Small hedge funds can bet on the family office space for capital raising. The high-net-worth community is taking interest in these smaller funds in order to access new and emerging managers before other investors get to them. “Single-family offices have and are continuing to put substantial amounts of money [into] smaller hedge funds,” says Angelo Robles, founder and CEO of the Family Office Association, and a FINTRX client. “To get single-family offices to invest, the hedge funds have to first connect with them. Then, the hedge fund has to frame their message in a way that aligns with the investment objectives and concerns of the single-family office.”
According to Peter Sasaki, managing member of CGS Associates, “For smaller hedge funds, the strategic positioning of investment talent is often critical. This is all the more important when the smaller hedge fund lacks a well-established and impressive track record. Being seen as a thought leader, for instance, concerning the type of investing they’re doing can be instrumental in not only sourcing single-family office but also getting them to commit funds.”
Another very effective way for smaller hedge funds to raise assets from the ultra-wealthy is to go through intermediaries, such as financial advisors and wealth managers. However, more and more other intermediaries such as private client lawyers and high-net-worth accountants are playing critical roles in the ultra-wealthy allocating capital to hedge funds. Smaller hedge funds that are: (1) systematically reaching out to intermediaries, (2) cultivating a thought leadership position, and (3) framing their message in accord with both the wealthy and their trusted advisors, are gaining significant asset raising traction.
For a large percentage of smaller hedge funds, the answer to raising capital is the ultra-wealthy. Aside from being expert at managing money, these small funds need to be proactive and methodical in order to connect with the wealthy and motivate them to invest.