Launching a New Fund? Let the Investors Know You’re Outsourcing.

Launching a new fund presents many opportunities for hedge funds and asset managers to diversify product offerings and capitalize on market trends, among  other benefits.

It'’s also a chance for newly established fund managers to prove themselves, convinced they could do things better on their own and beat the markets.

In either case, the pressure is on to attract investors and deliver:

1. "How do I convince the right investors to join my fund?"

2. "Can I ensure a winning strategy?"

And this is a situation where leveraging third parties via the outsourced model may help.

You might be thinking:

1. "How will it help?"

2. "And why should I let the investors know I'm outsourcing? Why would they even care?"

3 Ways Outsourcing Can Help New Funds

1. Outsourcing lets you focus on your core competencies.

Launching a new fund shouldn’t be all about operations and admin work bogging you down, which ends up being the case for many fund managers.

By partnering with a third party, you don't have to focus so much on areas that not only take excessive amounts of time out of your day, but also in areas you lack the relative expertise in.

This also frees up time and energy to focus on strategy and innovation, such as using AI for research, analysis, predictive modeling, risk management , portfolio optimization, and analytics, among other applications.

(Certain providers can help with that too!)

2. Outsourcing helps you cut costs.

By partnering with a qualified outsourcing provider, hedge funds can lower costs.

According to a KPMG survey of hedge funds, 71% of survey respondents said the remote work experience during the pandemic convinced them they could achieve greater cost efficiencies if they outsource some of their operations.

Expenses for launching and running a fund can fluctuate greatly. To keep some of those costs not only lower, but predictably lower, is a win.

3. Outsourcing helps hedge funds scale and be more efficient.

As more and more firms take on the outsourced model, the number of providers serving them have grown in sophistication and service capabilities, supporting them in a range of areas: investments via OCIO model, accounting, compliance, IT, HR, etc.

This is great news for hedge funds, as these third parties have greater

resources and know-how to deliver greater efficiency in their focus areas.

It’s also no surprise the above KMPG survey also found that 70% of respondents believes outsourcing makes their work more efficient.

As an outsourcing services provider, Empaxis streamlines and scales hedge fund operations with top-tier MBO talent, cutting-edge cloud solutions, and deploying intelligent automation/machine learning into their workflows.

Third-party providers should have the resources and know-how to deliver greater efficiency, and depending on their locations of operation and flexibility, they can provide custom services on an as-needed basis at any time of the day.

The above KMPG survey also found that 70% of respondents believes outsourcing makes their work more efficient.

As an outsourcing services provider, Empaxis helps fund managers boost efficiency and cut costs by streamlining their middle- and back-office processes.

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Why Hedge Funds Should Let Their Investors Know They Outsource

Of course, when outsourcing, make sure to choose the right vendors. Ensuree they are qualified and pass muster with compliance and security requirements, as well as being proven to do the job.

Then, by all means, let the investors know.

1. Outsourcing Shows You Are Committed to the Investors

As a fund manager, letting investors know you are leveraging third parties, especially for non-core work, shows you are 100% committed to the task at hand: formulating and executing a winning investment strategy.

When you spending more time on ways to generate big returns, you're serving the investors to the fullest.

Focusing on strategy and clients, this is especially important in the current climate, with heightened market volatility and uncertainty.

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2. You're Being Honest about Your Capabilities

It's all about transparency. Honesty and openness will open the door to better relations with the investors.

You are proud enough to boast of your investing acumen , but also humble enough to admit what you’re either “not good at” or simply not focused on.

After acknowledging those relative weaknesses, you will enlist the services of an outsourcing provider that can do the job at a higher level.

This reinforces to the investors your commitment to excellence in all aspects of the organization, be it through use of internal resources or external partners.

You are not misleading investors into thinking that you have everything under control, yet behind the scenes, you're sweating and scrambling to generate performance reports.

If you've spent your career dealing exclusively with the investments side of the business, then that's clearly your area of expertise… and where the bulk of your time should be focused.

Leverage Third Parties Shows Hedge Funds Put Their Investors First

When starting your own fund, you now have to think about many things (especially operations), which may have never been your focus before. Even if you have experience, ask yourself these two questions:

1. Are you launching a new fund because of your interest and expertise in the investment side (including attracting assets/investors and maintaining client relationships?
2. Which activities will actively generate revenue for your firm?
3. What activities are outside your focus and can be performed better by someone else?

Answering these questions honestly, the only conclusion can be to partner with an outsourced provider... and let the investors know about it and why you're doing it.