5) Play for the long-term
In all aspects of a start-up, it’s easy to be focused on short-term outcomes. Yet investing is a hard game to win in the long-term, and even harder if you get caught up in short-term results. Whether considering capital raising, strategy or performance, managers should do their best to keep their eye on the long-term prize.
Q: Why do you think these lessons are not widely known?
A: Neither allocators nor investment entrepreneurs have a lot of experience in working with asset management start-ups. The patterns of success in early stage funds are quite different from those in the larger funds more familiar to allocators. Unlike in the venture capital industry, the hedge fund industry does not house serial entrepreneurs. Once a hedge fund manager launches and the business is successful, the manager probably won’t ever launch a new business.
Q: What format did you use for the lessons?
A: Most of the lessons in the book are fairly straightforward and don’t require much description. In order to bring them to life, I used case studies from actual funds that embody the lessons. The book takes a particular vignette from the life of a fund where the manager faced an issue and describes what happened. Some are success stories, others much less so.
Q: How did you get so many managers to willingly participate, particularly the ones that didn’t work out?
A: Funny you ask that; a lot of others have asked the same question, but it never crossed my mind as a challenge in bringing the project to fruition. Some managers wanted to stay out of the public eye, which I accommodated, but many more were happy to share the lessons they learned.
I’ve been fortunate to work with a lot of terrific people, who also happen to be exceptionally talented money managers. When I began writing, I shared a draft of each case study with the protagonist and asked for their feedback. In almost every case, they generously clarified facts, offered deeper insights, and blessed the work.
None of the experiences described in the book are unique to any one manager. Quite the opposite, most of these case studies have been repeated by many funds. And while there is tremendous competition, many managers remember that they once were a babe in the woods. Rather than let a poorly prepared fund cast a pall over the industry, they’re happy to offer a little advice to help get a promising manager headed in the right direction.
Read this article by Katina Stefanova on Forbes.