Service providers can make or break a hedge fund and the process by which you select a hedge fund is very important to working with the right service providers. The following video provides hedge fund managers with some strategies for selecting top quality service providers.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Hedge fund startups are often unaware of how important hedge fund service providers are to their fund.
Consider requiring a due diligence questionnaire for your service providers.
A 2-3 page DDQ should allow you to better understand the service provider and how that firm operates.
Be wary of service providers that are not capable of handling a client of your size.
Implement a detailed process for hiring and working with service providers.
Transcript for Hedge Fund Service Providers
Hello, this is Richard Wilson and today we’re going to talk about the importance of service providers which I often refer to as business partners to your hedge fund business. Many people that we interviewed from my recent book, “The Hedge Fund Book” mentioned that they underestimated the importance of service providers when they started their fund. And I know funds that have gone out of business due to having a service provider who either stops offering the service or didn’t offer what was promised, and it could be an area that definitely can make or break your business.
So I just wanted to stress the importance of that and suggest that hedge fund managers should have a service provider Due Diligence Questionnaire that is constantly evolving just like an institutional consultant won’t invest their client’s money in a hedge which doesn’t meet some sort of initial checkbox mentality process. You should have the same system for your service providers to ensure that decision are being made based on industry friends, emotional decisions or based just on who has the best sales ability, so it’s different from who’s going to have the best functional support systems for your business.
So I think that having a — just to start with a 2 to 3-page DDQ, a Due Diligence Questionnaire which ask them for contact details, for 3 or 4 referrals, which ask them about the experience of each of the team members that you will actually be working with not just the people who started the firm but the people who actually be coordinating with and who are actually be doing the work for your fund at that service provider. You should have all of their details up front. You should have numbers on how many current clients and past clients they have served in the investment industry and the hedge fund industry specifically. It would be much different working for mutual funds then suddenly switches their offer or for hedge funds that never done it before, you don’t want to be part of that learning curve. You can work with somebody at the same price who did 200 hedge funds last year for legal formation works.
So you should be very careful about that, what people say their experience is versus how specific is that really to what you need them to do for you. Next, you should also have some sort of process for checking the reputation of the firm, speak with their competitors, speak with other people in the industry, speak with other fund managers that you know. Some service providers are very responsive and provide great service, others are overwhelmed, others do the bait and switch and sell you with the high pedigree person and then you get a junior person who’s never done the work before actually completing the work.
So it’s important to have this DDQ in hand and make sure that you hire service providers consistently. And also make sure that there’s some written documentation of what was promised and that can be written into a contractor or a service later and just add some real transparency and long-term kind of systems planning for your hedge fund as a business. So if you ever step away from the business or the business grows in multiple areas, this process can be used by someone else on your team to consistently hire highly experienced service providers and partners whether you’re there to tell them what to ask or evaluate the situation this allows you to outsource this to someone else on your team.
So this is something that I consider kind of a best practice and this becomes very strong. It could be something you even show your potential investors that before you hire anyone, we take them through this 20-step or this 3-step process which includes the 20 point Due Diligence Questionnaire and that’s just like one of 20 things that you can mention in part of being an institutional quality hedge fun. So I hope this short talk on service providers and the importance of a DDQ for service providers helped. Thank you for joining us in this video and we’ll see you again soon. Thanks.
I hope that this video has been a helpful collection of strategies for working with service providers.
I was in Europe recently for the GAIM conference in Monaco where I served as opening day chairman and a speaker on capital raising. During my travels, I was able to learn more about the hedge fund industry in Europe and about the current environment for European hedge fund managers. In the following video, I share my insights on the European hedge fund industry.
Video Transcript/Summary: The strategies and tips provided within this video module include:
European hedge funds have pretty much recovered the assets lost during the financial crisis.
However, managers are becoming increasingly sensitive to taxes and regulation.
The Alternative Investment Manager Directive has caused many European hedge fund managers to consider moving away from the EU.
New York is still the hedge fund capital of the world with London following at second place.
About 19% of all global assets are with London-based hedge funds.
Transcript for Hedge Funds in Europe
Hello, it’s Richard Wilson. I just want to give you a quick 3-minute update on the hedge fund industry in Europe. Overall since the past financial recession Europe has pretty much recovered the assets that were lost. They were up to about $440 billion in Europe 3-4 years ago dropped down to the 200s and now it’s back up to about $430 billion in assets, of known assets in hedge funds in Europe. So they really kind of recovered from where it was in the past but managers are becoming more and more sensitive to over regulation and over taxation of their businesses.
I’ve heard that some hedge fund managers based in London can end up paying up 60% taxes. Meanwhile, the EU just past a new regulation called the “Alternative Investments Fund Manager Directive.” It was just passed this year and you know it won’t fully go into effect until 2017, but managers can feel the pain coming of that and the extra cost and compliance burden and that combined with high taxes is just making a lot of fund managers look at basing their fund out of places such Switzerland or Monaco, or I’m here today shooting this video, or other places such as Singapore or other tax-friendly havens.
And it’s really not a matter of cheating on your taxes or trying to not to pay your fair due of taxes, really it’s that these governments don’t understand it by making their environment regulatory heavy and raising taxes on alternative investments and hedge funds and private equity funds, what they’re doing is just driving these funds and masses to other locations like here. So I think that trend is going to continue. I think that people are going to keep on raising taxes in many different countries but then smart countries such as Switzerland which is not part of the EU and Monaco which is not part of the EU, so they won’t be affected directly from that new directive which came out. I think that people are going to greatly benefit and they’re going to see their economies grow and they’re actually the ones who are going to be collecting more taxes at the end of the day rather than these countries who just want to collect a higher percentage of taxes. That’s not very smart business wise.
Just a few more quick tips on European hedge funds, New York is still the hedge fund capital of the world and still has a slightly more hedge funds than London, about 20% of US allocation goes to European hedge funds so lots of US investors are allocating to European hedge fund managers. And about 19% of all global assets are based in London, based hedge funds. So I thought those would be a couple of interesting facts to share with you just about how the environment is here and the hedge fund industry is definitely growing, it’s robust, there’s lots of people invested in the hedge funds, that’s also very dynamic. I just got done speaking at the Game 2011 Hedge Fund Conference.
There was about 800 professionals there including 300 investors and 500 hedge fund managers. And their attitude was positive, people are raising capital and doing pretty well in the industry but it’s also dynamic, people are switching strategies, raising capital from Asia, changing whether they’re based in Switzerland, et cetera, et cetera.
So, hope you enjoy this quick recap of the European hedge fund industry. It’s Richard Wilson and we’ll see you again soon.
The tax and regulatory environment has made many hedge fund managers consider leaving the European Union countries to avoid these measures. Overall, however, hedge funds in Europe have recovered rapidly.
A couple of months ago, I served as the opening day chairman for the GAIM conference in Monaco and gave a speech on capital raising. This is one of the largest hedge fund events of the year and the fact that it is held in Monaco is no coincidence. Monaco has a quickly expanding hedge fund sector and is home to many wealthy investors. In the following video recorded in Monaco, I talk about the hedge fund industry in Monaco.
Video Transcript/Summary: The strategies and tips provided within this video module include:
The biggest and oldest hedge fund conference in Europe takes place in Monaco.
There are many family offices and investors based in Monaco.
Monaco is a hub for ultra-high net worth individuals even more so than other European cities.
There are very low taxes in Monaco making it very attractive.
Monaco is outside the scope EU Hedge Fund Directive because it does not belong to the European Union.
There are relatively few hedge funds based in Monaco, but there are many managers and investors that live there.
Transcript for Hedge Funds in Monaco
Hello, this is Richard Wilson. I want to share with you a short video on the state of the hedge fund industry here in Monaco. I just got done speaking at the Game 2011 Hedge Fund Conference. It’s the biggest and oldest hedge fund conference in all of Europe. There’s about 800 people there, 300 investors, about 500 fund managers of different types and it’s a great conference. A lot of it is based on capital-raising to get an advice directly from investors. And I learned while meeting with family offices that are based here in Monaco and going to the conference and being here for a week, a lot about the cities. I just wanted to share with you what the hedge fund industry is like here in case you wanted to possibly move your hedge fund to Monaco or try to raise capital for Monaco. I thought it might be helpful just to share what my experience has been here in the city.
So first of, this is a hub in Europe for ultra-high net worth individuals. I say ultra-high net worth instead of high net worth because the cheapest studio condo here cost about 1.2 million Euros or about 1.6M, 1.7 million US dollars to buy and that’s a tiny, tiny little condo. So you have to have a lot of money to buy a place here. The result is that a lot of family offices, people who have sold businesses, people that run large multinational businesses and like I mentioned single family offices are based here because there is zero taxation or very little taxation based on how you’re classified by the Monaco government.
