Alfonso Peccatiello has just signed an investment management agreement with a North American institutional grade pension fund. Twenty due diligence processes in, here is what the large allocators actually pushed on, what they ignored, and what it cost to get through.

Alfonso signed the IMA a few days ago. The money is from a North American institutional grade pension fund, it goes into a managed account, and he expects to be trading it inside a fortnight.

Most of what gets written about operational due diligence is written by people who sell operational due diligence services, or by allocators describing what they would like to see. This is an emerging manager who has just come out the other side, with the money committed, saying what the process actually demanded of him.

He has been through roughly twenty of these now. So this article covers the common denominator across twenty processes, from a manager who was small enough eighteen months ago to be nobody’s priority.

In his own words:

“It’s also not referring to a single DD process, anyway. It’s much more of a broad, I’ve done 20 of these by now. This is the common denominators that I’m extracting from what investors do care about a lot and what they don’t.”

I have never read an article where a manager is so open and honest about the institutional DD process. So I’d like to thank Alf for his time and generosity as this will help so many managers see and prepare for what’s to come. And it will also highlight the other side of the experience for institutional investors to see.

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So here are the lessons:

The first big cheque is a signal to everyone else

The part he did not expect was what happened after.

“The press has picked this up. I sent a letter around, so you have seen the announcement, the press has seen the announcement. Then they come to me for comments, and all I can comment is no comment, because I don’t have anything to add rather than the formal statement allowed under the NDA. But then they still publish an article, and funnily enough, you have a bunch of follow-ups from very large institutions that are in the distribution list, and apparently they were waiting for the first large allocator to move to piggyback.”

The reasoning those institutions gave him:

“Most of them are coming and saying, look, if you’ve got money from somebody of this caliber, then most likely your ODD is okay. If you’re going to probably pass ODD, we’re not wasting our time. And if they came in and they got capacity and all of that, then we want to be with them in the founder share class pool. And then it kind of accelerates a lot of discussions, which is very nice.”

Two key arguments in that:

• The first is that a large allocator’s diligence is treated by other large allocators as a completed piece of work they no longer have to pay for. Your ODD becomes a public good the moment somebody credible has done it.

• The second is that the follow-on interest arrives wanting founder share class terms, which means the cheapest capital in your fund’s life, is the capital that shows up because somebody else went first.

I have written before about day two capital. The day you become fully investable, you become investable to everyone at once. Alfonso’s version is blunter. He calls it the snowball.

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Founders are not operations people

“When you start a hedge fund, you’re not an operations person. And even if you hire an operations person, you probably cannot afford a full-fledged COO of some firm. So you’re probably a little bit blind about a few topics.”

That blindness has a cost. Allocators had told him about managers who refuse:

“Sometimes I do ODD on a small manager, and they are not willing to comply, because this costs $20,000, that costs $15,000, and this is just a waste of our time. And then managers get annoyed, because investors need you to be at certain standards or they can’t invest.”

Alf’s answer to that is the correct perspective:

“And for us, it’s the opposite, right? If we are not at that standard, then the business doesn’t exist. So very happily, we’re going to comply with everything.”

Some may call it pay to play, but this isn’t accurate. If you want to play in the first division you need a proper kit. Nobody is charging you to be allowed on the pitch. They are declining to play against someone in the wrong boots.

Palinuro is six people now. Alf has hired an operations person and someone to run business development and put order into the CRM and outreach. The ops hire is doing this gradually.

What you already know is coming

Before we look at these surprises, let’s cover the boring essentials because most managers fail here and it is entirely avoidable.

There is a body of requests that is completely standardised. You know the questions. You have known them for a year. There is no excuse for not having the answers sitting in a folder.

• References. Nominate them now. Get their permission now. Then every time a request comes in, you are letting someone know a call is coming rather than asking whether they will vouch for you. A ninety second email instead of a week of chasing.

• Background checks. Have the pack ready.

The checks themselves are narrower than people fear. Criminal records and outside business interests. That is broadly it.

