Hedge fund managers have faced a litany of unique challenges since the onset of COVID-19, but what lessons have been learned over the last year? And what should be the best practices looking into the next 12 months as remote working continues to be a prevalent reality?
BNY Mellon | Pershing hosted a panel discussion with several industry experts to discuss the two sides of the capital-raising coin—both the manager perspective and the allocator point of view. The conversation covered topics ranging from fundraising best practices to transparency to process modifications, as well as addressed which changes might be permanent and which likely will be temporary. The takeaways fall very much in line with feedback we have heard from a wider cross section of fund managers and investors, and should serve as good reminders for what this crisis has taught us:
We’re in a shared experience of less in-person connectivity so looking ahead, transparency will benefit both manager/investor relationships as well as those with other market participants. Avoiding communication lapses will help both parties to make decisions based on facts and not assumptions brought on by lack of connectivity.
One word of caution: virtual meeting fatigue is just as real as the fatigue in our prior lives. Be cautious of being too ambitious with meeting marathons. While your counterparts may appear more available as less time is spent commuting and more time is spent in front of the computer, it’s important to find the right balance of virtual meetings and calls to respect the bookends of a traditional work day.
When it comes to technology in general, there is an added emphasis placed by investors and consultants on getting further into the weeds to learn more details about a firm’s systems, especially as they relate to business continuity. When a prospective investor can’t see the servers in person, it’s more comforting when they know details about the infrastructure.
Anecdotal consensus from allocators points to the resurrection of the onsite walkthrough, suggesting that while virtual due diligence has largely been beneficial to maintaining the industry’s usual pace for now, it cannot replace the real thing. “They want to get out onto the road again,” said one panelist, proving that the last ten months has shown us once and for all that we do ultimately work in an industry built on human relationships.
The final word: Looking back as we look ahead, consensus on what we have learned in the last year largely centers on the importance of transparency and connectivity. Flexibility and adaptation on the fundraising side have also proven themselves as key areas of focus. However, much like adjusting to a digitalized work-from-home scenario, straying too far from your personal norm may be more of a distraction than a best practice. The discipline of running a hedge fund continually evolves over time, and this evolution accelerates during events such as the pandemic. Managers must adjust accordingly to ensure they are able to deal with the new realities of operational due diligence that now present themselves. These new practices from an extraordinary time could differentiate managers as the launch and fundraising environment remains a challenge— and as returning to business as usual is still an unknown.
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1HFM Insights: “Capital raising in a crisis”, September 2020
2Hedge Fund Research, Inc., HFRI Indices
3HFM Insights: “Capital raising in a crisis”, September 2020
Lisa Lewin is a Vice President for the Prime Services division of BNY Mellon | Pershing and is responsible for new business development and managing existing relationships with hedge funds and other alternative asset managers. Lisa participates in a number of speaking engagements aimed at educating investors on the benefits of including alternative strategies in their portfolios.