But most people pays Euro taxes or 5% taxes by living here, while in most other places you pay a lot higher taxes, like Switzerland. But Monaco is not part of the EU so they get to avoid the recent directive which came out, which affects EU hedge fund regulation, that’s another advantage for them. And I think the taxes across the world in first world countries are going to be raised and that places like this, Singapore, Switzerland, other tax haven areas are actually — you know going to greatly increase and people are going to realize they could run their fund or live in many places around the world as the world comes easier to move around in, to get more connected and these hubs are just going to grow more and more popular.
What I found out that’s surprising here is that although there’s not many hedge funds based here, there are just a lot of investors here and hedge funds loves to come here obviously because it’s so central in Europe and they can meet with investors so easily. From here you could easily get to Paris, you could easily get to Switzerland, you could easily get to Luxemburg or Italy obviously. It’s right next door to Italy. So it’s a pretty good location for being in when you’re capital raising, you know city targets.
A couple other interesting facts, is that Monaco is only 0.7 square miles. It’s the smallest city in the world except for Vatican City. Another thing that I didn’t know before I came here was that basically, since 1996 hedge funds have been focusing more on being based in Monaco but the main reason they have and opened up offices here is that their operational cost would way up. If you’re hiring somebody who has 5 years or 7 years in capital raising experience or risk management experience, their knowledge might be really valuable and your hedge fund might be making a lot of money, but you’re going to have to pay them twice as much as if you lived in a Geneva or Zurich or some other cities such London or even New York because that’s how much higher the real estate cost are here.
So the result is that lost of hedge funds come through the city, people come here every year for a Game obviously like I was this week. But it’s really more of an investor hub than an active hedge fund manager hub unless the hedge fund manager has already cashed out or has gotten to a huge size and they’re just here for a part of the year.
So I hope you enjoyed this video on Monaco. It’s a great place to come visit, great place for your business, great place if you’re looking to connect with investors and it’s a great place to come check out Game if you have time one year. Thanks for joining me. It’s Richard Wilson and we’ll see you again next time.
The hedge fund industry in Monaco is quickly expanding because of its huge reach for hedge fund investors and I expect hedge funds to continue to focus their capital raising efforts on Monaco.
Brian Tracy is an internationally recognized business expert who has written more than 45 books over his career. I was fortunate enough to interview Brian on advanced capital raising techniques, strategies for building your authority in your industry, and Brian’s super-valuable advice on building a business.
Brian Tracy in Video Format:
Brian Tracy Interview in Audio Format:
Audio/Video Transcript:
Richard Wilson: Hello. This is Richard Wilson and welcome to this expert audio interview with Brian Tracy. At one point in my own life I was in an investment sales and capital raising job in Boston and it was through listening to Brian Tracy’s audio books over and over again every day on my way to work that I went from not making any sales and raising any capital, to raising millions of dollars every week in my job.
I then went on from there to running a team of 20 plus professionals and $1 million plus a year business as well. And I owe a lot of that success to Brian Tracy who’s on the call with us today.
Brian Tracy’s given over 5,000 speeches in over 50 countries. He’s written over 45 books and he’s also been one of the top three most influential people in my own success in marketing, sales, and capital raising. He’s well known for two of my favorite books, Eat That Frog: 21 Ways to Stop Procrastinating and Get More Done in Less Time and the second one is called Goals: How to Get Everything You Want Faster Than You Thought Possible.
So Brian, thank you very much for your time today and joining us here for this interview.
Brian Tracy: It’s a pleasure. Nice to be with you.
Richard Wilson: Great. So, I’ll just jump into the first question here. Everybody that I work with here personally on my own team of people that I meet at workshops that I put on or at conferences have these goals in mind-they want to raise $100 million, they want to launch a new product, a new division, a new investment fund-and they have these marketing or capital raising goals. And I read your book on goals, but I’m wondering if you could share maybe your #1 tip for accomplishing a very challenging or large marketing or capital raising goal?
Brian Tracy: Well, I think the critical thing is the product or service that you’re trying to raise money for. And probably the best description of that, people should say when they hear, “This is what I want to do. This is what I want to bring to the market.” They should say, “Gee! That’s a great idea” or “Gee! Why hasn’t somebody else thought of that before? Well, that’s an incredible idea!” In other words, the more a person is delighted, or astonished, or happy with your product, or service, or idea, the more happy they are to put up money for it.
I work with people who come up with an idea and people throw money at it. They say, “Geeze, can I give you some money? Can I get a piece of that?” So, if your concept is good everything else becomes much easier. If your concept is unclear, then everything else is harder.
So, my favorite word as you know, Richard is clarity…clarity…clarity. And the critical clarity is what is the transformation that is going to take place in the customer’s life or work when they buy and use your product? And how profound is that? How important is that? You know the old saying, “If you could come up with a cure for cancer you’d be a billionaire by the end of the week” because of that profound result.
So, always start with a product, always start with a customer, always start with a service and how this product or service will dramatically improve the quality of the life or the work of the customer.
Richard Wilson: Okay. So, have a very good understanding of what your customer’s perspective is, what they want, and a very clear picture of exactly how your solution is going to be amazingly valuable to them I guess.
Brian Tracy: Yes. And it has to be either amazingly valuable to someone who will pay an enormous amount of money for it or has to be valuable to an enormous number of people who pay a small amount. And also the person you’re talking to-especially if you want to raise capital or raise support-has to personally say, “I want that. I like that. That sounds really great. I want that for myself.”
Richard Wilson: Right. Right. Great. Great. And then I like to talk a lot about authority building techniques. I look up to people like yourself who have built such a great position within the industry and the pushback I always get is about people being too busy, especially people who are starting to find success, who are already in charge of a business or an investment fund of some type. And their push back on building their authority further is really about a time excuse.
But then there’s other people who kind of rise above that. They find time to speak, write books, build their authority year, after year, after year and you’ve really mastered that process more than any other expert I know with your 45 books and 300 plus training programs out there. How have you been able to write so many books and what is your #1 secret to getting all of that done?
Brian Tracy: Well, I began writing books after speaking for several years and I realize that when you have a written book people think that you’re smarter than you really are if I can joke. But it’s interesting. People will buy your book and hire you without reading the book just because you have a book and you have a book on a subject that they think is of interest to themselves or in this case to their company.
My secret for writing is going back to clarity. I’m very clear about what I want to accomplish-the goal-and then the next two are focus and concentration. And as you know, I’ve probably spent my whole life both practicing those two and teaching them. Focus. Focus on a single point and concentration. And concentrating on a single thing till it’s done.
Now, I just finished a book about two weeks ago on schedule. The book’s scheduled for publication. It’s already signed, sealed and delivered. In the next two days I need to finish my next book which is coming out three months later in 2012 cause I write and publish at least four books a year.
Richard Wilson: Okay.
Brian Tracy: I publish them 90 days apart and I publish books that have at least potential buyers. And I just signed a contract last month to write 21 eBooks…
Richard Wilson: Wow.
Brian Tracy: …that will be published now to the end of the year and will go out to 32 eBook sales media worldwide. And the whole eBook business is completely different, but everything is focused on concentration. “How can you write a book?” It’s because I put my head down and I do only one thing for an extended period of time. And I’ll structure my time, and I’ll plan it, and I’ll carve out pieces of time, and then I’ll just put my head down and work.
If anyone wants to write a book, by the way, I have a little outline on my website, BrianTracy.com called, “How to Write a Book”. It’s free. And I’ve had many people send to me. Just last week I got a book saying, “I did it!” It had a sticky on it, “I did it! And here’s a copy of the book.” They got those 20 points and they wrote and published a book within 90 days.
Richard Wilson: Wow.
Brian Tracy: And they sent me a copy of the book.
Richard Wilson: Wow. That’s great.
Brian Tracy: So, is it possible to do it? Yes. Just follow the formula. Follow the recipe. And I learned this recipe as a result of my own experience. I found out in order for me to keep building authority-actually the word I like to use is credibility-you have to have a book. However, to promote a book they’ll only promote a book that’s come out in the last 90 days. So, after 90 days the window shuts and you can’t get interviews. And interviews are the cheapest almost inexpensive way to continue talking to thousands of people. So I said, “Well, if I want to continually be interviewed I have to continue writing a book every 90 days” which is crazy reasoning.
So, I went out, and I would write a book, and I would get in touch with different publishing companies. Some of my books sold very well, so they would listen to me. I said, “I have a great book title” so that they would say, “We’re interested in that one” then they started to come to me. Well, now I have 7-8 publishers nationally in the U.S. and Canada. I have about 30-40 publishers worldwide…
Richard Wilson: Wow.
Brian Tracy: …that came from those publishers. So, I come up with a book and I go to the publisher. I say, “I have a book idea for you” and they say, “Yes we like it” or “No, we don’t.” But always somebody says yes. I say, “Good. Let’s work on its publishing schedule, drop down date, when you need the manuscript and so on” and we pump out like a production line four books, four different publishers every single year.