What you expected, demanded years earlier than you expected it

Palinuro trades under a regulatory host today. A lot is outsourced to the host by definition, and allocators generally accept that model. But it doesn’t stop there.

When a large allocator comes in and looks through into reg host model and says, okay, that works for now. But at some point they may want you to graduate towards being an independent investment manager. This means they will want you to know what you will need when you apply for the license yourself and to prepare and have these things in place earlier.

The list he was handed, in his words: partitioned phone, partitioned computer, two factor authentication on everything you trade through, penetration testing, phishing tests, cybersecurity insurance, and the rest of what a regulated investment manager is expected to carry.

“Not that they will require it from you before getting your own investment manager license, but some allocators, they want to see that. I was expecting it, but I was not expecting it to have to do it so fast.”

Same for background checks on every employee. Required at licensing. Wanted now.

The reg host model gets you trading without a licence of your own. The allocator will still price you against the standard of a firm that has its own license, and will ask you to pre-build towards it while you are still small enough that every line item hurts.

Trade reconciliation, and the Excel that ends conversations

This is the one he spent most words on, and it is the one I would put to any manager reading this tonight.

“How do you do the reconciliation of your trades? When there are a lot of people that still do this in a semi-manual way, i.e. they receive the broker report, and then they look at the broker report versus what they have booked on an internal system, and often the internal system read is Excel, and they check that Excel of a list of positions they run versus the broker statement, and if they find something, then they will flag it, right? It’s a trade break, or whatever it is.”

Palinuro does not do that:

“We were already much more advanced than that, because we’re all good at coding and IT and tech in our firm. So we had already made our own fully automated reconciliation platform and trade breaks, flagging, and all of that is all automated.”

And the allocator’s reaction:

“And they really appreciated that, telling us, for example, that with a lot of managers that scale up, that’s a big red flag. They can never catch a trade break live because they don’t have the IT infra set up to do that. They haven’t coded up something that tells them in real time if the trade isn’t flowing in the right account, it is in the right trade, it is in the right direction. They will have to wait for the day after and do it manually versus the broker statement.”

“They care a lot about this stuff. Trading ops are incredibly important. Making sure you have processes in place, not just manual. The old - Oh, I checked the day tomorrow if it reflects what I think it should be in the book - doesn’t work anymore. They want much more than that.”

The word that matters is LIVE. Accuracy by close of business the following day is a different product. If your answer to “how would you know” ends with “the next morning”, you have given them a reason to stop.

The things he did not see coming

Alf had a list. The list came from the regulatory requirements of an investment manager, which are published and knowable.

“When you look at the regulatory requirements of an investment manager, you can see what’s expected from you over time. And so we had a list prepared. What did surprise me? Because they went beyond that.”

Three items went beyond it:

Key man succession

“Oh, key man risk. So, you know, it’s unacceptable that I am trading and then what if I’m sick? What if something happens to me?”. Allocators want key man succession plan properly written down.

I pushed back on the call, because there will always be key man risk in a firm built around one person’s judgement. His answer separates the two things properly:

“They want a soft succession plan. So they want to know who’s the person who’s going to take over if you die. And it needs to be in place. It needs to be credible. You can’t say, ah, my junior here who doesn’t have any clue. You need to have a strong right hand. I mean, I have it. So for me, it’s very simple to say it’s him. He takes over. He knows the strategy. He’s already, by the way, I mean, he can trade also today. So it’s pretty simple as a step, but they care a lot about it.”

And then the sentence to pin above the desk of every single-manager fund reading this:

“You can’t just go around and say, oh, it’s me. I’m a single manager. I run the show. I mean, sorry, but you’re not going to pass. You’re not going to pass an ODD from a large investor if you say I’m the only one taking risk. And there is no plan B or no credible plan B, really.”

It needs to be written down. A credible name in a document, and that name needs to be someone who can already trade the book.

Insurance

Alf assumed this was standard, a commodity. It’s not.

