When it comes to fund raising, one key piece of the process is the hedge fund pitch book. While some have questioned the need for such a document, it doesn’t change the fact that majority of hedge fund investors expect to see a formal presentation.
The value of a hedge fund pitch book is not measured in bulk weight.
Your pitch book should be kept concise and easy to read. It is often a lead-in to developing a new investor relationship and can set the stage for a great first meeting. It is not enough to talk about investment objectives and historical alpha levels, investors need to know who is running the show.
The hedge fund pitch book should include your firm’s background, who the principals are and what they’ve accomplished. What are your personal strengths and have you hired to cover your weaknesses? A key to success is hiring the right team. Not just talented individuals but people who fill in the gaps in the team. Remember, in the end, this is a people business. Investors are looking to invest with people they like and trust.
You also need to cover your investment strategy. Whether your focus is global macro, arbitrage, distressed securities, short selling or another strategy, you need to demonstrate a focus. Jack of all trades doesn’t work well in trading strategies. Investors want to see the depth of expertise that comes with sticking to and executing a strategy. Does your pitch book clearly show your focus?
And, especially if they are not currently invested in a particular strategy or market, they need to understand the opportunity. What exactly is the market opportunity and how are (or will) you capitalize on that opportunity when trading?
Few areas have become more important than risk management and transparency. New hedge fund regulations are being crafted that affect record keeping and reporting. These new hedge fund compliance requirements also aim to address risks in certain strategies. In the end, the goal is to pull back the curtain a bit and reduce both individual investor and system-wide risks. Your pitch should reflect your fund’s risk management strategies and reporting systems as well.
Overall, your hedge fund pitch book should look professional, include the basic elements investors are looking for, answer the most common questions and be easy to follow.
Remember, investors are putting their trust in you when they hand over their money. Your book should help build that trust.
