales professionals will have a deep understanding of the investment

process, which creates an ability to maintain meaningful dialogue with institutional

gatekeepers across the entire sales cycle. They must properly orchestrate the sales

process among these decision-makers, including trustees, internal investment staff and

consultants.

All representatives should also be well versed in how to use their fund’s correlation numbers

as an adjunct to raw performance. In the end, sales professionals will garner more investor

loyalty over the long-term by providing objective market intelligence rather than pushing a

less appropriate product.

And a salesperson should not be shy about referring other funds to potential clients,

especially when their strategies differ widely. The best salespeople judiciously use their

network of asset gathering colleagues, and know that sharing leads is a two-way street.

The relationship building skills needed to land new clients is also a key element in retaining

investors in the face of subpar or negative performance. While often overlooked, a

salesperson who has been successful in minimizing redemptions offers a valuable benefit to

a potential employer.

Leaders in the sales function also keep careful note of their relationships by segments as

well as a detailed track record of investment mandate wins. Potential employers much

prefer a clear picture of asset gathering accomplishments to vague promises of extensive

relationships. Meanwhile, the growth of liquid alternatives has led to increased demand for

experience with broker-dealer platforms and the skills to spur sales through financial advisor

networks.

Another important skill is the art of introducing portfolio managers and other investment

specialists during the sales cycle. The proper coaching of portfolio managers on

presentation skills is also crucial to asset gathering success. The A-players will shine when

it comes to quarterbacking finals presentations and driving toward a close.

Having an effective distribution team can be a key difference in whether a hedge fund

succeeds or not in today’s uncertain climate. The most successful professionals will be

adept at all the different skills that are needed in each phase of the sales process, and build

a thriving client base for their firm.

Frank Carr Managing Director

Asset Management Executive Search

203-344-9531 office

frank@mjeadvisors.com