“No, they have different requirements. Some of them want a certain, like, errors and omission. Some of them want, different levels of insurance, depending on what type of mistake you run. And there is also the coverage of this insurance, right? It can really vary. It can be $5 million, $7.5, $10 million a year. And some of them have quite high requirements. I think it also depends on the allocator. Maybe some of them have been burnt before by insurance which was too small to repair a trade error.”

Another one was Errors and omissions cover, sized to the size of the mistake your strategy can make, against a requirement that varies by allocator and is sometimes set by an allocator who has been burnt. Add the cybersecurity cover from the licensing list and you are carrying multiple policies before you have carried a single management fee to profit.

Fat finger controls, on two independent lines

The one he had already solved, and rates as the biggest of the three:

“I think of the categories I said, the one I spent the least time on, because we were already very much on the ball, was the trading ops. And that’s big.”

What it means in practice:

“Anything from using an OMS that already applies several filters to prevent you from making fat finger mistakes, so having a max limit of futures lots you can trade, pre-agreed with your broker and coded up in your OMS. Having two lines of defense. Your OMS and then your broker on the other side, because the order can go through, but the broker can still stop it.”

“They want to make sure that you can’t trade sanctioned countries by mistake. They want to have them hard coded either by your broker. So basically, if you try to put down the trade, it’s not going to be cleared or accepted in the first place. And two lines of defense. Even in your OMS system, you shouldn’t be able to put up too large of a trade, and the broker should be able to stop it anyway. So this type of fat-finger prevention, it’s really important to them.”

Two lines of defence, independently enforced, with the limits agreed with the broker in advance and coded in both places. A single control is a preference.

What turned out to be theatre

I asked Alf what he had braced for that never arrived. And we giggled. It came down to three elements:

Mayfair office

Here it is in Alf’s own words.

“Quite a bunch of stuff. Where do I start? Office. I’ve heard a million times before that you must have a corner office in Mayfair. Absolutely not.”

“Me? I never thought of it. But I’ve heard very often from other relatively smaller managers, let’s say 100 million or down, that it’s very important to have an office in Mayfair.”

Nobody cares.

I would go further. If you are sub one hundred million and you are paying Mayfair rent to look investable, you have spent the money that was supposed to be invested in your business on a postcode that no allocator has ever cited as a reason to write a cheque.

Onsite visit

“Some of them are even able to proceed without an in-office visit. It’s another interesting thing. So some of them insist to have an on-office visit, basically due diligence, and some not. They never show up. They have never been in your office. They don’t care.”

“On-location ODD is not a must. Some people can proceed without.”

Risk management grilling

This is the counterintuitive one, and the reason it did not happen is specific to how he pitches.

Palinuro is discretionary. Risk on a discretionary macro book is usually where the ODD gets uncomfortable. It did not.

“When I pitch something, I’m extremely risk aware. So a lot of feedback I get is that I’m the least macro manager they’ve ever heard pitch a macro fund. What exactly does it mean is that generally they hear a pitch which is heavily concentrated, very opinionated, people that come in and basically tell them that they know better than the market. They’re going to concentrate risk. And for me, they hear a very different pitch. It’s all about my hit rate and my convexity and my stop losses and correlation stress tests.”

“These are not even questions. I just put them through because the risk management approach is fully quantitative on our side. So maybe the allocator, when it hears this type of quantitative risk management pitch, it doesn’t need to dig too deep into it.”

“But I have not been asked. Nobody has shown up to the office and said, OK, show me what you pitched in the deck from a risk management perspective. What is the system you run it through for this, this and that? But it’s never happened.”

“Although, of course, I can do it. No problem. We do it every day, twice a day. The fact that the whole pitch is based on a very quantitative risk management angle maybe soothed some of the discretionary-manager fear. Oh, the guy doesn’t have a stop. The guy can blow up. But I found it interesting that there has been no major digging of: do you really have this system? Can you really show me how you size a trade quantitatively? Very rarely this has happened.”

Risk management still gets diligenced. What happened here is that a pitch leading with hit rate, convexity, stop losses and correlation stress tests answered the question before anyone asked it. The grilling is what arrives when the pitch leaves the fear sitting there.

