It’s been a longstanding myth that professional fund managers are entirely focused on investment opportunities and naturally have free flowing conduits to capital. However, the truth of the matter is that both new and seasoned managers are spending a significant portion of their time raising capital for their funds. Attracting capital to manage and generating above market returns are the bloodlines for any good fund manager. Historically, many funds, due to their size and regulations, were limited to dealing with institutional investors that were able to write larger ticket sizes. This is in part due to the limitations on the number of investors an unregistered fund can have, but at the same time was also highly influenced by the limited reach by fund managers to the broader community. As technology meets evolving regulation, we form new opportunities for fund managers looking to raise capital.
Here are 5 reasons why fund managers should consider raising capital from retail investors.
(1) U.S. Investable Assets Are Huge
As of 2013, there has been estimates of investable assets exceeding $28 Trillion in the United States. While a majority of these assets may indeed be held in short term cash like securities, the sheer size represents a huge opportunity for fund managers to tap into a previously inaccessible pool of liquidity that dwarf the aggregate of many financial institutions.
(2) Leveraging New Reach
Prior to the JOBS Act (and also the recent lifting of the ban with relation to hedge funds more specifically), funds were largely unable to utilize any form of advertising or general solicitation to reach their audience. While the investor pool is limited to accredited investors, this still represents a large majority of the type of investors that funds should be keen on tapping into.
(3) Enhanced Appetites for Alternative Investments
Investors are continuing to gain access to more information and are becoming better informed as both consumers as well as investors. With this trend there has been an increasing appetite to access alternative securities which ultimately decrease the volatility of their portfolios and can potentially enhance returns above and beyond the traditional stock and bond investment pool.
(4) Not Your Grandfather’s Logistics
With this recent access to a large pool of smaller investors there has been concern raised around the sheer logistics of managing a large group of investors. Leveraging technology, platforms like DarcMatter are able to manage this large pool of investors for a fraction of the cost that it used to be historically.
(5) Shifts in Demand by Institutional Players
Recent regulatory burdens (Volcker Rule) as well as changing investment return expectations and realizations have pulled many larger investors from the ring, including Calpers and Goldman Sachs. This recent change may cause ripples in the pond causing less institutional capital to become readily available. Alternative sources of funding will becoming increasingly more important.
DarcMatter is empowering the next generation of fund managers to benefit from this new pool of capital in a fully compliant and seamless matter. If you have any questions, feel free to email us at ask[at]darcmatter[dot]com anytime.
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DarcMatter is a technology platform providing enhanced capital connectivity between issuers and investors in the alternative investment space. Visit DarcMatter to start raising capital or get transparent access to alternative investment opportunities.Visit DarcMatter