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Capital introduction initiatives offered by prime brokers have long been a carrot dangled in front of hedge fund managers keen to get meetings with potential new investors. And hedge fund managers have been lapping it up. And why not? It’s a value-added service, without a direct cost.
But in the past decade or so, cap intro offered by banks has arguably become less effective. That’s no one’s fault; mitigating business and operational risk have been a driving force in the general theme of asset flows going to larger, more established managers, with a longer track record than emerging and smaller managers.
Other solutions have emerged to enable hedge fund managers to get face time with potential allocators. Conferences are the obvious one, with seemingly all event producers offering some kind of meetings program, with varying degrees of cost (and success). But one road less trodden is the engagement of fund administrators in the capital-raising process.
Fund administrators have access to allocators through their day job; after all, they send the NAV to the hedge fund’s investors each month. Consequently, fund administrators are a natural ally to the capital-raising process due to their direct relationships with allocators/investors. Many LPs are always looking for new products and even request that the fund admin make introductions when possible. Also, many fund administrators work on behalf of family offices and fund of hedge funds to calculate the performance of a range of investments including private equity, venture capital, real estate, stocks and bonds, to provide a single source of truth to these clients.
Some fund administrators are increasingly adapting their service offering to better support their hedge fund manager clients. In a world where competition for asset flows is increasing, hedge fund managers need a fund administrator who can provide value-added services and assist the manager in growing their business.
Anthony D. Mascia is Managing Partner at EFSI. Connect with him on LinkedIn here.
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EFSI is an independently owned, SOC-1 compliant, full-service fund administration firm. We provide accounting, reporting, administrative, and capital introduction services to a wide range of alternative investment funds including hedge funds, funds of funds, private equity funds, real estate funds, venture capital funds, and family offices. The center of EFSI’s service incorporates resilient technology and accomplished staff, providing clients a tailor-made service with exhaustive transparency. Give us a call today or reach out to our support team online. We look forward to hearing from you soon.