I told him those conversations normally arrive at the front of the process with systematic managers, where the assumption is that risk is inseparable from the portfolio system. A discretionary manager who pitches like a systematic one imports that assumption.

What they dig into instead

“Actually, it happens to me more often: they come to me and dig into the idea generation part. They want to know, ah, you’re a discretionary manager. Where are you getting your ideas from?”

They are assessing replicability. He agreed immediately, because it is the whole game:

“Some people have a much more instinctive way of approaching global macro, which is non-replicable. Maybe their instinct is somehow replicable and they know it better. From our perspective, of course we’re discretionary. We don’t just trade signals, but we have a bunch of frameworks that we have built. So even there, there are models in place. They will suggest to us whether to look at the Brazilian interest rates rather than the Mexican currency, for example, more closely, because a set of variables is pointing in that direction rather than the other direction. We will always then take a discretionary look at the idea before putting it in. We’re not a systematic manager. But my answer is: here are the frameworks. They’re based on the business cycle. They’re based on interest rates and terms of trade for a currency and whatever other macro framework we have.”

“And so the investor probably hears: okay, so if this model is there, it’s there today, and it’s there in three months, and in a year, and in two years, it will keep producing repeatable outcomes that these guys can evaluate whether to put in a trade or not. And so for me, the entire business has to be built about repeatability. Otherwise, what am I literally doing? Just shooting some trades this year? Maybe I get it right, maybe I get it wrong, but what tells me that I have a business?”

The important part to remember is that your track record cannot do the work on its own.

This is the passage I would print and hand to every manager who thinks a good year is a fundraise.

“Unless you have a very high sample size of trades in a year, which I don’t. I’m a very long time horizon oriented person. Every trade stays in the book for like over six months. That means your sample size of trades in a year is pretty small. We trade maybe 40, 50 new ideas every year. So imagine three years of live track record for us. It’s the equivalent of like 150 trades. 150 trades is completely irrelevant from a statistical perspective. Totally irrelevant as a track record.”

“And that’s why, for me, it’s all about the process. I always say to the investor: if you want to have statistical evidence of me having uncorrelated Sharpe of one with this macro strategy, you’re going to need 25 years to have a sample size that is statistically relevant. And that is not a way to run your diligence, waiting 25 years before investing. So at the end, we put a lot of emphasis on the process and on the repeatability of it, to give the investor comfort that they know what we’re doing, because the track record isn’t going to be able to do it. Statistically speaking, the role of luck will be too big. That’s true, by the way, for many, many hedge fund track records, unless they’re trading 3,000 times a year.”

Forty to fifty ideas a year. Six month average hold. Three years live is one hundred and fifty observations. He puts the time needed to prove a Sharpe of one at 25 years.

If that is the maths, then everything the allocator does other than look at your numbers is the only method available to them.

But what happens after ODD?

Tier one and tier two

Some allocators hand the findings over as a formal document. From my experience working in several DD with managers, allocators are going to be very collaborative in this part because they want to see managers implementing any of the changes they recommend. Alf confirms this:

“Some of them, Claudia, by the way, are very, very clear. They send you a list. This has happened two or three times. And they say, look, we have done the ODD. You have a big DDQ. You have a lot of stuff in place. Some stuff is excellent by the state of your AUM at the moment, in terms of ODD, state-of-the-art situation. Some is lacking. And therefore, here is a list of 10 to 12 points, which are Tier 1. And Tier 1 means you have to fix them or you will not get an allocation.”

“Then there is a Tier 2 list of points, which is: we would love for you to work with us over time to make sure that these things, which are not a priority, you will get the money if you don’t fix them before, but over time we’d like you to fix them and consult with us on how to fix them as you proceed towards your license.”

