Build A Community, Not A Group Of LPs

Are investors proud to be involved with a manager? Or are they just looking for some place to put some money?

If you can pull off performance anywhere close to the S&P, and you can achieve the former, you have a chance of raising money.

Managers need to understand what it means to be a brand.  They need to develop a sense of community around their offering.  And this extends far beyond hiring some people that are always wearing headphones.  You need to ask yourself a big question, “Will investors defend you when you don’t perform, or will they chastise you?”

People defend things they believe in.   Have you ever watched when someone who drives a BMW has a conversation with someone who drives a Mercedes?  It is often a very passionate discussion – a discussion that extends far beyond the gas mileage.

No, a hedge fund can’t deliver the emotional response you get from turning a tight corner in a BMW. However, people can “believe” in a cause or an intangible thing just as much as anything else.

How then, do you create community around a hedge fund or a private equity fund?  You need to create a sense of belonging.  People need to feel they are part of something unique.  Simply articulating that you are a long / short fund, or that you invest in commercial real estate doesn’t accomplish this.  Focus on the gaps that you fill in the lives of the investor you are targeting.

A good example, a client we are working with indicates that they help investors sleep at night.  You can agree or disagree with the positioning, however, your ability to create community is readily apparent.  There is undoubtedly a large number of investors out there that don’t sleep well.  Focus on this, build community around this, offer insights and thoughts around how to sleep better from experts, etc.  Oh yeah, and then tell people how their investments are doing now and again.  (And, yes your performance has to jive with your positioning.)

The point, become more than someone that can spit out a return, contribute to the lives of the investors you are targeting in a meaningful way.  I can show you 100s of funds churning out over 10% annually, I can show you 100s of long / short funds, real estate funds, and private equity funds.  Show me one fund that is legitimately helping people sleep better.

By Kyle Dunn