Curious to hear from anyone who has successfully raised capital (or works closely with someone who has raised capital) for an investment fund (ideally HF but VC/GE/Buyout is probably relevant as well)....
Does having an MBA (H/S/W or at least M7) help in the initial capital raising process?
Did it open doors with LP's (maybe even the endowments of alma mater) or wealthy individuals (classmates, alumni, etc.) that otherwise you would not have access to?
Does it lend a certain credibility that a Bachelors degree or other graduate degree outside of business (PhD, MD, etc.) does not?
I understand that performance is probably the most important factor for PM's looking to strike out on their own and I have seen SM PM's with and without MBA's. I'm just wondering if there is value in the degree in that it increases the probability of success for that initial capital raise?
Sure, of course it does. It's signaling that psychologically can't be avoided. But that's not really the value. The value is that very often, you will know someone at (pension fund / endowment / other capital allocator) who also went to the same MBA program you attended and so you have a foot in the door.
Thanks for the response. Yeah, that is what I thought. I suppose those guys that successfully raised capital without having an MBA likely had to have some other strength (extraordinary performance) or access to other pools of capital that facilitated their success...
If trying to raise capital without connections, performance is not probably the most important factor, it’s pretty much the only factor.
I’ve been told by a PM with M7 MBA the only value added for raising capital is whatever connections you might have built while doing it. It doesn’t really signal a special degree of credibility, there are 100s, maybe even 1000+ people from M7 who enter finance every year. The guy said my elite PhD + postdoc research is barely a signal either lol ... investors have seen it all before and don’t give a fuck about your clout, only your results.
Appreciate the response. I wonder if this is specific to public equities investing where returns are much more difficult to "massage" than they are in LBO/GE. I've heard that some MF's cite how many H/S MBA's they have working at their fund in fundraising marketing documents......so I wondered if that translated to HF's as well but your answer makes me think not. I guess you really have to hope that you connect with the right people when doing your MBA or else there isn't much added value in it.....
MBA probably has its merits, but I doubt turning you into a better stock picker is one of them, and that’s what your fund investors are after, that’s all.
I think you need to have a unique process, and be able to say why it's different from what everyone else does. Performance matters but actually less than you would think for institutional LPs. Big funds can underperform for many years but still raise AUM because they are the big players. There are tons of ways to disguise poor performance, by redefining what risk is or the benchmark is. Clients sometimes like to see top mbas/phds who worked at big firms, because they need to justify the decision to invest to their own boards and cover their own backs if the fund underperforms.
This is more in line with what I was expecting. While I'm not denying the importance of performance, the proliferation of SM funds out there with supposedly "unique" processes and great historical performance makes me very skeptical. Is it possible that capital raising really is a marketing exercise of which performance is only one (somewhat nebulous) factor? If that is the case, does the MBA degree contribute to the marketability of the principal in a valuable way even if it doesn't necessarily make them a better "stock picker"?
Any marginal benefit in marketability would be far outweighed by the opportunity cost of 2 years wasted not really advancing your investment skills.
There are probably many good reasons to pursue an MBA, but the one you propose is not one of them.
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