Rewriting the P’s of Hedge Fund Marketing

January 30, 2019

The 5 P’s of thinkAEN’s Fund Mix

You have a brilliant idea for a business and have considered the ins and outs of your product/service. You are excited and motivated to make it a success, except you are missing one thing: marketing. I believe everyone is familiar with the 5 P’s of marketing.

At thinkAEN, we have rewritten the P’s of Hedge Fund Marketing to create “The 5 P’s of thinkAEN’s Fund Mix.”

PEOPLE

Without the horse, the carriage has no driver. It is imperative to develop relationships with extraordinary managers. thinkAEN’s due diligence efforts centers on assessing the competence and character of the individuals responsible for the portfolio decisions. An active manager for us worth hiring must possess an edge that will create a reasonable expectation of superior performance over time. The investment by institutions in a manager is not taken lightly by us, after all, their reputation is at stake. There has to be an alignment of interests with the manager committed to placing institutional goals ahead of their own self-interest. It is our belief that selecting investment managers with an entrepreneurial spirit improve the chances of identifying a contrarian path necessary for investment success.

PRODUCT

If an investor is not interested in pursuing a low-cost passive strategy, then considering returns from active management strategies should be approached with skepticism. Superior results does not necessarily mean a sound investment strategy or intelligent hard work by a fund manager. At thinkAEN, the critical examination of managers puts integrity at the top of the list of qualifications, diligence and hard work can take an investment manager only so far. In our view, smaller tends to be better especially in less liquid markets. Ordinary portfolios with ordinary ideas tend to produce ordinary results. thinkAEN managers gravitate towards constructing unconventional investment portfolios and continually look for new mis-pricings to exploit.

PROMOTION

A strong client base is important especially when the manager is experiencing a bumpy stretch of performance. Emphasis is placed on selecting secure long-term partners. Conflicts of interest are abound in the financial world. Putting clients first is at the heart of thinkAEN’s ethos. It’s about understanding our allocator, knowing who they are, where we will find them and what they do and don’t like.

PRICE

The alignment of fiduciary and fund manager interests is imperative. At thinkAEN, a fund managers personal stake in the fund suggests that the manager shares the investors orientation. thinkAEN fund managers pay close attention to fee arrangements. Gathering assets or closet indexing do not lead to sensible fee arrangements. Appropriate benchmarks and hurdle rates represent the point at which a fund manager begins to add value. Managers receive a base fee to cover reasonable overhead and earn a portion of excess returns or provide incentive. Emphasis is placed on generating investment returns, not collecting fees.

PLACE

The odds of winning the active management game increase when committing funds only to managers possessing an edge likely to produce superior performance. Independent firms can navigate the ever-changing market dynamics. Location, location, location - markets with inefficiently priced assets are favored by thinkAEN managers. Out of the way, undiscovered opportunities receive little attention from other market players. Over time, managers in efficient markets gravitate toward closet indexing. Inefficiencies in pricing across the globe allow managers to achieve greater investment success. Contrarian investment behavior requires shunning the loved and embracing the unloved, most people prefer the opposite.

In the words of Benjamin Graham –

“You are neither right or wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”