Richard Wilson: Wow. Okay great. That’s very helpful. And connected to that question, what are your suggestions for not just writing a lot of books-four books every year-but making the book very powerful and very popular? You mentioned that you like to write books that have an audience of a million people or more.
Brian Tracy: Yes.
Richard Wilson: But what’s actually your #1 tactic for doing a lot of books? Is it really just doing a lot of interviews and keeping those interviews constant so you’re kind of mentioned everywhere-in the press, in the media, in the news? Is that your #1 tip or is that a tactic like corporate sales, or your speaking engagements-getting people to buy 1,000 books at a time where you’re speaking?
Brian Tracy: Well, you start off with your subject and perhaps the greatest million dollar insight I can give anybody is find a big problem and then solve it in a big way. And this simple concept is what is a big problem or need that people have and then how can I solve it in such a way that it kills the genre? And after that, nobody will enter that area.
So for example, my book Eat That Frog is the bestselling management book in the world, sold millions of copies in 38 languages. But what is the biggest time management problem that people have is procrastinating. So, I took it and I said Eat That Frog: 21 Great Ways to Stop Procrastinating and Get More Things Done Faster. That’s my value.
Richard Wilson: Okay.
Brian Tracy: My publisher told me last month that, “Your title has to be so good that people will buy the book and they’ll buy it on the basis of the benefit that you offer in the title and they won’t even read the book. They just carry the book around. And so, the title has to be so strong that spasmodically their hand jerks out to buy the book-to reach for the book.”
Richard Wilson: Wow.
Brian Tracy: So, if you want a book that’s going to sell well a perfect example is Jim Collins book Good to Great: How to go from Good to Great. It sold millions of copies. It’s a perennial best seller. And why? It’s cause everybody who’s running a business wants their company to be a great business and then he follows up. And this is really important, Richard. You have to deliver. Whatever promise you make you’ve got to deliver on that promise in your book so they say, “Gee, I’m glad I read this book!” And they don’t want to put it down and they want to tell everyone else about it.
Richard Wilson: Right.
Brian Tracy: Then you can use every marketing technique that’s out there. Some people buy 1,000 copies of my books and hand them out to everybody. Some people like Oprah advertised one of my books and it went out and sold 50,000 copies because on the Oprah newsletter she said, “Everybody should read this book”.
Richard Wilson: Wow.
Brian Tracy: It was on self-discipline. If you want to view it it’s called No Excuses: The Power of Self-Discipline. So, if you want to be successful stop making excuses and take action. And the book shows you progressively how to do that.
So, you always say, “What is something that people really need?” And if the book is on a subject that has a small need like Tom [Name 11:00] book is The Five Dysfunctions of a Team. Every single person who has a business who has people working with them is very interested to know, “I wonder what they are” and it becomes a best seller…
Richard Wilson: Right.
Brian Tracy: …because he’s dealing with something you really want. And then all of your marketing techniques will work.
Richard Wilson: Sure.
Brian Tracy: None of your marketing techniques will work unless the subject is something that people want instantly based on the title and then you deliver.
Richard Wilson: Right.
Brian Tracy: Then people say, “I really got my money’s worth”.
Richard Wilson: Right. Which I love that as a piece of advice because I’m a big fan of studying kind of John Carlton Copywriting Best Practices…
Brian Tracy: Yes.
Richard Wilson: And it really comes down to just having basically your headline-the book title. You have to grab the person I think is what you’re saying in the delivery of the goods after you’ve made the promise. But I guess a really unique piece of advice I haven’t heard before by people who I guess have sold a lot of books , many people recommend doing 500 different tactics and it’s hard for them to come up with the #1 most powerful thing. But that’s interesting.
Brian Tracy: There’s a book called 1001 Ways to Promote Your Book. Buy it. It’s in paperback. It costs $10. If you buy it on Kindle or iPad it probably costs $9.99.
Richard Wilson: Right.
Brian Tracy: But there are 1,001 ways. The starting point is the book has got to be really good.
Richard Wilson: Right.
Brian Tracy: And I bought books that are highly recommended, and I read 1-2 chapters, and I’m so disgusted I throw them away. I very seldom throw a book away, but there are some books that…
Richard Wilson: Right.
Brian Tracy: …are so poorly done. The hype is great and I won’t buy a book from that person ever again.
Richard Wilson: Right.
Brian Tracy: The reason my books sell so well-and I’ve got 52 books but I’ll have another 20 books by the end of the year-short books…
Richard Wilson: Wow.
Brian Tracy: …between 8,000-10,000 books because that’s where the market is going to short books/high content as opposed to longer books because people won’t read longer books anymore and it’s going to electronic books.
Richard Wilson: Right.
Brian Tracy: So, you do two things. You get on the bandwagon-short, high content books, electronic. Now, the thing is that you have to deliver on your promises and that’s the key.
Richard Wilson: Right. Right. Great. And now I have more of a marketing/sales question. I work with a lot of people who raise capital, or business owners who have to make sales constantly, big complex type sales, long sales cycles that could take make months to make a big sale. And I know you’ve done a lot of sales training both with corporations and individuals in your training programs. What would be your #1 suggestion for moving past your competitors and selling more within these kind of complex, relationship based sales environments?
Brian Tracy: Well, you know because of your expertise about the milestone method or the production line method which means that there’s a series of questions that must be answered at every stage of the sale for the sale to move ahead. The first question is this person generally qualified? In other words, can they benefit more than the cost of your product or service from buying? And that you need to find out from your initial contact.
The second thing is does this person have the authority to advance the sale or do you have to go to a higher level? Do you have to have this person introduce you to a higher level? Because especially in a large sale you have what I call gateways. These are people who cannot buy, but they are the first person you have to talk to before you get to someone else. So you think, “What are the questions that need to be answered? Is this the right product for me? Can it pay for itself quickly and efficiently? Can I use it? Will it fit in with my business?
And these are questions you have to ask. These are all milestones. So, in a large sell like when I worked with IBM, they would sale a particular type of sale system that took seven months to sell. And it took seven months from the time you met the prospect who was a genuine prospect who could use and need advantages from your product. It took seven months to move it through the pipeline.
So, for people to meet quota they had to have their pipeline full by April/May because it would take seven months to close the sale. If they wanted to have their quota that year they had to have all their prospects in the pipeline by May or they wouldn’t make it.
Richard Wilson: Right.
Brian Tracy: So, that’s what you do. And what I do to encourage people to keep up their motivation is you have awards benefits, prizes, congratulations at each of the milestones. And as you know what large companies do is they do reviews of each client account and where are we in terms of what milestone are we at here. And by doing that they can tell you pretty much how much they’re going to sell in a given quarter or a given year because they know how many of those at each particular milestone will become a sale, and what the average size of that sale is, and what the average profitability will be. So, they can predict with tremendous accuracy based on the milestones.
Richard Wilson: I see. So, your sales approach for these types of things we marked with milestones and it’s ran like a well-oiled machine where you know the conversion numbers for [Overlapping 16:25]
Brian Tracy: Yeah. Write these things down and track them. It’s interesting. There’s a new book that’s just been written by a doctor and it’s called The Checklist Manifesto.
Richard Wilson: Right.
Brian Tracy: And it’s a very simple concept that whenever you use it you’re amazed at the difference it makes. And what he found is they can lower the death rates from infections or mistakes within hospitals by 90% just by putting in a checklist so that no steps are missed.
Richard Wilson: Wow.
Brian Tracy: And it’s selling using the milestone method of putting in a checklist You can imagine a pinball machine where you remember you pull the spring, and you let it go. And the ball goes up to the top and it goes boing, boing, boing, boing, boing as it bounces down toward the bottom.
Well, it’s the same thing as a customer’s mind has to go through boing, boing, boing, boing, boing, boing, boing, boing, boing as it drops through the slot. So, you write down what are the steps that the customer’s mind has to go through before they ultimately reach the point where they will say yes? And you think of those and those become your checkpoints.
Richard Wilson: I see.
Brian Tracy: Now, here’s an interesting thing. You can sit down with a customer and you can say, “Mr. Prospect, I’ll be completely transparent with you. What we have found is that for a person to buy and really maximize the benefit from our products or services they have to go through these steps of thinking. And these are the questions they have at each step of the way. And what my job is to do is to answer these questions for you satisfactorily so that you can make the best decision for yourself and your company”. People love it when you’re transparent like that.
Richard Wilson: Right.
Brian Tracy: And you help them with the questions, so they don’t have to be wondering, “Gee, have I left anything out?”
Richard Wilson: Right.
Brian Tracy: You give them the checklist and you go through the checklist with them. So, here’s question #1: Will this pay for itself?
