A start-up’s journey in any industry is not easy: it involves facing a series of challenges and hurdles. Those hurdles must be recognised, understood and then overcome.
As a measure of the industry, just under five hundred hedge funds manage approximately $2.8tn in assets1. They contain only a little more than 10% of the industry in terms of number of firms but manage close to 90% of its assets. Much attention focuses on this club and firms close to attaining this status.
But what about the rest of the industry? Those estimated 3,000 firms, that run no more than $1billion in AUM2, account for approximately $400bn AUM. In our paper, Alive & Kicking, published last year, we examined the universe of emerging managers (which we define as having AUM of up to $500m). Expanding on this work, this year’s paper looks at those firms that run no more than $1bn AUM and those that have made it into the billion-dollar club.
Through six key takeaways, this paper provides a road-map for all emerging and start-up managers seeking to build their firm to a billion-dollar business. In drawing on these takeaways, we sought feedback from both investors and managers alike.
Ultimately, what’s good for emerging managers also benefits the entire hedge fund industry. Investors value having the best choice possible; incumbent firms benefit from having their preconceptions challenged. We hope that this paper is of use to both emerging managers who are in the process of growing their firms, but also of use to those who are considering launching a hedge fund.
Tom Kehoe CAIA, Global Head of Research, AIMA
Sean Capstick Head of Prime Brokerage, GPP