The Most Expensive Mistake Emerging Managers Make Has Nothing to Do With Performance

One of the most expensive mistakes emerging managers make is refusing to invest in the parts of the business that could materially improve their ability to raise capital.

They may spend tens of thousands of dollars on conferences, flights, hotels, and roadshows, and still walk into those meetings with suboptimal materials, a poorly articulated story, and a weak investor pitch.

I was never a fan of paying a retainer to a third-party marketer myself, and in many cases I still think that is money poorly spent.

However, spending a few thousand dollars on a seasoned advisor who can improve the positioning, tighten the messaging, strengthen the DDQ, and frame the investment program properly is not the same thing as paying a 3PM to try to raise capital using your existing materials before the underlying positioning work has been done.

Looking back, I wish I had had that kind of advisor myself when I was building my hedge fund. It would have materially improved my capital raising and accelerated the growth of my AUM.

What strikes me, after speaking with emerging managers today, is how often they still underinvest in the things that matter most for raising capital.