Cap intro Q&A

oh,m that's difficult. You are in what I'd call the Valley of the Shadow of Death. Any fund with AUM below $30mn can't really afford the team and infrastructure to make it institutional, so it's difficult to attract real institutional money. You can't get the prime broker support, you can't have a compliance officer, etc. You need to instead to try to run some managed accounts for people and win their trust slowly, while also given them the safety they need. Over time, as you prove yourself via audited track record, then you can try to market and slowly grow your capital base. But it's really difficult.

I have seen some unique strategies. 1) some guys run their own PA, and then get audits. Later, they go do fundraising based on what are hopefully stellar results 2) run managed accounts for a few UHNWs and family offices, and try to get track record that way, plus hopefully impress a group that can sponsor you 3) try to get money from a platform that may onboard you - like a Vision, or Black Pine, that will underwrite all your back office costs; that's how I've seen a number of stellar managers run a fund with lower AUM and later scale up

Hey, so I've been out of CI for a few years. I found recent rankings at https://www.ft.com/content/0761ead6-0f10-11e7-a88c-50ba212dce4d Apparently now MS&JPM are the top 2 and GS is 3rd. I think you can consider those the top tier. Then there's the next level down with CS, UBS, DB, BAML. Then comes the 3rd tier, which is Citi, Barclays, etc.

Basically prior to the financial crisis, it was just GS+MS at the top. And there was little for anyone else to do. Then during the crisis, it became apparent to a lot of funds and LPs that even the banks pose counterparty risk, so there was the need to get a second PB for most funds, so there was another tier of banks serving.
For most big funds, you get either GS or MS, then get a tier 2 bank. For smaller funds, you start w/ whomever is willing to take you. If you're tiny, you go with Citi, etc. then you tend to graduate to a bigger bank as you grow.

To get in to the industry you should know who the big funds are, have a full mental list of those, and a list of who the LPs are.
You need to understand the different types of funds (quant, vs macro, vs long-bias, etc.) And you need to like the job. I hated it.

I think it can be pretty lucrative if you can get in to the top 3 banks. Job still sucks tho. No creativity. No variety of work. No mental exercise. Just match this fund and that LP, repeat a hundred times per day, and do it again tomorrow.

Standard IBD pay I think. I was VP-2, and got $200k base + $40k bonus (in a down year) + $20k retirement benefit + eligible for bank equity program

if you get lured to the bigger hedge funds, I suppose you can get paid more. It's probably more commission-based, so you'll want to pick your horse carefully

Be super clear with the PB what your strategy is, and what criteria you need the HF to meet, before you take the meeting. Reiterate this often in writing, as it will make it easier for the CI officer to remember. If you get bad intros, tell the CI why you're not satisfied. Ask the CI to connect you with other LPs so you can compare notes. Be empathetic to the CI specilaists. They are sometimes forced to put certain funds in front of you. It's not that they aren't listening, but that they do need to show the HFs that they are doing work. Set up a mutual signal that they can use so that they can signal to you if the fund is mediocre. Take a few courtesy meetings even w/ bad funds, if the CI is having trouble filling out a schedule. It will win you a friend. Give continuous and clear feedback to the CI, even if it is negative about funds or the CI performance. Tell the CI's managers if the CI is being especially helpful. Share data, insight about funds, etc. w/ your CI. They'll thank you for the insights. Remember ,it's a crazy jungle and we need to look out for each other. Treat your CI well, and you'll get better insights and care from them too.

There's definitely a bias.
We give max service to the clients that pay us the most fees, or have the potential to pay us the most in the future. So we would favor funds of a larger size, funds that have us as sole / main PB, and funds that use a lot of higher-margin products, like stock borrow, shorting, leverage. That bias is typically driven by the more vocal and senior client-coverage salespeople, as well as our senior management. So for instance, a big NYC funds with tons of AUM is DEFINITELY going to get priority over smaller funds, irrespective of strategy, over a smaller funds.

Another factor that a lot of people ignore is that we also favor funds that are easier to raise for, and ignore the ones that are harder to raise for. That's because when we contact an LP, we are spending our political capital with them. If I shovel sh**t at them all day, they won't take my calls. To be frank, my LP relationships are MUCH MORE IMPORTANT to me than my GP relationships. I have many HF clients (in fact I had 75, but that's another story). But I only have 1 relationship with each large LP, such as CIC, GIC, Fullerton, Temasek. Those relationships are my bread and butter. When so-and-so big fund comes to Beijing, I need CIC to take the meeting, or GIC to take the meeting when funds go to Singapore. I can't piss them off by showing them something outside of their mandate, or they stop taking my calls and my client meetings. So, I'd rather blow off a few hedge fund clients, just to preserve my LP relationships. This dynamic forms a pretty bad tension inside of the CI team. I've got my sales MD and the aggressive sales team trying to promote certain clients because they pay us big fees.
And I get that. But if their performance is down, or volatile, or if they are in an out-of-favor strategy (India long-only, private /illiquid credit, Japan, etc) I have to fight with my sales MD to say "no, I won't take them to those LPs" because I still need those LPs taking my call tomorrow, next week, and next month when more suitable funds come to town.

Are you referring to hedge FoFs or PE FoFs? In either case,yes, pretty much. For hedge FoF, it's pretty competitive because Eureka Hedge has put most HF performances online, and because cap intro people can also help put GPs and LPs together. Many LPs now have consultants like Albourne, Jana, Frontier, or Cambridge Associates on retainer for more insight. So where's the value of a FoF?

