samadvisory tag:www.samadvisory.com,2008-03-05://1 2010-05-11T02:52:31Z Movable Type Pro 4.32-en First, Admit You Need Help tag:www.samadvisory.com,2010://1.148 2010-05-11T02:42:48Z 2010-05-11T02:52:31Z Have you ever noticed how talented individuals, when they get together in a room without focus, can forget what their target is?... Sanem http://samadvisory.com Have you ever noticed how talented individuals, when they get together in a room without focus, can forget what their target is?]]> About a year ago, I met a smart portfolio manager, who was looking for someone to hold his hand as he formed a new hedge fund.  We got to know each other in three meetings, discussing every detail and process he wanted me to work on.  His strategy was compelling, and his pedigree and achievements would make him stand out in the business.  Then, I met his business partner, who was supposedly more focused on the portfolio and less on business matters.  That impression quickly disappeared when that partner came into the room and started questioning why they needed a consultant in the first place.   Needless to say, I was quite surprised--feeling like a marriage therapist!  This was a conversation these partners should have had long before I got there.  

Coincidentally, the same firm's name came up in a conversation with a hedge fund investor last week.  This investor said he couldn't figure out what bothered him about this firm despite four interviews.  He had apparently met with the investor relations rep and each of the two partners one by one, and asked for one last meeting with both partners in the room to address some remaining questions.  The fourth meeting was meant to close the loop and help the investor make the final investment decision, but ended up confusing him altogether.   He walked away thinking there is something odd about the relationship of the business partners.  Now this is normal and partners don't always see eye to eye, but I am seeing a trend...

Had they been open to working with someone experienced to help them focus their message and avoid such internal miscommunication, they could have easily won this investor over.   This is not the first time I have seen a situation like this.  And it begs me to question when some fund managers will drop their egos and let professionals do their job by helping them. 
]]> Hedge Fund Marketing tag:www.samadvisory.com,2010://1.147 2010-04-06T13:15:08Z 2010-04-06T13:17:18Z Sanem http://samadvisory.com One of the most time-sensitive projects I focus on at each start-up is the design of a marketing strategy and the engagement of the best people in the HF industry to execute that plan.  To my surprise, quite a few portfolio managers choose to launch their firms without an effective game plan when it comes to fundraising for their own businesses.
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]]> The feedback I hear most often when I present such portfolio managers with a marketing strategy is that regardless of where their firm representatives travel to and whom they contact, they should just focus on approaching as many prospects and trying to sell the new "product." My reaction is "are you really just selling a product?"

Let us think about what a traditional hedge fund offers:

- Access to some of the brightest investment professionals in the financial world who choose to provide their services only for the most qualified, knowledgeable and experienced investors
- Trust in a portfolio and risk management team which seeks to identify those unique opportunities that average market participants cannot locate as efficiently or cheaply (i.e. the team has a unique investment edge)
- Ability to invest capital in a (fund) structure that provides the portfolio team with the greatest flexibility, even if the investor has to abide by numerous guidelines when it comes to high fees or long investment lock-up periods

As long as hedge funds are such unique and non-mainstream investment vehicles, then why should any portfolio manager assume that a basic institutional fundraising campaign is the most effective marketing strategy for the new hedge fund?  I often propose that a hedge fund avoid focusing on "pushing" products, and instead spending most of the firm's marketing resources on the education of the right target investor base.

For example, start by identifying a small target prospect group who tends to appreciate your firm's investment edge and has had some prior experience investing or at least evaluating similar strategies.  Arm those investors with the right data points and firm facts over the following 1-6 months.  Slowly expand that prospect group as you nurture the initial relationships and identify similar investors.  Accept upfront that the firm is not selling research, a product or service everyone is familiar with--and that this relationship building cycle can take a while.

