While industry veterans in the futures space understand the value of CTAs in a portfolio, hedge fund assets under management dwarf those AUM totals by over thirteen times. To explain it like one of my traders, “There is a multi-trillion-dollar industry pushing stocks no matter how they perform.” We do not have that luxury as investors come to us looking to steady their portfolio and ultimately hold us to a more demanding standard. After all, the marketing machine is owned by our competition. This puts the value of reaching potential prospects at a higher premium. Each conversation is one more that we can position to help someone now or down the road. So where does one look for these investors?
If we start with the expectation that most of the desirable clients will be QEP qualified, we immediately cut off 90.3% of the population of the United States who fall below the easier level of even an accredited investor. The remaining select group invests only 10.8% of their assets in alternative investments with the remaining bulk going to equity, fixed income, and cash equivalents. That leaves us fighting for a fraction of their portfolio dollars. Clearly, any traction we can achieve with an investor should be welcome. Many new traders think asset raising will be easy but I assure you it is not. In fact, it was the reason our company started in the first place.
Our founder Perry Jonkheer traded on the floor of the Chicago Board of Trade until 1993. He realized that a small set of professional traders were quietly making investors incredible gains despite a lack of sellers to support them, so he launched IASG. Starting with a mailing list, he began to send the “IASG 100” which listed the top one hundred programs to prospective investors. Within a few years, this list grew considerably and when the internet became a viable option, he began posting results to IASG.com and has done so since 1997. Since that time the user base increased significantly and numbers into the tens of thousands of potential investors, traders, academics, and more. Quite simply, it is one of the largest databases in the industry and one that remains free to all users. Importantly, it attracts the small subset of users we are looking for anyway. High net worth individuals, family office, and institutional clients who by nature of finding us, show some interest in our asset class.
While I believe our site is superior in many ways to our competitors, I tell new entrants to the industry to post their results everywhere. This will often connect you to the IB Community. Introducing Brokers (IBs) spend much of our time working with newer CTAs and can help connect you to our existing base of customers. You will find that each IB might provide different types of customers, levels of service, and expectations for your strategy. Ultimately, you may decide to focus on specific organizations that provide the best results for your firm. The goal of all brokers should be to handle the customer relationship as much as possible so you can focus on trading. This helps everyone but especially the customer to be successful.
We often hear from CTAs that someone found them through our site and reached out directly in order to avoid paying the broker a fee. While this may seem beneficial at first, setting up accounts, answering questions, and providing ongoing support are not typically a trader’s expertise. By simply asking where they found you and referring them back to the source you create a buffer between you and the customer, inspire goodwill with the salespeople that can support your business, and most importantly provide a better investing experience (in many cases) than you might be able to provide yourself. This is not a sleight on relationship building for managers but a recognition that running an operation at the earliest stages is a lot of work and the payoff for you comes with good returns not managing a lone customer.
When the phone does ring be prepared to answer the following questions:
- What is your strategy?
- Why is it unique?
- Why are you better than other choices similar to yours? Know your competition.
- How do you fit in the portfolio and what value do you add?
Being able to answer these questions and putting up good returns can help you grow quickly with the right support. While we cannot work with everyone, we promote the industry as much as we can and look forward to helping you become successful or continuing your progress.
Contact Greg Taunt at IASG for questions, comments or additional information