So, what IBM would do is they would explain the IRR method. The Internal Rate of Return is how much does money cost you, how much will you earn or save from installing our products or service, and a critical question is time to payback. When you’re selling-especially to business-the critical term is time to payback. How long will the product or service pay for itself? The shorter the time to payback the faster the buying decision.
It is not the customer’s job to figure this out. It is your job to ask them for the information, get the information saying, “Based on what you told me if you install and use our service your time to payback will be three months and seven days” “Your time to payback will be nine months and 15 days”.
And so, therefore, that’s a very high return on investment-internal rate of return. Where else could you get a return on investment which is approximately 134% per antem? You put this money in you get 134% back to your bottom line in nine months and 15 days. In other words, when you point that out to them it becomes a no brainer.
Richard Wilson: Right.
Brian Tracy: It’s easy to sell internally, it’s easy to buy. And again, you work with grown up companies. Their job is to make darn good and sure that they fulfill on their promise. “We will work with you hand in hand, arm in arm to make sure that you get the benefits and results that you promised.”
Richard Wilson: Okay. Great. Yeah, that sounds like advice that I don’t think is taken too often within the complex sales that I’m used to doing or used to training in like in the hedge fund, or capital training, or even business to business sales contracts. Usually not myself and I don’t hear the other people calculating the IRR for their clients and kind of making the argument for them so that they can show it to the rest of their team and get it approved right away. So, that does make a lot of sense.
Brian Tracy: Yes.
Richard Wilson: Great.
Brian Tracy: And I’ve always said this, your job Richard, is to make it easy for your customer to buy. Let me repeat that. Your job is to make it easy for your customer to buy. And it’s so simple. And they say, “Really! Yes, make it easy. Don’t make it hard”.
Richard Wilson: Right.
Brian Tracy: Difficult, make it easy.
Richard Wilson: Right. Yeah. That’s a very good reminder. I think that my next question is a little bit more geared toward business owners and this question is about people who are running businesses at say $500,000-$1 million a year in revenue. When your business was there at one point or when you were coaching people with businesses of that size what would be the #1 focus that the business owner should take to get their business to that next level-to $5-10 million in revenue? What do you see as the #1 roadblock or the #1 thing that they really need to do in most cases that’s the most important thing they should be focusing on at that point?
Brian Tracy: Well, I went through this exact same process myself this year. And I wanted to achieve sales of $100 million on a new product, alright? And it goes back to what I said a little bit earlier which is so simple, yet so profound is try to find a big problem that a lot of people have and solve it in a big way, alright?
So, what is a problem that a lot of people have? And what I came up with is this idea that there are 29.6 million businesses in America and of these about 90% or more are struggling. At least they’re struggling or they want to do better and they don’t know how, okay?
So I say, “If I could put together a program that would help these business owners, would give them a whole series of great ideas based on years of experience” almost a practical MBA in one audio program which I’m qualified to do and at a price really, really low so it’s a no brainer…
Richard Wilson: Right.
Brian Tracy: …a person would look at it, then if I could sell 1 million of those at $100 each that would be $100 million.
So I said, “Okay. What has to be in a program for it to sell $100 million?” It would have to have all of these ingredients. So, I designed the program on that basis. I ran it up a couple of flagpoles of professionals in the industry. They said, “Oh my God!” “OMG!” “OMG!” They kept saying, “OMG!” They said, “This program will work. It’ll sell in all the big box stores. It could sell $250,000 in Wal-Mart over the weekend…”
Richard Wilson: Wow.
Brian Tracy: …cause Wal-Mart has 4,700 stores and if they promote it-but Wal-Mart has a requirement. With Wal-Mart it has to be less than $50. You have to sell it for less than $50. So, I will sell it for $49.95. And will the pricing work for us?
And so, now Wal-Mart, Price Club, Costco, every book store even though they’re fading away, and the programs have all been produced. They arrived on my desk. It’s called Business Success Made Simple. It’s 12 solid hours of materials with a PDF of all the key notes and $100 worth of downloadable internet based video learning programs on the subject, plus a complete analysis that you can do for yourself to determine the strengths, and weaknesses, and areas of opportunity for your business. I’m not trying to sell it because I wouldn’t waste your time for $49.95, but every business owner in America if I said, “Here’s a program and it’s guaranteed for a year”…
Richard Wilson: Right.
Brian Tracy: “Here’s a program that can double, triple, quadruple your sales and profitability. It’s $49.95 and comes with a guarantee for a year.” How many people wouldn’t buy it?
Richard Wilson: Right.
Brian Tracy: The reason I mention this is not because of my program because I have a whole series of programs like that. It’s that this is where you have to think. You have to think, “If I want to raise $100 million”, or “If I want to sell $100 million”, or “If I want to double my revenues what product or service could I develop and what price could I charge for which there are a large number of people that would buy it from me and pay the amount I need to charge to make that profit?”
So, you work back from there and it’s quite astonishing. You know that 80% of all products and services that will be on the market in five years do not exist today. So therefore, always be innovative, always be creative, always think, ‘What new products or services could I create, could I represent, could I joint venture?” Sometimes you can find someone else that has a fabulous product or service that you can use your existing business or resources to sell and you can double your income or sales in your business by selling somebody else’s product to the same customers that are buying yours.
Richard Wilson: Sure.
Brian Tracy: Strategic alliances and joint ventures are what we call sell to OPC-Other People’s Customers. And how many other people have products that you could sell to your customers?
So, that’s how you think. But you always think in terms of customer benefit. You always think, “How could I really benefit people at such a high level that they would love to buy my product or service and recommend it to others?”
Richard Wilson: Right. Right. That makes a lot of sense. Alright. Great. That’s something I think every business probably needs to do every quarter or every year. I was about to say that’s something I need to do, but I think that pretty much anybody that’s running a business needs to constantly be doing this, right?
Brian Tracy: Yes.
Richard Wilson: Great. Alright. So, just a couple more questions here. Speed of implementation is one of my favorite business principles. I tend to talk about it a lot. I just wrote a really short book on it. Kind of in line with what you were saying the trend is going towards short books with a lot of content.
Brian Tracy: Yes.
Richard Wilson: And is this idea of speed implementation something that you’re seeing as being very valuable for capital raisers, marketers, and business owners? And if so, how do you see that playing into their success or how important do you think it is?
Brian Tracy: Yeah. The critical thing is if a person wants to invest the question they ask is how much in, how much out, how fast, how sure? Just strip it down to those four questions. How much can I put in? How much can I take out? How fast can I get it back and how sure can I be that I’ll get it back?
Your job is to have the answers to those questions. So, the first question is how much do you want. That’s easy. Most people start there. The second question is how fast will you get it back. And what you do is you compile medium and low scenarios. If it’s real successful this is the best likely and if it’s medium successful it’s low. Low should be so attractive the person’s going to invest even if it has low return.
The second question is time to market. How fast are you going to get this product or this service to the market because people today, there’s so much risk in timing. It takes a long time to get the product to the market. The market could’ve changed completely. And I like to use the Apple method of analyzing the market. Look how fast they come to market.
They come out of the gates with an iPad. I went out and bought one and wham! They’ve got an iPad2 with two video cameras in it which my wife bought. And now they’re talking about iPad3, iPhone3, and they’re creating markets. You saw their sales jump today. Their profitability jumped 124%, sales are up 82%. They just opened 100 new markets. They’ve now got the iPhone in 100 countries which completely kicks the chair out from under T-Mobile and all of the others…
Richard Wilson: Wow.
Brian Tracy: …whose brag was, “We’re in these markets with Blackberry”. Now, iPhone is in those markets and nobody has a reason not to buy it. They’re selling like hotcakes! They’re up to speed, but they’re moving fast! They’re moving fast.
You can imagine people on a treadmill in the Apple offices. They’re not just sitting up there with their feet up on their desk coasting. They’re moving really fast.
So, speed is really important. Everybody has a need for speed and you actually make your product, or service, or services more attractive when you do them fast.
Richard Wilson: Right. Right. Right. And I guess that since you’re writing 20 books between now and the end of the year it’s something that you’re definitely not just advising other people to do. But you’re actually taking constant action in your own business to produce more value more quickly, right?
Brian Tracy: Right. Yes. And you can never stop. You can never coast. The joke is you can coast, but you can only coast in one direction.
Richard Wilson: Yeah.
Brian Tracy: And nobody can coast. People say, “Well, when does the intense pressure for results stop?” It stops when you retire.
Richard Wilson: Right.
Brian Tracy: It never stops. No matter how successful you’ve been in the past the question is what’s your next miracle.
Richard Wilson: Right.
Brian Tracy: What do you got for me now because what you did for me yesterday’s forgotten so fast.
Richard Wilson: Right. One line from one of your audio programs that’s always just kind of stuck rerunning in my head is that I think you recommend that if you can consistently do things quickly and well, you’ll constantly be getting more responsibility, people will constantly be giving you more projects, and pretty soon you’ll be so much more successful than you were just one or two years ago I think is just such a valuable thing for people to realize and really not just write off as, “Oh yeah. It’s obvious I should do things quicker rather than slower”. But if you do it consistently on every valuable project you’re assigned with it can really make such a huge difference in your life or your sales success.