Ten to twelve items standing between you and the money. And he is candid about how managers take it:

“I have to say it’s a generally pretty straightforward process. The only thing that is not straightforward, I think the reactions are very dispersed. Some managers might think, what the hell, I can’t put this up, why should I waste all this time? It’s receiving such a list after having gone through such a lengthy DD. The IDD is done. They’ve grilled you for like 10 interviews, 12 interviews. They know in and out what you do. That part alone is literally 50% of the process. If the remaining 50% isn’t as good, you’re not going anywhere. If you’re not fixing those points, you’re not getting the money. We’re talking about large allocators here, like 100 million plus tickets. But it’s equally important.”

Ten to twelve investment interviews gets you halfway. Managers treat ODD as the administrative tail on a decision already made. It is half the decision.

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Turnaround time is a diligence test in itself

“You see that the bigger the allocator becomes, the more requirements and the more professional the ODD is, and also the time.”

“If they ask a question, or a list of it, generally like 20 questions in one go, generally speaking, if you’re able to reply within an hour, with all the docs, it tells them, oh, okay, so these guys, this is not their first rodeo. They know already where to fish all this stuff, they have it available, they come back to me. If the CIO is not the guy replying to these emails, but you have a dedicated ops person, that also gives a completely different impression.”

Twenty questions in one email. An hour to answer with the documents attached. That is the standard being set by the managers you are competing with for the ticket.

My own version of this, which I say to managers constantly: the way you deal with the little things says a great deal about the way you deal with the big things. If a request is bespoke and you do not have it ready, that is fine, you were not supposed to have it ready. Tell them you will come back on Tuesday, then come back on Tuesday. Come back a month later and you have told them something about yourself that no reference is going to unsay. If you cannot manage that, how are you going to manage their money?

And the structural consequence, which is uncomfortable and true:

“Turnaround, having a structure in place where you have at least one dedicated ops person. I know for smaller managers, it’s a lot of lift. You don’t have the firepower to have all these people hired. It also speaks to the fact that if you have less than 50 million nowadays, it’s really hard to think about scaling a fund, because the requirements that are necessary in order to scale, these things you must have, Claudia, otherwise they’re not going to give you money.”

What your early investor is actually buying

I raised the emotional side, because this is what I see managers break on. The due diligence processes are long. You clear a hurdle, you think you are close, and another request arrives. Managers tell me they had no idea it would go on this long, with a binary outcome at the end that they cannot influence.

Alfonso’s answer reframed the entire thing:

“The reality is that the early investors writing 75, 100, even larger tickets, they are basically underwriting your business. In exchange, they’re getting good terms. Luckily, at least in my case, there is not even a discussion of GP stakes. I value very much my independency and I’m not up to selling GP stakes in my firm. To be honest, they’re not even asking for it. What they want is pretty fair terms and they want, especially, they want capacity, which is their way to have a large optionality.”

Capacity at fixed terms, for two years and often three:

“You’re literally selling call options in your business, and they’re buying call options in your business. So you sell some, you get some premium up front, that is the amount of money they throw at you and the management fees. Again, they’re underwriting your business. They are buying an option, you are selling an option.”

“And the premium in exchange is the management fees that are coming through the door. But not only that, the AUM increase, which is a very important signalling effect. And as it happened with me with the pension fund, the follow-up, the fact that the reputation, you have a mark, a large pension fund is invested in you. That unlocks so much. It’s a bit like an avalanche, a snowball, basically. The snowball effect. And that is also very valuable.”

You give away optionality. You get certainty back. It is a trade, and the premium is the fee income plus the signal.

The part managers never think about is what the buyer of that option is risking:

“When you buy a call option in markets, you can only lose your premium. For them, it’s very different. They can lose the premium and their reputation. So they buy an option in you. And if you’re the new Ray Dalio, then they get to allocate a large amount at pretty small fees, which is very nice. And they probably also get bragging rights in the investor community, which is equally important. But they’re also risking, compared to a normal call option, they’re risking reputation. That’s why the ODD process will be quite something. And there will be a list of non-negotiable things that you have to put in place. Otherwise, there is no money.”

There is career risk on the other side of the table. Every non-negotiable on that Tier 1 list is a line the allocator will have to defend internally if you blow up. It is normal that investors want to protect the thing that lets them keep writing cheques.

