Launching a New Alternative Fund
APRIL 16, 2020
DAVID SHALOM
What do alternative investment allocators look for in new product launches? Pershing’s Capital Introductions team shares insights from investors and considerations for managers thinking about launching a new fund.
At BNY Mellon’s Pershing, our Capital Introductions team works with alternative investment managers on new product launches, including variations of their core trading strategy and newer private investment strategies.
Since our investor network spans across the U.S. and includes both institutional and private wealth investors, we are able to get investor insights on similar strategies available in today’s market, their views on different investment considerations, and thoughts on competitive fees and liquidity terms.
What is top of mind for investors when looking at new product launches?
With new product launches, investors often look at total risk/return potential, the strategy’s historical track record within a manager’s larger flagship fund or from prior co-investments, and the incremental benefits the new product will add to an established portfolio of managers.
What should managers think about before speaking with investors?
Before discussing new products with investors, there are three primary considerations for managers:
- Who are your buyers? Within professional investor organizations, investment strategy coverage is often divided by asset class. As a result, the investment professionals responsible for covering diversifying alternative strategies are often on one team, which is generally separate from the other teams covering long only strategies and private market strategies. At Pershing, our Capital Introductions team can reach out to investor organizations and determine which investment professionals are directly responsible for covering your new strategy.
- Who are your peers? As part of the investment categorization process, professional investors often develop peer groups of similar strategies, understand how each strategy is differentiated, and then determine which managers have the greatest competitive edge. At Pershing, we can learn directly from investors which aspects of strategies within you space are viewed as having a competitive edge.
- Are your fees competitive? Fees vary by investment category. At Pershing, our team can reach out to investors to determine which fee structures are competitive within your peer group.
What should managers consider when timing their launch?
Other considerations for managers include:
- How many similar strategies in your space are available to your investors today?
- How is demand changing for specific asset types and strategies at this point in the market cycle?
What solution set does Pershing provide to alternative investment managers?
Our Prime Services team at Pershing provides alternative investment managers with a solution set that includes capital introductions, securities lending, and financing. By offering leverage, our clients can take advantage of market conditions, expand their portfolio beyond direct capital, and become more efficient with their own capital.
If you are in the process of launching a new alternative investment fund and are interested in learning more about our prime services offering, please reach out to the Prime Services team at Pershing.