For PE FoF, it's pretty bad as well. Many FoF are having trouble raising their next fund, and are themselves being forced into becoming GPs. Partners Group is now essentially a PE and REPE fund, not a an LP. They now have some token LP funds, but I think that is mostly to keep the GPs showing up at their door so that they get co-investment opportunities. Honestly, the world has gotten way too flat and efficient to need FoF.

Back in the day, you'd hire a FoF to get access to oversubscribed funds, or to get you into new geographies that you didn't cover (eg. Asia). Now the LPs have all the access they need. Why should they pay 1+10 to get what they can access themselves anyway?

sorry please elaborate on your question

So I've been out of CI for some time. But at the time, India was out of favor because people had lost so much money there, on rampant volatility. Japan was out of favor because they had zero economic growth for so very long. Private credit was quasi-PE , and that was harder to raise for. Funds with a lock are harder to raise for.

All LPs look at the world differently. That's something most GPs fail to recognize. If you want to be successful at fundraising you must be targeted. The trouble is, most GPs don't know what each LP is looking for, or they fail to qualify - to ask the questions of what the LP is looking to do. Nothing is worse than going on a roadshow, spending tens of thousands of dollars and days of a PMs time, just to get into waste-of-time-meetings, where you're all checking your phones wishing you weren't there. The secret to Jordan Belfort's Straight Line Sales Method is - find out who you ought to sell to, pre-qualify them, make yourself seem like an expert in your field, and then move them to the close. If you're selling to someone who isn't a willing buyer, you're wasting your time. And that time is better spent selling to someone who IS a potential buyer. For CIC, they are either 1) Chinese government employees, trying to earn an ok but steady salary and not rock the boat or lose their "iron rice bowl," or 2) they are a bulge bracket investment banker on loan from the bank to try to curry favor with CIC, or 3) a well-trained ex-bulge-banker or PE person, who is spending time at CIC because it's getting them crazy good connections. So if you're pitching alternative products to CIC, you need to be pitching a big blue-chip name. If you're a tiny fund, it's not likely they will take you seriously no matter how crazy hot your returns might be, or how good your pedigree might be. A government employee is not going to risk their position taking a risk on you.

If you're pitching to a family office, each one has their own criteria. But one thing is for certain - there is usually just one decision maker, and it's the senior-most family member / ie. the patriarch (or matriarch but that's more rare). That means that the person you're meeting with is likely not able to exercise discretion, and you need to find a way to get in front of the decision maker. Hard to do.

If you're dealing with an Aussie superannuation fund, the challenge is different. The supers are in 2 buckets: 1) the top 10, who are massive and have in-house decision making teams, and 2) everyone else ,who runs small teams, and rely on consultants.
If you're dealing with the latter, you need to cultivate the consultant relationships and go through them.

My point is, all LPs are different, and you need someone to point you in the right direction and tell you how to approach them / act with them, so that you don't waste an undue amount of time.

Two factors - 1) didn't like the work, 2) didn't like the lifestyle/hours. Good money, but truly unenjoyable.

I was previously a deal guy in PE for years. Going from that to doing CI was a move to keep my family fed during the financial crisis. It was high stress, low intellectual stimulation job. So I did not enjoy it. The clients would sometimes talk down to me, because I was a service provider. I could not tell them "bitch I used to manage way more money than you, and had much higher returns." Had to stay humble.

Also my work situation was uniquely difficult. Despite the fact that I was at a WS bulge bracket, I was our only staff in the region. Other banks had teams of 10-15 people. We had 1. So I had a LOT of unhappy clients who felt they didn't get enough attention. I worked 7.30am to midnight or 1am daily, and still couldn't get all the client needs covered. You can do that for a short while, but day after day, 6 days/wk, and you will eventually burn out.
IBD (which I've also done) has long hours, but they are project based. At some point you get to unwind and do laundry. Not in our CI practice, it was just always on.

Too much variance between CI and private funds to comment. Depends on team, bank, clients, etc. Different models. Independent PF groups like Mvision probably pay super well. CS PF group probably pays very well. CI is not a revenue generator, it is a sales-enabling tool for prime brokerage. So while it is a very well paid role, it's still a cost center.

I am also in Asia, and based in HK.

I think secondaries is still an emerging area in Asia.
But most of the FoF do buy secondaries as well, and the global players cover Asia from Singapore. I'm not knowledgeable on the specifics, but I'd imagine it's a bit better than direct FoF but the trend is similar. Fortunately I don't think the language requirement is quite as strict on secondaries. You might be able to move into CI in Asia, seeing as you're at a FoF, but key will be to build out your local LP relationships here. LP relationships remain the key.

It's always a factor of whom will actually agree to PB you. If you're a famous equity research analyst, or if you're coming out of a famous fund, then maybe you're lucky enough to have your choices. In which case, you'll have to consider a lot of different factors. But otherwise, you are on to the second-string as a new fund manager, and then still, you want to consider various intrinsic factors. For instance in the last house I was at, we launched 2 HFs. One was a famous PM, and he got a GS/MS/JPM to be his PB, and at nearly no charge, plus they rolled out tons of CI conferences and intros. The second fund had a less famous PM, so had fewer choices and a smaller starting AUM, so less money to pay fees. Ended up choosing a 2nd string bank that had good conferences and coverage within the fund's target industry. Worked out well because the bank brought a lot of good trade ideas and conferences -- though no real CI yet.

I'd recommend calling up your alumni at the banks and tell them you want to do informational interviews with the people in cap intro. That 's your best ticket in.