Brian Tracy: Yeah it transformed my life completely to learn how to accept responsibility and do it quickly. Whatever you say you will do, do it fast.
I’ll give you a little example. Perhaps one of the most popular business hotels in America or the world is Marriott. Marriott has a little game that they play with you when you phone room service. And room service is almost like the pulse. You can tell how well a hotel runs by how well their room service runs. And so, with Marriott you call and order anything, and they say it’ll be there within 30 minutes. And then they have a game to see if they can’t get it there within 15 minutes. And it’s the most amazing thing. You place the order you have to run to the door because they’re there with it.
Richard Wilson: Right.
Brian Tracy: And it’s the same thing that Zappo’s did. Zappo’s took themselves from an idea to a $1 billion company by overnight delivery.
Richard Wilson: Right.
Brian Tracy: You could order a pair of shoes by 5:00 today and it’ll be at your front door at 8:30 the next morning through a private messenger service paid both ways. If you don’t like it you can put it back in the box and they’ll pay to return.
Richard Wilson: Wow.
Brian Tracy: They went to $0-1 billion with speed and customer satisfaction.
Richard Wilson: Yeah. That’s pretty amazing.
Brian Tracy: Yeah. There’s nothing that makes people more frustrated than to say, “Yeah. Well, I’ll get to it next week.” Nothing makes people happier than to say, “Yeah. I’ll get back to you today.” “I’ll email it to you”, “drop it off personally”, bang, bang, bang. Fast.
Richard Wilson: Right.
Brian Tracy: People love fast. When you’re fast people think you’re smart, think your products are of higher quality, think your management is of higher quality, think that you’re worth more and they’re willing to pay more money for it. So, I’m really big into speed.
Richard Wilson: Right. Great. That’s a really valuable example there. I love that book about Zappo’s and how they got to $1 billion in value so quickly. It’s a great, great book.
Brian Tracy: Yeah. Delivering Happiness.
Richard Wilson: Yeah. Exactly. Alright. So, I just have one final $100,000 question for you. You already gave us a $1 million piece of advice about selling a lot of books and having a powerful proposition when you’re coming up with your book title or benefit focus. But my last question is really about how you’re an enormous success-a top tier business speaker, a trainer, known globally-but if you had to do it all over again I know you could probably do it faster, better, and more profitably with all the depth of experience that you now have.
So, my $100,000 question is for someone who wants to become a mini “Brian Tracy” within their own little niche or industry over the next 20 years and they really want to lay out a path of speed of implementation for projects they need to get done, and immolate your big success, and follow in your footsteps, how could they do that? What’s kind of your $100,000 piece of advice for following in your footsteps and kind of replicating the success that you’ve had?
Brian Tracy: Well, my success is unusual in that I responded to the market. Somebody calls and asks me, “Could you do a seminar for us on selling?” Then I would interview them to find out exactly what they sold, and who they sold it to, and design a seminar that was just for them. Then when somebody else from that industry called say, “Yes, I’ve done work in this industry” and I would just piggyback on what I’ve already done. Then I would say personal development, or time management, or management, or leadership, or even strategic planning. So, I always responded to the market.
In retrospect, there are speakers who earn $1 million a year who are very focused on a single market and very focused on a single subject, for instance something like profitability and growth strategies.
Richard Wilson: Sure. Sure.
Brian Tracy: All they focus on is companies in a $10-15 billion range, how they can increase their sales and profitability more rapidly by doing time tested and proven things.
I would suggest that you write a book. That you pick a subject and imagine that you have the ability as a speaker to speak on many subjects. So, pick a subject that you really love, that you really care about, that you really want to share with people, that you really think can be really helpful to your clients because then it’s something that you really love to learn about it, talk about it, upgrade your skills in it, and become very good at it. And write a book on your subject which has a unique twist. It has something in it that’s really practical that people can use and stick it in the first chapter. Don’t hold back. Some people write a book and they hold back. “You’ve got to read my whole book before you get to the secret success in chapter 12”. No. Stick it in the first chapter.
And so, something that you love, something you care about, something people really value and are willing to pay for. And make yourself the best in that area. Make yourself the go to person in that area.
I have friends that speak in car sales. There’s about two or three of them that’s all they do is they teach car sales to people and they’re fully booked. Everybody knows if you want to train your sales force these are 2-3 of the top people in the country. Same with real estate sales and so on. So, specialization and becoming really, really good at what you do are the keys to becoming a big success.
Richard Wilson: Okay. Great. That’s really valuable advice and I think just like some of the other advice you’ve given it’s the type of advice you need to hear every quarter, every year because there’s always a further refinement, another niche within a niche you could further become an expert on or further dominate with another 2-3 books on that topic, or different angles on that topic.
So, thank you for that great advice and thanks for sharing advice through this whole interview. That wraps up the list of questions that I wanted to fit into this expert audio interview. And if anybody would like to learn more about Brian Tracy you can visit BrianTracy.com as he mentioned. There you can find his guide to quickly writing a book in 90 days. You can also learn about where Brian is speaking next if you want to go see him in person at one of his seminars or conferences. He has training programs available on his website, audio programs, and his latest books are featured there as well obviously.
So, thank you for joining us again today, Brian. I think I got a lot out of this interview and I’ll be listening to it several more times and taking more notes on what you said here.
Brian Tracy: Well, just before you go Richard I just wanted to mention that we are offering what I call Total Business Mastery. It’s an intensive, three day MBA program September 16th, 17th, and 18th in San Diego. And this program, we have people that run companies with 1,000 people, people that run companies with three or four. It transforms the business. It’s virtually every best idea for business transformation condensed into three intensive days. And I’d really like to encourage your listeners to attend it or if they’d like more information come to BrianTracy.com/Register or if they’d like to hear I’ve done a one hour webinar that they can listen to that explains the seminar in greater detail. And it’s BrianTracy.com/Radio.
So, it’s BrianTracy.com/Register to get more information or BrianTracy.com/Register for the webinar on July 20th.
Richard Wilson: Great.
Brian Tracy: That’s tomorrow and you may not get this out by that time. But this seminar is literally business and life transforming. It’s called Total Business Mastery.
Richard Wilson: Total Business Mastery. Great. Okay. Well, thank you for sharing that and I do encourage everybody to check out BrianTracy.com. I’ve gotten such a massive return on the advice that Brian has shared in the past. That’s why I’ve asked him to do this interview here with me today and I’m not sure who we’ll be interviewing down the road. But I guarantee you this will be one of the top 2-3 interviews I ever do for me because of how much I’ve followed his work and gotten such a huge return on the advice Brian Tracy gives away, and provides in his training program. So, thank you again, Brian for all your time and advice.
Brian Tracy: Thank you, Richard. You have a great day.
Richard Wilson: You too.
I hope that you enjoyed listening to this interview as much as I enjoyed doing it. Brian Tracy is recognized around the world for his insights into business and sales and this video was a great example of why he is so sought-after.
Starting a hedge fund career can be difficult, so I have made an effort to provide lots of free hedge fund career resources to make this process easier. In the following video, I review some career advice and the basics of starting a career in the hedge fund industry.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Visit HedgeFundCertification.com to access a library of career resources.
Access the 10 Steps to a Hedge Fund Career article via HedgeFundCertification.com
Decide whether you really want to work at a hedge fund.
Become a student of the hedge fund industry.
Use the Three Circles Strategy.
Identify Hedge Fund Career Mentors.
Complete One or More Internships.
Develop Your Unique Value Proposition.
Hedge Fund Job Tips.
Land The Unadvertised Hedge Fund Job.
Consider Hedge Fund Service Provider Jobs.
Apply To Hedge Fund Jobs.
Transcript for How to Start a Hedge Fund Career
Hello, my name is Richard Wilson and this short video is going to review some hedge fund career advice and job search advice. I’m the head of the Hedge Fund Group Networking Association. We offer a hedge fund training and certification program and I also write daily in hedgefundblogger.com.
So first of, let’s start with the very basics. If you’re completing a job search and you have work experience, you may know exactly what type of hedge fund position you’re aiming for and you might know what you want to do, what type of formula you want to work for. If you don’t already know that, before following the advice in this video I would recommend that you probably spend some time reading some books on hedge funds or even easier you could just simply go to hedgefundblogger.com and review the free videos, look at the free career articles, download our free eBook or you can go to hedgefundscareer.com and read about different types of hedge fund careers there as well.
I’d really encourage you to try to narrow it down exactly what type of career you would like and what type of goals you have during your job search before you go out applying for positions or you’ll get into a job interview and they’ll ask you why you’re applying for that position and you know your answer is not really going to resonate with them when they’re interviewing 20 different people. It becomes obvious who really wants the job and who has thought through the process of why they did like to work in that position.
