HN Explorer

Ask HN: How would you growth hack a hedge fund?

14 points by caruana ↗ HN
I work for a small technology advanced real estate hedge fund that has been delivering great returns to middle class investors for several years. I am wondering what HN members would do to promote their values, technology and integrity to a wider audience to grow their investor base?

20 comments

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jklein11
Can you explain how you serve middle class investors?

Only accredited investors can invest in hedge funds. The requirements for becoming an accredited investor, as described by Rule 501 [1] state that an individual's net worth, excluding real estate must be over $1,000,000 or have an income of over $200,000.

I think one of the biggest struggles to "growth hacking" a hedge fund are the regulator requirements. [2]

1. http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=8edfd12967d...

2. http://www.investmentfundlawblog.com/resources/marketing/mar...

caruana
The fund is a RRSP eligible investment in Canada (I think the equivalent of 401K in USA?). We are not currently serving the American market, sorry, I should have mentioned that but I think the growth management would be similar in both markets.
nugget
Are you really a hedge fund in that you actively hedge your positions or are you just an actively traded long-mostly fund that calls themselves a hedge fund because it's a trendy label? What benchmark do you compare yourselves to? Are you sure you haven't outperformed the market simply because REITs have been such a strong asset class since 2010? It's extremely unusual for any actively managed funds to consistently beat their benchmarks net of fees, and those that do, typically have no problem attracting huge amounts of capital (to the point where they lose their ability to outperform). A Random Walk Down Wall Street by Burton Malkiel [http://fave.co/29ZnkN6] is a fantastic book for anyone who wants to learn more about why this is.
caruana
I don't want to get in a debate about what a hedge fund is, but while the term "Hedging" is the practice of reducing risk, the goal of most hedge funds is to maximize ROI. The term hedge fund comes from the historical tendency of the first "hedge funds" to hedge against the downside risk of the market by shorting the market (as where mutual funds can not usually take a short positions). In today's terms, hedge funds employee many different investment strategies so it isn't accurate to say hedge funds just hedge risk. Hedge fund managers usually make speculative investments and can sometimes carry more risk.

The funds is bench marked to Credit Suisee HF Index, Citibank Prime +5%, S&P 500. It is beating the bench mark since inception and that historical statement is verified by our auditors. Your point regarding "attracting huge amounts of capital" holds true when a fund reaches a certain size, typically greater than $120M, getting to that point is where a lot of the work happens. The point from start to autonomous growth must be managed with extreme care and diligence, it is imperative that a growing fund manages their growth to not try and grow faster than their operations can support. -- Which is what I'm asking HN, I am soliciting opinions and experiences from smart people, maybe growth hack is the wrong term.

I agree that as a fund grows it definitely gets harder to scale, and at this time, we haven't begun to scale at our full potential, so that point remains in the central view of the risk committee.

Thank you for contributing your opinions.

doug1001
so in the parent thread, i've learned more about hedge funds than i knew before, and i certainly formed a favorable opinion of the fund discussed here. So i'll reiterate a prior post's suggestion regarding education. Beyond ignorance though, there's a clear bias that perhaps you ought to target. the HN community seems to me, to be very clever, fiscally conservative, and highly skeptical. I'm certainly the latter two.

Also, i suspect that a large fraction (easily double digit is my guess) of HN readers are accredited investors. Despite these attributes, knowledge you take for granted might be lacking. In my case, i lack a basic fluency in what a hedge fund is as well as a knowledge of a few simple rules to distinguish legitimate ones from those that (likely) aren't.

Without this knowledge, what i know about hedge funds is what i read on HN and that is usually unfavorable (setting this thread aside). So for instance, i recall reading that Ellen Pao's husband is a manager of hedge funds of sufficient reputation to attract more than $100 million from municipal pension funds, but is now bankrupt and declared a ponzi scheme by the bankruptcy judge.

Again, not to disparage hedge funds, rather just to emphasize that these are exotic instruments that very few have any idea how they work, and so there's nothing to mitigate the highly negative association caused by the alarmingly frequent instances of massive fraud orchestrated with hedge funds.

clearly it's not logical--everyone knows what a "hedge" is and they know what a "fund" is, but put those two words together and they metastasize into an term with a strongly reinforced negative connotation.

zhte415
> I don't want to get in a debate about what a hedge fund is, but while the term "Hedging" is the practice of reducing risk, the goal of most hedge funds is to maximize ROI.

So you're not a hedge fund.

>The funds is bench marked to Credit Suisee HF Index, Citibank Prime +5%, S&P 500.

What a crazy combination of benchmarks.

jklein11
I'm no hedge fund expert, especially ones based out of Canada, but I think it's based on the fee structure. Hedge funds typically get 2% AUM and 20% of the return. I don't see any reason to think that isn't the case.

Those funds make sense to me for a real estate focused hedge fund that is primarily used in retirement accounts.

Just my $.02

floki999
An RRSP in and of itself is not a fund type. Similarly to a 401K it is an account which holds investment positions (e.g. Mutual funds, ETFs, single-stock positions).

As for 'growth hacking', that's really not a mindset I would recommend for any investment strategy. First, think of the asset class (real-estate), the investment strategy and the securities/investment products involved: can you scale them up and be as profitable? If you can demonstrate that you can, then growing the AuM shouldn't be too hard. 'Growth hacking' sounds like smoke and mirrors - I wouldn't recommend that terminology with investors.

caruana
Agreed, that growth hacking was the wrong terminology, I think I was being to aggressive with the description.

Yes, an RRSP is not a fund and like you said, a vehicle to hold an investment position. I was not trying to insinuate that an RRSP was a fund and I will edit my previous comment.

floki999
Caruana- as a more constructive comment, I would say your question is more one of marketing retire than investment strategy. In that sense, one advice I would give is to focus on customer education. The majority of funds, whether they are institutional funds or retail funds, do a poor job of educating clients. Especially with technology involved - a client who understands, is comfortable and truly engaged about your technology will probably stick around longer in the not-so-good times. From a sales point of view, education is a differentiating factor. My 2 cents, Canadian.
caruana
Great comment, thank you. I love the idea of education as a differentiating factor, so my question would be, "from a customer's perspective, does the educational material have to be original content or would it be better to reference 'non biased / not affiliated' material?
floki999
It could be a combination of both, but I would suggest developing some original content along with reference to independent references perhaps. In my view, taking the time to develop original content sends the message that the company/fund cares, and is not recycling external material. Plus, you control the quality of the material. Retail investors, especially, are bombarded with infomercial fluff that has no value. Good quality material can only make you more credible.
izyda
Could you go into detail about how you are technically advanced relative to your competition?

Would be curious to hear what that entails / differentiates you from other investment firms in the same space. The alternative data space taking off among hedge funds is pretty interesting, and I'd be interested to hear how a real estate fund approaches it.

55555
scraping and cold email for lead gen leading to sales calls to potential investors.
swanson
I would reach out to the MrMoneyMustache/Ramit Sethi's of the world if you can offer a compelling pitch to their target audience (24-40 years old, tech-oriented) about why I should start funneling some of my investment dollars into your fund (vs Vanguard target date).

Other options: ad targeting people that are customers/users of Vanguard, Betterment, Wealthfront, Robinhood, Simple, etc

rajacombinator
I would leak stories to the press about how we have a secret internal fund that generates mind blowing returns year after year thanks to our army of math phd geniuses but is closed to the public. (Yet conveniently publishes its returns publicly.) Yea, that's what I would do.
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