How to evaluate funds under the radar?
Hi,
i am currently having the opportunity to join a fund, however I don't know to evaluate the fund. Fund is super unknown on WSO there are 2 threads with 5 comments in total.
- Strategy: Complex Situations and Value Add, Long Holding Period (Equity 300-500MM sometimes 800 and more)
- Returns: Non-Traditional -> e.g. focus is not on multiple but IRR (money isnt primarily created at exit but during holding period - think something a long the lines of Macquarie)
- Fund 1: 1.8x and 20%IRR both net
- Fund 2: 1.8x and 40%IRR both net
- Fund 3: 1.1x and 17% IRR both net Vintage 2022 (so far return only generated by cash flow not by exit)
- Fundraising:
- Founded early 2000
- 10 years ago ~ 1bn AUM
- over last 5 years 5bn raised
- currently about to close another fund at 6-7bn
- Total AUM before closing 10bn
- Team Size:
- about 30 investment professionals
- about 20 operational partners
- generally super unorthodox profiles -> fund doesnt like to here past senior assoc -> so most people are promoted internally -> there are close to zero traditional backgrounds (finance students, investment banker or MBA) fund rather hires people from the industry, consulting since more value is placed om operations than on deal structuring
- Reputation: fund is nearly unheard of -> spoke with 10 people ranging from Analyst to Principal nobody knows them
Now how should i think about them? The strategy is pretty interesting, fund despite lackluster multiple, seems to perform well IRR wise and LP's like them, given they have raised 3 funds in 6 years each reaching hard cap and growing about 80-100% from prior fund. However, I have a very big problem with the reputations and concerns about the profiles.
Reputation wise, I am aware that joining a mega fund like blackstone, would be completely different and the chance to get promoted to post VP is pretty non-existent, but I could potentially switch to another large cap fund and make principal or partner there? Please here I would need some helpful input from someone more senior on likelihood. Simultaneously exit to HF or Corporate would also be higher.
Profile wise, I am not having a bias against non finance degree or IB experience - actually most of my friends have a non-finance background - I am more concerned regarding the funds reputation - seems like noone with a classic profile touches them? Unsure what to make of this.
Anyway, if anyone has been in a similiar situation as me, please help me out.
I am currently a european graduate student, looking to start working FT by next year. I have done banking before, hated it and want to avoid it at all cost. Longtime goal is to potentially work at a SM, but this can be 5 years down the road.
Evaluating under-the-radar funds, especially those with limited visibility on platforms like WSO, can indeed be challenging but also potentially rewarding. Here’s a structured approach to help you analyze the opportunity:
Performance Metrics Analysis:
Strategy and Market Fit:
Fundraising and Growth:
Team Composition:
Reputation and Industry Recognition:
Career Impact:
Personal Fit and Preferences:
In conclusion, while the fund shows strong internal metrics and growth, your decision should also consider personal career goals and the potential trade-offs regarding industry recognition and future mobility. Engaging with current employees or alumni from the fund, if accessible, could provide additional valuable insights.
Sources: Top under the radar hedge funds, Random Musings on the HF Interview Process, https://www.wallstreetoasis.com/forums/the-only-post-about-active-investing-you-will-ever-need-to-read?customgpt=1, Where / How can I learn more about funds?, How do you know if a less well-known fund is good?
Ding
I'm a little confused what your concern is? They have raised a ton of money, have good returns. Are you worried that no one on this website has heard of them before?
What do you mean by this "I am more concerned regarding the funds reputation - seems like no one with a classic profile touches them"?
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