Okay. Next, I’d like to just go through a process you can follow during your hedge fund career search. I know that this process works because it’s the process that I used to get into the industry several years ago. So let’s go to hedgefundcertification.com. Here is our hedge fund certification and training program website. On the top right-hand corner there’s a resources tab, go down to hedge career resources, click on that. This opens up our library of career resources. You’ll see several resources listed here. The first one is an article I wrote for investopedia.com last year on 10 Steps You Can Take to Manage Your Hedge Fund Career.
Let’s go there real quick. Okay. Now, skip down here. Number 1, we already covered this. Now make sure that you really do want to work for a hedge fund and try to figure out what part of the industry is going to make the most sense for your skill set, what you’re passionate about, what your education and past experience has been. It’s an important first step because it can help you focus your career search on a very small niche of the industry and can save you, you know potentially months of networking with the wrong people.
Down here, step number 2, become a student of the industry. Subscribe to 5 free newsletters on hedge funds, read 4 or 5 books on hedge funds, read articles about the area you’re most interested in, go to networking events. So really try to learn as much as you can about the industry, terms people use, strategies that hedge funds use for investments, what challenges the industry is facing. All those are going to help. Make sure that the industry is right for you but also it’s going to help you when you’re interviewing and help you work more efficiently once you’re on the job.
Step 3, down here is the Three-Circle Strategy. This is a business strategy put forward by Jim Collins and his book “Good to Great.” In his research he found that businesses who made consistent great decisions often considered 3 things when they’re looking to make a decision. They looked at what ideas would fit your passions or what you’re interested in doing. They looked at what ideas would be highly profitable and then they looked at what other ideas really would be a fit with your kind of DNA and what you’re naturally good at doing.
So when you’re looking at a hedge fund position, make sure that you’re not just going after position that pays the most money. Almost every position in the hedge fund industry pays very well after you gain some experience. So I really encourage you to figure out what would be the best match between your background but also your interest and you know where those 3 areas kind of combined for you in the industry.
All right. 4, identify some hedge fund career mentors while you’re mentoring or networking in the industry. Try to keep an eye out for people at networking events potentially service providers or consultants who are very well connected and very knowledgeable about the industry and see if they’d meet with you just once or twice for coffee. If you could send them an e-mail once a quarter for just a couple sentences of advice on what you should do next. It’s important not to overwhelm people who mentor you with 5-paragraph, long essays asking for advice and telling them your life story. Sometimes you can get through that quickly or a coffee but over e-mail just becomes an annoyance to most busy professionals.
So try to keep the advice very pointed and straight forward if you have a question, figure out exactly how you can word it concisely so that you can get the most value out of them while they don’t have to spend a whole lot of time with you because if they’re a valuable mentor then they’re usually very, very busy. Complete one or more internships. I definitely recommend looking to work for a fund as soon as possible even if it’s a hedge fund startup and you’re helping them just to complete market research, complete research on their competitors, put their information into online databases for them, anything you can do so that you can get available — so you can get familiar with how a fund works, how they normally operate, how their investment process works, how they manage risk in the portfolio, how they raise capital for the fund.
There’s a lot of things that you just kind of pick up by being around them that you don’t get if you’re just always searching for your dream job but never working within an internship. Develop unique value proposition. If you have a master’s degree or you’ve completed internships in the past and it’s very important to figure out what makes you really different from everybody else that’s applying for jobs, and everybody who goes to a firm is going to say that they want to be there long term, that they’re very hardworking, that they only want to work in this position. So you have to think of something really unique and that’s usually based on internship experience or insights you have on the industry. And the trick here is the sound unique and valuable without overselling yourself.
Many people are so desperate to get a job in the hedge fund industry. They might say that they’re an expert trader when they’ve only been trading for a year or two or that they can produce 30% returns forever. You know I’ve only been trading for a couple of years in a very small portfolio. So it’s important to balance and having something unique to offer and not overselling yourself because that will be obvious to most hedge fund employers.
Step 7, is some hedge fund job tips. There are certain things that employers will look for having passion and experience in marketing and sales can help if you’re looking for a capital raising role or if you’re working for a small hedge fund and you can be wearing many hats. Having heavy quantitative experience and modeling and just being familiar with all the terms and ratios that are often used in modeling and evaluating portfolios could be something highly useful. Many hedge fund employers look for highly educated professionals. It does not mean you have to go to ivy league institution. It just means that you put in the hard work to complete your bachelor’s degree or that you put in the extra work to complete your MBA or complete your JD. I think that means a lot to many employers because it shows you’re not flaky and you’re organized and you follow through on what you commit to.
Step 8, this is probably the most important step in the process. You should really consider unadvertised hedge fund jobs. Go and network with hedge funds, ask them for a job, ask if you can be fitted into the organization, ask if you can prove yourself. It is the most overlooked opportunity in the industry. Most people only look for jobs that are being advertised and I think that’s absolutely wrong approach. Every single job I’ve ever gotten was unadvertised and I landed it by being pro-active and proving myself as someone that was worth a lot to that organization.
Step 9, don’t rule out service providers. You can work for a service provider and gain some experience within trading, print brokerage, risk management, investment research or marketing in the sales and then with that experience you could go work inside of a hedge fund later or you could ask as a consultant or keep on working for a service provider in the industry.
And step 10, apply for the job. Often times you can kind of get into a paralysis mode or there’s information overload, you don’t know where to apply, you don’t think they would ever hire you. But be pro-active and apply for the positions you do see online and also apply for those, like I said, that were unadvertised.
So those are the main tips in this article for managing your hedge fund career search. It’s called 10 Steps to a Career in Hedge Funds. And again, if you want to access this just go to hedgefundcertification.com. Go up to hedge fund resources and then down the hedge fund career resources. And we’ll be adding more articles here and videos over the next two to three weeks so check back soon and we’ll have more content.
I hope that this guide has provided you with some concrete steps to launch your hedge fund career.
In recent years since the financial crisis and scandals like the Bernard Madoff fraud, transparency has become even more important to investors. Now more than ever, investors are looking for hedge funds of an institutional quality. In the following video, I discuss the importance of institutionalization and transparency as well as how it relates to running a hedge fund. This video will be very valuable to hedge fund managers looking to improve their operations.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Transparency is basically operating and investing within your portfolio so that investors have near 100% understanding of what you are doing and how your hedge fund operates.
Reporting to investors should be done quickly and consistently at least once a quarter.
Establish a very thorough process for hiring.
Be as transparent to investors as possible in your investment process.
Be pro-active in your transparency efforts.
Transcript for Hedge Fund Transparency
Hello, this is Richard Wilson and today we’re going to talk about institutionalization and specifically the importance of transparency, what that means and how to really get some transparent things in place for your hedge fund business. So first of, transparency is basically operating and investing within your hedge fund portfolio in a way that investors have almost 100% see-through of your decision-making processes, your research, your risk management and your investment process and even your team and what they’re doing every day.
So let’s give some examples here and they could really mean. First is risk reporting. Lots of hedge funds have T plus 2 or you know a day or two delayed at risk reporting, somehow same day position risk reporting. Someone may do monthly or quarterly detailed risk reports. It’s important that they’re done consistently, usually the more often the better. Usually you can enable them with technology so that they’re done faster and with less individual manual levels of effort. And on a consistent basis it’s good to send this to your investors proactively, maybe once a month, once a quarter at least, it’s being sent to them so they know that you know what your risk positions are at all times.
And one thing that goes along with that is that if you get in the habit of acting in the right ways in terms of operating in the right ways, operating about looking at intraday risk positions then that’s something you can produce for an investor. And the largest of investors are the ones that are going to do the most checks on how your businesses ran. And one other test might be, if they ask for a risk report, how many days does it take for you to produce that? Does it take a month? Do you say well maybe until the quarter? You know once you response maybe you can provide it back to them in an hour or the same day or the next morning, that’s a world difference from it taking two weeks for a fund that has never had to do that before or that doesn’t have the technology in place to do produce that same report.
So risk reporting is a good example of being transparent. Other transparency could be the very thorough process through which you hire somebody. Everybody knows that a pedigree is one of the most important things for attracting new investors but how many hedge funds when they go and do a due diligence call and talk about not only their investment process but their pedigree investment process. How do they hire very talented experienced professionals? How do they attract more talent per dollar spent than any other competitors? Is it through equity sharing? Is it through vested benefits? Is it through vested profit sharing? Is it through building a strategic board and then slowing hiring on some of those professionals?
I think showing how your business as a hedge fund is advanced enough that you thought through these things and you have a documented, somewhat rigid process for making sure that you had grade A talent for your team is something that the biggest institutional investors will really appreciate because a larger — the more money they have to invest, the larger their organization potentially is and they might have similar systems in place or maybe they realize they should have such systems in place and they’ll respect you for having it already in place.
