agree with your post generally except good 3pms are even harder to find than good money managers imo... but more importantly, if as a money manager you know what you are doing, you'd rather trade $5mio AUM at 3 to 5 times the leverage via your choice prime brokers than being stuck with 1-2 institutionals, having to trade $25mio via THEIR choice prime brokers, typically higher-rated institutions that offer much less leverage, under THEIR this that ratio constraints etc etc, inability to apply (fully disclosed) mark-ups etc etc... an oversimplification indeed but thks to the additional leverage alone you'll make 3-5 times the fees... honestly, stuff the institutionals, and the 3pms mesays, HNW clients are much less hassle, and at least they've got some balls usually unlike your average spineless asset-gatherer / allocator, as a manager i much prefer to deal with that category of people if you'll excuse me... other good thing is... they usually have a strong network of HNW people as well... lower alloc size you say? your right but, thats more than fine by me ))))))
I think hedgefunds summed it up fairly well. Except, I don't agree that money has flowed out of hedge funds into private equity funds. Both of those asset classes have experienced huge inflows this past year at the expense of mutual funds. As 2cents said, good money managers have choices too. However, the number of truly good money managers who are really worthwhile are very few and far between. Most are major beta surfers (that means they are playing an implicit long equity strategy in one form or another). Convincing an investor to take a risk on an 'early stage' manager is a very valuable and rare skill that should be well compensated. The fact is, if you are one of those rare few, you will spend many years proving it before investors will flock to you. You need to survive in the interim. If you are great, you can pay 3PM fees on the first $500 Million and the next $5 Billion you can raise on your own. Also, if you are that great, you can raise fees to 50%+ like the really great ones (ie. Rennaissance, Tudor, SAC, etc.).
What I meant to say was that more money has poured into private equity relative to hedge funds this past year, not that investors were necessarily redeeming their HF investments to pour it into PE. I was referencing an article that I read a few weeks ago talking about how a select few funds (<10)- gathered something like 50% of hedge fund inflows in 2005. Also, they quoted a HF marketer as saying it had been the toughest fund raising environment he had seen in the past 8 years. and 2cents, I would have to agree- HNW investors do have more balls- and are more prone to invest with smaller funds. They realize the added alpha that emerging managers have (one study thinks emerging managers can outperform peers with larger AUM by 300-500 bps per yer). They also won't subject you to an investment committee that takes 6 months to make a decision....
Surf..c'mon you know better than that. You've been around a long time..........good to see you still here btw. How's your fund doing? You should PM me I have access to seeding capital now.
A hedge fund manager, regardless of whether it is registered as an investment adviser, may engage solicitors, commonly referred to as third party marketers, to introduce prospective investors to the manager. Solicitors normally enter into a referral fee agreement with the manager, whereby the solicitor receives a monthly fee (presumably, for reimbursement of expenses), a percentage of the performance fee generated, if any, as well as the management fee, from any investor introduced to the manager by the solicitor. Although referral fee agreements may be terminated by either party, referral fee agreements usually require the sponsor to continue paying the solicitor the percentage of income generated from the performance and management fees charged to the investor introduced by the solicitor until such time that the investor no longer maintains an investment relationship with the manager. In connection with soliciting investments in a hedge fund, solicitors are subject to the same legal limitations as the hedge fund manager and its employees and affiliates. In order to receive compensation for having introduced an investor to a hedge fund manager, under both federal and state securities laws: * Solicitors may need to be registered representatives of a registered broker-dealer; and * The agreement governing the relationship between the hedge fund manager and the solicitor should be entered between the manager or an affiliate thereof, and the registered broker-dealer employing the solicitor. Source: http://www.hedgefundworld.com/raising_assets.htm
there must be tons of law breakers, then... how about all the ex bankers/brokers who are not affilated with broker/dealer raising capital for private investments? surfer ps. sent you an email--nice to see you back!