Its only Wednesday and the hedge fund industry this week is going crazy. The news seems to have gone from bad to good as the stories of the Bear, Stearns & Co. Inc. debacle and bailout are being replaced by the news of a deal for GLG Partners LP and Quellos Group LLC. “All the news that fit to print” about hedge funds seems to be getting the ink this week as people around the country get ready for another weird Fourth of July holiday week.
So the question on everybody’s mind is what does it mean? The answer, I am happy to tell you, is nothing!
The situation with Bear, Stearns will continue to get only the “next few” sentences of commentary, as every legitimate and potentially illegitimate news outlet that covers finance has already analyzed the story six ways from Sunday. I think that this is the beginning of a very difficult period for many funds that deal in illiquid securities. As for the sale of GLG and the purchase of Quellos, I think it shows us that when the money is made available, it is time to take it!
A number of people have asked me if I think transactions like these and others that seem to be on the horizon are a signal that we are near the top or that the industry is “over”. My response is absolutely not. It is clear from all signs that the hedge fund industry is going to remain an ongoing and growing part of the investment management community for some time. The sales and mergers of funds is just another step in the industry’s evolution, It will continue to develop as more and more investors look for product and more and more traditional investment managers realize that they do not have the talent or skill sets to meet their investors’ needs.
As the summer is truly upon us, I thought I would see a down-tick in the number of questions that come into the blog; quite the contrary. In fact, the site has been flooded with questions about starting up, launching and of course raising assets. It seems that most people believe that building a fund – that is creating the documents, etc. in this day and age is somewhat commoditized. Clearly, all the of the lawyers who write documents bring their own uniqueness to the product. However, for the most part all of the documents are the same. The nuances may be different but the essence is very similar. The same can be said for the way funds are administered and audited. The one big question on everyone’s mind is marketing and capital raising.
Most start up hedge fund managers continue to struggle with this aspect of their businesses. They often truly believe in the concept of “if you build it, they will come”. I have said many times that if you believe this you are crazy! There is no easy answer. Some people will tell you that raising money is about relationships; some people will tell you it is about luck; some people will say it is a numbers game and others will say it is about being in the right place at the right time. My experience is that all of these answers are right! You need a whole lot of things working for you in order to raise assets and it is important you cover as many bases as possible because you never know where the money will come from.
© DASP – All Rights Reserved