So I think that that’s another good example, something transparent that you can share. Another thing that ran across most often with emerging hedge fund managers is that they believe that they need to be so secretive. They cannot even share their investment process. And there was a study that came out in 2007 that showed that 86% of institutional investors will not invest in something unless they understand the investment and the investment process behind it. And so I think it is very important that you’re as transparent as possible of your investment process. Maybe your investment process has 4 steps and maybe each of those 4 steps has 5 parts. So maybe what you do is you explain the 4 steps and you provide a summary of those 5 parts.
If you provide some detail but not so much as somebody could copy every little step of your investment process or if your magic sauce is really your research in the inputs under your research system, maybe you share all 20 points of that research, of that investment process and that way you’re more transparent to your competitors, your investors understand exactly all of the different checks you’re doing and processes your following consistently and that can come up stronger than somebody who has 2 percentage a year performance better than yours or even a longer track record but they’re not as transparent.
So that’s another example. Being very transparent on your investment process is another great practical, you know something that you can take away today and start using it as an example of how to be more transparent and how you operate. So in every case within your business, if you look at the 18 or the 12 business functions or strong points about your firm and look at each one and how transparent you are, how transparent your competitors are and how far you could push that line of transparency, I think you’d be rewarded for being proactively very transparent. I agree, there may be an area or two where you want to be less than 100% transparent, or possibly one or two of your reports may only go to investors who have a certain criteria of being the very highly interested or qualified investor.
But in most cases it just kind of benefit you to be more transparent than most or all of your competitors if possible within every area of your business. On some level now, after the Madoff scam there is actually a sense of distrust. At some level nobody trusts anybody. There’s always friends and business that helps smooth things along and get things done quicker, but then when it moves up the chain of command there’s almost always more regimented controls now to have everything checked, due diligence done and things compared and revisited more frequently.
So it’s important to be transparent. I don’t see that trend reversing and you actually make everything smoother for yourself if you’re just transparent upfront. They’ll be less questions and less scrambling to come up with answers and reports down the road when those questions do come up. So thank you for your time today and I hope you enjoyed this video. We’ll see you next time.
Transparency has perhaps never been as appreciated by investors as it is today. I believe that you will be rewarded for your efforts at increasing transparency and communication with investors.
There is a near-constant debate that takes place between hedge fund managers and investors over liquidity and lock-up periods. In this video, I explain hedge fund liquidity and lock-up periods and what these things mean to hedge funds and hedge fund investors.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Liquidity is often something taken into consideration by investors that invest in hedge funds.
With some hedge funds, you have monthly liquidity and you put in a redemption request that will be filled by the end of the month.
Other hedge funds have long lock-up periods because they invest in assets with longer investment horizons.
The average lock-up period for a hedge fund is 18 months.
A lock-up period could be very strict or the fund might simply charge a fee for withdrawing your money earlier than the agreed-upon time.
Institutional investors may be better suited for these longer-term investments.
In the following video, I talk about public relations for hedge fund managers. Hedge fund managers often shy away from media attention and overlook opportunities for public relations. I believe that public relations is one of the most ignored marketing tools in the hedge fund industry.
Video Transcript/Summary: The strategies and tips provided within this video module include:
The media is very hungry for stories about hedge funds and the opinions and insights of hedge fund managers.
If you speak with your compliance or in-house legal counsel, you can really use the press as an asset rather than an adversary.
By only doing interviews via e-mail you can run your communications with the press by your compliance or legal firm to make sure that you are not violating any laws or regulations.
Have a process in place that you have written with your compliance officer so that you avoid any problems in your interviews.
Identify a few select publications that you would like to appear in and contact those editors with information about you and your hedge fund.
Speak at public events, conferences and networking events in the hedge fund and finance industries.
Consider writing a book on your experiences and your insights.
Transcript for Hedge Fund Public Relations
Hello, this is Richard Wilson and now we’re going to talk just real briefly on public relations for hedge fund managers. This is a topic that isn’t talked about too much because most hedge fund managers ignore public relations strategies, don’t talk to the press at all and kind of shy away from any type of media attention. And it’s probably one of the most ignored marketing tools that I see in the hedge fund industry. I’ve spoken and worked with over a thousand hedge funds. I work pretty closely with three dozen hedge funds and with the exception of one fund which I’d highly publish, author as a CIO, the rest at best put out one press release every two or three years and that was the extent of their public relation strategy.
So I definitely recommend meeting with a PR expert or a consultant, plan it out, reading four or five books on the area and figuring out how you can position your firm in the industry maybe combine that with some authority positioning tactics and it can really go a long way for your hedge fund. The media is always hungry for real-time opinions, from real hedge fund managers. That’s something they see as kind of scarce because hedge fund managers don’t want to talk to the media. So if you speak with your compliance firm or your in-house legal counsel and figure out when it’s appropriate and what can be said, what can’t be said or if you respond only through e-mail interviews which are first written and then approved by your compliance counsel before being sent out.
There’s ways on working with the press and getting around or taking regulations into consideration while still speaking with them and benefiting from that exposure. Sometimes your hedge funds can be written about whether you respond to the press or not. So it’s better to have some control of that message rather than none. I have about four main tips if you want to implement some public relations strategies for your hedge fund. First and foremost definitely speak to your legal counsel on exactly what you can say, what you cannot and have a documented process in place that he has approved that you’re going to follow when you’re speaking with press professionals. You’re always on the record when you speak with the press and you need to know what you’re going to say beforehand or how the approval process works or if you can really respond in writing, et cetera.
Second, I would develop a list of 10 to 15 targeted publications you’d like to appear in, identify the editor of the financial columns within the publication or news source and then introduce yourself to them, tell them who you are, what you do, how much money your firm manages, show the full picture of your strategy, your challenges, your background and your pedigree so that you look like a valid source of information for him. Next, try to speak at public events, conferences, networking events and other places in the industry where you’ll be heard by others in the industry but also by members of the press. That’s going to help while pitching yourself to the press and it will help you get invited for other goals in different publications in the industry.
The fourth tip is to consider writing a book on your insights and experience. People who write books get invited more often to speak to the press, speak at conferences, to write articles, to write columns and it might sound really extreme to somebody who’s already working 50 hours a week to write a book but really just writing a couple of articles a week, it’ll turn into a book in just two or three years. You’ll have a book written just from those articles if you do a good job writing them. So it’s really not hard as it may seem.
So my fourth PR tips in managing a public image as a hedge fund manager would be, first, speak to your legal counsel on compliance and to find a process that’s going to work every time when you speak to the press. Next, develop a list of 10 to 15 target publications you want to go after and figure out who the editors are of those publications. Next, speak at public events, conferences, seminars, networking events and last, fourth try writing a book. You can do this through writing separate articles or just getting a book deal on writing a book. But I think with these four tips, you’ll be doing 10 times more than the average hedge fund manager does and you will realize some long-term benefits from that.
So thank you for your time and we’ll see you again soon.
I have spoken with thousands of hedge fund managers during my career in the hedge fund industry and I have only met one or two who really make a big effort to use public relations to help their hedge fund.
Many people were totally unfamiliar with the hedge fund concept until only a few years ago. It often surprises people to learn that hedge funds have existed in their basic form since Alfred Jones started his hedge fund in the early 1950’s. In the following video, I give an overview of the history of hedge funds, what makes up a hedge fund and how hedge funds operate.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Alfred Jones founded the first hedge fund in 1949 by matching short sales with long sales of stocks to manage risk in his portfolio.
The term hedge fund refers to this method of investing and how it hedges risk by combining long and short bets.
There are trillions of dollars in the hedge fund industry and more money pouring into hedge funds every year.
Some of the earliest hedge fund managers were Warren Buffet and George Soros.
The performance fee aligns the hedge fund manager’s interest with that of the investors.
Hedge fund portfolios can include almost anything which has led to a huge growth in the industry.
Hedge funds are mostly restricted from direct marketing to retail investors and must market to accredited and institutional investors.
The hedge fund industry can be highly-lucrative.
Knowledge is the hedge fund manager’s most valuable asset, therefore they are very private.
Transcript for History of Hedge Funds
Hello, this is Richard Wilson and today we’re going to talk about the history of hedge funds or the history of the hedge fund industry. This is a topic which is often confused with the term hedge fund and what makes up a hedge fund especially with people that work outside of finance. Most people on the financial industry have a pretty good grasp of what a hedge fund is or is not. But people who work just in business or in journalism or media or other areas are often confused by what would make a hedge fund versus something else. So the history of a hedge fund can kind of clear that up.
So first of, in 1949 there was a person, Alfred Jones, who was a journalist. He was also an author and sociologist, and he basically started the first hedge fund. What he looked at was the performance of securities in the broader markets and he looked at how he could pair trade or mesh some short sales with long sales of stocks to kind of manage risks within a portfolio. And so in a very literal sense he was hedging his investments. He would invest in Intel but short with AMD or something such as that.
