Q&A: Rowen Pillay, Edgefolio
AlphaWeek’s Greg Winterton discussed the current state of the hedge fund industry’s use of technology in the capital raising space with Rowen Pillay, CEO of Edgefolio, a technology firm dedicated to the asset management industry.
GW: Raising capital is difficult for most hedge funds. What technologies should a manager invest in to help with the asset raising process?
RP: Technology should be a part of a more comprehensive fundraising strategy that any fund marketer has. Before selecting the technology, one should be cognizant of the stage of the fund and then set realistic targets for fundraising over a given amount of time. An emerging manager that nobody has heard of is going to have very different tech requirements than an established blue-chip fund. But no matter what the stage of the fund, there are some must-haves:
A great website: It should be obvious to anyone out there that if investors cannot find you via word-of-mouth referrals, news items, etc. then you are missing out. Websites are inexpensive and easy to set up, and should be clean, easy to digest and have a clear lead capture facility.
An Investor Relations Portal and Dataroom: All of your materials should only be shared behind a login. This needs to be trackable for compliance; not having one sends the wrong message regarding how you treat security. You are trying to ask someone to part with millions of dollars; spending a couple of hundred to make them feel more secure is definitely a good investment.
A CRM System: These can become a beast to fully utilise, so my advice is to start with something very light touch that keeps all your contacts in one place, all correspondence and interactions with them, as well as the notes you wish to keep. Meticulously tracking deal flow is also great, but this is more for when you are not a one-person marketing band with a hundred things to do to. Use tools that remove workload and add scale, not give you more admin to do.
Have a LinkedIn profile: Everyone needs to be on LinkedIn. If you are not, you are missing out on the most common B2B marketing channel that is being used today. Grow your network by publishing insightful content and joining groups. This is one of the easiest ways to scale relations.
GW: Many hedge funds still use Microsoft Excel as a band-aid CRM system. Why is the adoption of CRM technology slow?
RP: Simply put, inertia.
Our industry is a technology laggard so using new tech is swimming against the individual nature of our client base (late adopters to smartphones and using mobile apps for example). Using something like a web-based CRM system creates the perception of more “low-value work,” as its value only becomes apparent as the business scales and the team grows. My opinion is that having a CRM from day one is crucial, as you have a clear trail of all the interactions and contacts that you have ever encountered during the life of the business. Perhaps adding that person you met in year three that is now working at a large Scandinavian pension fund to the distribution list for a white paper could be the catalyst for bringing in that next large ticket.
GW: What else can emerging hedge fund managers do to help them improve their communication strategy?
RP: They can improve consistency and develop a multi-pronged approach; different communications to different prospects/investors. Here is an example of a really simple communication strategy:
Weekly: Post something on LinkedIn. Even share something by someone else. Dedicate 10 minutes of your week to this. You will continue to be relevant to everyone in your network this way. Try to be interesting. Public distribution.
Monthly: Commentary on what happened at your fund. Systematically keep existing and prospective investors up to date. Anyone tracking you in their investment pipe loves this stuff, so keep it relevant, short, and try to tell a story. This should be tracked so you can see who is engaged. Private distribution.
Quarterly: White Paper — An interesting thought piece on your sector, what happened in the quarter, and what the quarter ahead could look like. Public distribution.
Annually: The Year Ahead — Produce a thought piece on your sector, and what the outlook is for the year ahead. Remember to keep it at the sector/strategy level and not talk about your fund in particular. Public distribution.
Emerging Managers should also realize there are two ways to grow your piece of the pie. First, you compete with other managers for those already looking at your flavour of pie. The second (which is often missed), is getting more people interested in your flavour. In other words, work with your competition on getting more attention to your strategy.
GW: What is driving the asset allocators adoption of technology to assist in the manager research and selection process?
RP: There are more alternatives than ever before for the asset allocator dollar. New asset classes are appearing with attractive low fees, and promising great returns. Asset allocators are hungry for data, and technology that can allow them to easily navigate this data, to discover the gems that are out there.
Today’s tools allow allocators to analyse how a manager performs against other similar managers, as well as other available products on the market. Being able to roll this manager in and out of the asset allocator’s portfolio, quickly run backtests, and portfolio simulations to understand the potential impact from a risk and return perspective is what is rapidly accelerating the adoption of technology. Technology and the solutions today also enable connectivity, so gone are the days of clunky desktop software. By moving to cloud-based solutions, you are able to get real-time data updates, and most importantly connectivity to other stakeholders in the industry. It’s an exciting time to be a player in this space.
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