Hedge Fund Lions' Den continues with the three lions giving advice on a wide range of topics relevant to start-up hedge funds, as well as those established and seeking capital.
Andrew McCaffery, global head of hedge funds at Aberdeen Asset Management; Luke Ellis, president of Man Group; and the godfather of the hedge fund industry, Stanley Fink, now Lord Fink and chief executive of ISAM, deliver the gems of wisdom.
The advice given to emerging managers should help attract institutional investors. "Focus on what the special skill is that they bring to the business," advises McCaffery. "It is important that they get across to investors the degree to which they are motivated and committed. It is very important to find that they are thinking through to the business strategy, not just when they open the doors, but what they will be doing in three, six, 12 months down the road to allow them to really succeed and bring the expectations they have put on the table to achieve for investors."
On the future of the hedge fund industry, Fink says: "I think the future of the hedge fund industry is going to be quite interesting. My guess is that there will be a slight bifurcation between managers."
He also cautions against too much simulation of performance. "One year of live trading is more interesting than 10 years of simulation."
Ellis cautions against being too eager for success. "People think that it is going to be easy to start a fund and get rich. But the answer is if the rewards are good, it should be hard. Starting a hedge fund is a big entrepreneurial stop," he says. "[Many] think they can just turn up and start trading and it will all be good. That is not how the real world is anymore."
Episode three, which airs on December 11, is crunch time for the emerging managers taking part in the series as they face the lions and have just two minutes to pitch their fund ideas.