And so that’s how the term hedge fund came to be. What happened next was that this method of investing became popular, really not till the 50s and the 60s. And in the 1970s it was recorded that there was 150 hedge funds in the industry, probably more if you count really the small ones, and there was also close to a billion dollars in assets which is very small compared to today and then on what source you go to, there’s between $1T and $2T in assets and hedge funds. So an enormous industry compared to a billion dollars.
I’ll give you an example. Just last month $14B in new capital was invested in hedge funds which means besides withdrawals there was actually a $14B increase in total capital in the industry. So just last month it increased 14 times more than it was in the 1970s. Some of the earliest hedge fund managers were Warren Buffet, George Soros and Michael Steinhardt. And since hedge funds were first invented and since the 60s and 70s they’ve evolved and instead of a hedge fund being a fund or portfolio hedges, they’re security investments, a hedge fund has come to mean an investment, a private investment structure which charges both a management and performance fee.
And that performance fee is really key to making something, a hedge fund, because a mutual fund might charge a management fee, and ETF might charge a management fee. But a performance fee really kind of aligns the hedge fund manager’s interest with the investors. So another important thing to remember is that hedge funds now getting glued, commodity investments, bonds, real estate, patent portfolios, commercial financing, currencies, foreign exchange really can include almost anything and that is why hedge funds have grown to such size.
They include such a broad spectrum of investments and the term is used so loosely that the hedge fund industry is now enormous, whereas a term like private equity although has expanded in various types is more concentrated. It’s just one of those terms. Hedge fund has just been used more frequently for more types of investment structures over the years. So that’s why there’s some confusion and some very large growth and some of that confusion around the hedge fund industry has also been created over basically two reasons. The first reason is that in many places such as United States, hedge funds are restricted and how they do it in public marketing and how they perform in public relations.
They can’t do most types of direct marketing as a traditional company could. Because their investments into a hedge fund are mostly restricted to accredited or high-net-worth investors and institutional investors. So that just leads to some confusion because many hedge funds are scared to do any educational or marketing efforts and they’re restricted from doing lots of types of marketing and public relations efforts. And so that is one’s risk and confusion in the industry. The other source is really just out of competitiveness. The hedge fund industry can be very lucrative for a fund manager or a professional in the industry, whether they’re raising capital or managing a portfolio or being an analyst. It can be very lucrative.
And the result is that knowledge is power and knowledge is a hedge fund professional’s greatest asset. Knowledge about investment process research, risk management, fund operations to a hedge fund is there most valuable asset. And if somebody else has all of your knowledge that you can quickly copy everything about your track record and maybe some of your team pedigree. And so it’s actually a very valuable thing to have unique knowledge and the constantly growing set of specialized knowledge within the industry. And because of that, hedge fund managers are not likely to give away their knowledge to the press. They’re not as likely to write books and they’re not as likely to consult with other their hedge funds.
For example, Jack Welch after leaving GE spoke to many different companies and is on the boards of many companies and he has written books about his practices and you don’t find that as much in the hedge fund industry. When a hedge fund executive retires they either have so much money that they don’t care about doing those other things or they’re on the board of a few hedge funds which pay them very handsomely or they go and join as a strategic adviser to a very large hedge fund and they serve that one hedge fund. Typically, they’re not out giving speeches everywhere, writing 6 or 7 books, going on to Oprah, doing interviews with the media all of the time. It’s just more of a competitive, very knowledge-centric industry. And so that can cause some more confusion.
So I hope that helps with the general overview of the history of hedge funds and how it moved from being a hedge portfolio to being more popular in the 60s and the 70s and being more of a management performance fee combination that made up a hedge fund. And then also how it moved from being a billion dollars in assets just in the 1970s, 30 years ago and now just last month gained over $14B and depending on who ask there’s $1T to $2T in the industry. And then we covered the two reasons why hedge funds are a little bit confusing or hard to understand, and that is the first reason about the laws of hedge fund marketing and public relations that restricts them. And second, it’s a very competitive knowledge based industry.
So I hope that’s helped with your understanding of hedge funds. If you’re completing the CHP designation this is important information to know. If you work in the industry it’s probably something you at least already partially know and hopefully it helps. Thanks for your time.
I hope that this video has given you a better understanding of the history of hedge funds and how hedge funds have evolved over the years.
The level of wealth in a country is very important to hedge funds for two main reasons: it is easier to raise capital if there are a large supply of wealthy investors and second, because a high degree of wealth in a country is usually indicative of a business/wealth-friendly tax and regulatory environment. In the following video recorded in Singapore, I talk about the level of wealth in the country and how hedge funds in Singapore are faring.
Video Transcript/Summary: The strategies and tips provided within this video module include:
Singapore is one of the richest cities on earth.
The average income in Singapore is about $35,000 a year which is very close to the US average of around $42,000.
One out of twenty-five people in Singapore is a millionaire.
If you are looking to start a hedge fund or an investment business you should consider Singapore.
With such a high level of wealth among the people in Singapore it is definitely a place to consider for hedge funds looking to raise capital.
Transcript for Hedge Funds in Singapore
Hello, this is Richard Wilson. I’m coming to you from Tokyo, Japan today. I just finished speaking at the Hedge Fund Congress in Tokyo downtown. And what I want to do is share with you an update just on family offices to family office wealth management industry and the hedge fund industry here in Asia. This summer I’ve been traveling around to Singapore, Hong Kong and Tokyo, Japan and I wanted to just share what I’ve learned about what’s going on in these areas.
First off, family offices aren’t really allowed in this very sense or the term in Japan due to regulations, so really what they have here is retail banking and you get more service basically if you’re a high-net-worth or ultra high-net-worth professional. What that means is that family offices in other areas are going faster than others would, because people in Japan don’t really have the type of service here. So family offices in Hong Kong, China and especially Singapore are growing very quickly, that’s what’s interesting about Singapore, is that just in the last year and a half over a million new people have moved to Singapore and it has grown from 4.2M up to over 5.5M people.
The amount of wealth there is enormous. It’s one of the richest cities in the word that has more billionaires per capita than any other place in the world. Also, 1 out of every 25 people in Singapore is a millionaire. Now, when it comes to the hedge fund industry, what I’ve been learning here is that if you’re going to start a hedge fund there’s so many regulations in Japan. Often times it can take 6, 8, 12 months to start a hedge fund. There’s a lot of red tape, whereas if you start a hedge fund in Hong Kong, your rent and your expenses are higher, your overhead is higher. It’s a little bit more expensive, where if you start a hedge fund in Singapore, you can get registered typically within 2 to 4 weeks to open up your fund for a third of the cost. What it might cost you in Hong Kong is a lot lesser in cost here in Tokyo. So the result is that a lot of people are going to Singapore.
When it comes to taxes, which affects both family offices and hedge funds, the tax rate here in Japan is around 40% and Hong Kong I’ve heard it’s around 16% and in Singapore I’ve heard it’s around 11% to 13%. So basically Singapore has the best tax situation and tax environment for both wealthy individuals and hedge fund managers. Hong Kong comes in second with higher taxes, around 16% but also higher cost of living than Singapore. And then Japan is sky high in terms of taxes. It’s pretty close to the United States.
So if you think about where to start a hedge fund, Singapore and Hong Kong have the least regulations and least expenses for getting started. They have lower expenses in operating than Tokyo and lower taxes. And because Singapore is the easiest to work in, the least regulation, the lowest taxes, there’s just this huge influx of assets and money coming to Singapore. I’ve heard Indonesia, Malaysia, New Zealand, even Australia, Japan and China, lots of people are going to Singapore. I imagine it’s going to keep on growing very quickly and that’s the number one lesson I’ve learned traveling here in Asia and speaking at a few conferences and meeting with lots of different wealth management firms and hedge fund managers is that Singapore is really becoming a huge hub for growth in the future.
Of course China, Hong Kong, Tokyo, all these other big cities and lots of further growth and emerging markets, as there are some other, I’ve heard they have huge markets already. I do think Singapore is going to be the head of where a lot of business is done in the future. So I hope you enjoyed this update on Asian hedge funds and family office wealth management industry here in Asia. I know it wasn’t really in depth. For those of you wondering how things worked over here or you’re looking to raise capital in this region or if you’re looking to start a hedge fund and you’re based in Asia or near Asia and you’re wondering where in Asia possibly to start your hedge fund, I hope this video helps you on your way and to give research on that topic.
Thanks for joining me. I’m Richard Wilson and we’ll see you again soon.
The tax and regulatory environment in Singapore make it especially appealing to hedge funds. Also the high level of wealth that exists in Singapore should be attractive to hedge funds looking to raise capital from new investors. I hope that you enjoyed this update on hedge funds in Singapore.
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