Investors’ Cycle Trial for Managers

Chidem Kurdas

The manager sounded frustrated. Over several months he had spent precious time repeatedly meeting the client, answered all the questions and provided requested information. The client would not commit to making an investment, but neither would he say no. He still wanted to meet some more.

Other managers also complain that would-be customers waste their time. When should they call it quits in this kind of situation?

Being patient can pay, suggests Emma Sugarman, managing director and head of capital introduction at BNP Paribas. She said one manager received money from an investor after eight years! “I wouldn’t burn any bridges,” she said, speaking a couple of weeks ago at a panel organized by McGladrey, an accounting firm that provides services to many hedge funds.

The time investors take to make up their mind has increased in recent years, possibly substantially, though estimates vary.

On average the cycle for getting money is nine months from the initial meeting, says Andrew Schneider, founder of Global Hedge Fund Advisors and previously HedgeCo Networks. It tends to be shorter for high-net-worth investors and longer for institutions, he said, at the McGladrey conference. This is a much more challenging environment than the past decade, he says.

Another question is whether a particular client is worth spending time with. You need to address the question of who your target investor is, says Alan Alzfan of McGladrey.

Mr. Schneider recommends that managers make themselves known to investors from day one when they start their fund, for instance by going to conferences. “If you build it, they will not come,” he says. You have to go to them.

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