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How to Build Your Hedge Fund’s Value Proposition

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There are a vast number of hedge funds hitting the scene every year – 735 were launched in 20171 – with a total of $3.6 trillion in AUM by the hedge fund industry overall.2 That’s a lot of funds vying for investors’ attention.

To elevate your hedge fund above the fray and pique more interest from investors, you should start with a compelling, well-thought-out value proposition. A value proposition summarizes what makes your offering unique and why it’s well-positioned to deliver performance for investors. It can form the foundation for all your sales and marketing efforts, including a pitchbook and website.

Value propositions can take on many forms and vary in length, but an ideal structure consists of a powerful headline, sub-head and bullet points of all the factors that separate you from the pack. It should take on a tone and use language that resonates with your audience and, above all, be easy to understand.

Related: Liquid Alternatives: Disruption and Opportunities

Understanding your edge may take some soul searching

Figuring out the most compelling competitive advantages of your hedge fund isn’t a quick process. It requires profound self assessment and, perhaps, wider feedback from your team and partners. While these distinguishing factors may not seem apparent at first, if you dig deep enough, you may be surprised with what you find. Here are some avenues you may not have fully explored yet:

  • Exceptional leadership. Your management core’s pedigree, pioneering ideas, accomplishments or shared work experience with other leaders may demonstrate a sound foundation and unique formula for success
  • Productive culture. A collaborative environment, rigorous debate, uniquely structured team meetings or other distinct cultural traits may help to generate great investment ideas and attract investors
  • Proven or potential success. A strong track record of performance immediately elevates your hedge fund above others. If you’re growing, you can still differentiate yourself by calling out past accomplishments that lend to the potential ahead
  • Distinct opportunity. The particular sectors/subsectors, regions, special situations, etc. your hedge fund is focused on – and how you capture this potential – may point to enhanced opportunity
  • Special parts of your process. It may seem pretty standard from your vantage point, but your research methodology, proprietary technology, selection criteria or other tactics you integrate are compelling – and may directly delineate you from the rest
Sources:
1 Hedge Fund Research, Inc., HFR Market Microstructure Report, March 2018.
2 Hedge Fund Research, Inc., HFR Global Hedge Fund Industry Report, Q2 2017.
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