Evan Rapoport on Capital Introduction - Excerpt

Filed in archive Hedgetalk on July 18, 2009

Capital Introduction is a service usually provided by hedge fund prime brokers. The biggest teams coming from the largest prime brokers, firms like Goldman Sachs & Co., Morgan Stanley, Merrill Lynch, etc. These prime brokers have teams within their 'prime services' divisions that will help clients of the firm to find investors suitable for their funds.

How do they introduce investors you may ask? Well, investor introductions are made through occasional capital introduction conferences, road shows, one on one investor meetings, and individual investor conference calls. When done properly, this service can help to raise a fund millions of dollars at no cost to the general partner and no harm to the limited partner.

The real trick here, is finding a firm that actually follows through with what they claim. Many smaller trading firms and 'mini-primes' claim they offer capital introduction when in reality all they offer is a list of fund of funds or introductions to third party marketers.

So to sum up, there are various differences between hedge fund capital introduction and third party marketing, however I believe when making a decision which method you will use to grow your fund you should consider your:

* Hedge Fund Track Record
* Hedge Fund Monthly Trading Volume
* Current Firm/Fund Assets Under Management
* Hedge Fund Age
* Hedge Fund Capacity
* Current Marketing Budget

Decide what is most important to your fund, and what will ultimately be the fastest path to your firm's success. Then hope the capital introduction teams and third party marketers will help you!

More on Capital Introduction in the Hedge Fund industry on his blog