By avoiding the typical financial firm marketing mindset of "selling something," portfolio managers who later own and run their hedge funds have a greater shot at building a long-lasting business with investors who want to "partner" with them.
]]> The most important hedge fund hire tag:www.samadvisory.com,2010://1.146 2010-03-27T19:47:01Z 2010-03-27T19:58:26Z Sanem http://samadvisory.com One of the least understood roles at hedge funds is that of the person overseeing the setup and growth of the firm's infrastructure.   Depending on the fund, the title and background of this person can vary greatly:  President, CEO, CFO, COO, Head of Business Development, Head of Administration, Partner, VP, Senior VP...   There is absolutely no industry standard!]]> The people who assume this type of a "business manager" role tend to be given responsibility for some major projects during the pre-launch as well as later stages:

- Negotiating important contracts with employees and external service providers (fund custodian to auditors or banks), and managing relationships with all of these parties
- Designing and following a budget
- Renting office space and securing technology, office equipment and business staples
- Ensuring the fund assets and investments are accounted for by engaging accountants and tax professionals internally and externally
- Assisting the portfolio research team with any trading or investment related projects that require a business manager's involvement (for example, a unique investment that may not be easy to value or store)

Given these projects can have a major impact on the success of a business, why not institutionalize this particular role at hedge funds and look for talent in a more methodical way?   

In my view, those firms that hire the best talent for this particular "business manager" role are likely to make it a lot farther than those firms that cut corners by not hiring a dedicated business manager or hiring someone not well trained to do the required work.

For example, look for a skilled CFO who can think strategically about different firm projects, from recruiting to finances to fundraising.  This person will likely be a great addition to the team and step up and act as a business manager.   Avoid hiring old friends or family whom you think you trust, respect and like.  Any relationship can turn sour quickly; it is more important to hire someone whom you don't know well, but whom everyone else respects enormously and speaks highly of.  Finally, do not hire someone who may have managed a team but never had exposure to hedge funds.  The hedge fund business has very unique needs and not everyone can adapt to its high pressure, high speed--thus truly demanding--nature.

]]> What makes a good fund manager? tag:www.samadvisory.com,2010://1.144 2010-03-26T20:48:04Z 2010-03-28T00:18:37Z Sanem http://samadvisory.com From where I sit, the most enjoyable aspect of starting a new venture is bringing and keeping together a unique team. 

I have so far worked with over a dozen teams around the world from Tokyo to Singapore to New York.  Imagine the diversity of personalities, nationalities, religions, educational and family backgrounds!  These teams have ranged from small to large, emerging to experienced, and seeking seed investors to well capitalized. 

Here are some red flags I now avoid when I evaluate fund managers as business partners:
]]> -       Transparency:  Does the fund manager believe in long-term compensation, which is fair and transparent?  Avoid those leaders who promise discretionary bonuses based on multiple criteria, especially if you have no way of meeting these guidelines.   For example, if you are the firm marketer and the fund manager wants to compensate you with a year-end bonus based solely on that year's fund performance (i.e. not your objective results), think twice about signing that contract.

-       Scale & Scope of Work:  Do you have a good idea about what kind of responsibilities you are expected to take on and what kind of results are expected?  Best to avoid situations where you are asked to assume new responsibilities without renegotiating related compensation/title/recognition that you feel most comfortable with. 

-       Micro-Management/Oversight:  You have been delivering good results and have a well-established work flow, but suddenly, your boss decides to micro-manage or have someone else oversee what you do.  Address those types of conflicts by asking smart questions proactively.

-       Colleagues:  Are your colleagues disgruntled about working for the firm?  Do they have plausible concerns about the fund manager?

Many of us have numerous observations each day, some of which are worth ignoring and others that are important to pay more attention to.   Based on my experience, I find that it helps enormously to stay focused and reflect periodically on what kind of people and organizations I work with.   

At the end of the day, success depends on not just the nature of the products and service we deliver to our clients, but also what kind of people we partner with. 
]]> Welcome to the new SAM Advisory blog tag:www.samadvisory.com,2010://1.143 2010-02-28T00:55:33Z 2010-02-28T01:31:42Z During the last decade in the investment world, including the five years SAM Advisory has been in existence, I have had the great pleasure of collaborating with some of the most insightful, experienced investors and investment professionals around the world.... Sanem http://samadvisory.com ]]> My work has taken me everywhere from Rio de Janeiro to Tokyo, from Budapest to Dubai.  I have been exposed to interesting investment strategies ranging from currency trading to natural resource equity/commodity investing, and learned from the finest minds around the world.  

By assuming responsibility for an important part of each business every time, I have had the opportunity to help my partners focus on their core functions as they built new firms and introduced unique products.  

My reward in the end has always involved seeing each start-up become a small-scale institution and a firm well-recognized globally in its unique sector.  

This new blog is intended to be a brief trail of some of these experiences and observations.  I welcome any suggestions and comments along the way.  

Thanks for the visit!


DSC02670.JPG     Hong Kong, 2005
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