The economics

“Scaling a hedge fund, when you look at the math of the business. Unless you get seeded by someone or you spin off from Citadel and Millennium, fine. Then you live on another planet. It’s a different story.”

The people spinning out of the big platforms are a different conversation. They usually have their own capital sitting there anyway. Set them aside.

“But if you live on our planet, and you want to start a fund the way I started, effectively bootstrapping with funds of funds and other people that know your process and want to get you started, let’s say at 40, 50 million, which I believe being the bare minimum at which you can start a decent structured fund. And I’m not talking an Interactive Brokers account. I’m talking about having a clearing agreement with a bank, having some ISDAs in case you need them, and having a team in place. When you look at the P&L of the fund, you need to understand that you’re not going to make any money for minimum a couple of years, if you’re lucky.”

$40- $50m is the floor for a properly structured launch. A clearing agreement with a bank, ISDAs, and a team. Two years minimum before the business pays you anything.

And then the second wave of spending, that does not appear in anyone’s launch budget:

“Then, if you’re lucky again, you get seeded, or you get early investors like these ones. They come in, but in order for them to come in, you have to pay. So you need to be willing to step up more capital on your side.”

“The investor is going to tell you, you have to do all these things for me to show up at the internal ODD committee and to present you. If you do these things, then your chances of being passed by the ODD committee is higher, but it’s not a certainty. So you go in and you invest in all these things and IT and cybersecurity and then you don’t know. You still don’t know if the money is coming through or not from their side. So emotionally speaking, that’s what you asked before, it’s a roller coaster.”

I want emerging managers to really sit with this. You write the cheque for the system, from limited cash, to qualify for an allocation that may not come. You are buying a ticket that improves your odds without guaranteeing anything, and you are buying it at the point in your firm’s life when the money is scarcest.

Very few people say that out loud.

The negotiation changed in your favour

Alfonso’s own view is that this is the most important thing in this piece.

“So the most important aspect, in my opinion, that you should try to write about is the change I’ve perceived from early this year to later this year. And the change is a function of the AUM increase in the multi-strat world, and also the change is the length of my track record.”

Early 2026. He has fourteen or fifteen months of hedge fund track. Multi-strat /pods AUM was materially smaller than it is today.

“And what happens is that they hook you with some amount of drawdown risk that they want to throw at you, which is very large. Let’s say 25 million drawdown limit. The equivalent of 500 million at 5% vol. So like a large amount of money.”

“And then the negotiation tactic I’ve seen two or three times is to start from large numbers and then to send you to a bunch of committees and to later basically lower this amount. So basically to play on the downside effectively, as if they know that they have a large sway on your business and they know that they are the strong party in the negotiation. So they basically squeeze you down and down as the deal progresses.”

“And the squeeze can happen on lower risk limits, lower fees, stricter exclusivity, a longer term in the deal. It can be so many things. But the attitude is that they start from a number, the number looks great, and then as you work through your process it becomes tighter and tighter and tighter.”

That is an anchoring strategy and the number that got you excited was never a final number.

Now the second half of the year:

“Then you go into the second half this year. My track record is longer. I’m outperforming other macro managers this year. I’ve had a very strong 12-month run, and the attitude changes very quickly. The attitude becomes: oh but we can actually pay fees. Oh but the exclusivity only works on a short list of competitors. Oh but we can accept less capacity from you than before. We don’t want half your capacity, for example. We want a bit less than that.”

And here is why it is not just about him:

“And I don’t think it’s only a function of my performance and my track record, but it’s also a function of their AUM. The AUM of multi-strats are going to the moon. Which basically means that the capital they have to deploy is getting bigger and bigger. And the ability for them to hire PMs in-house is hard. It’s very hard. The supply of PMs that are not already allocated as pods is not infinite. And the guys that are already at Millennium, they don’t have a reason why to switch to Citadel in the first place. And if they do, then there are very long garden leaves. So they basically can’t redeploy capital quick enough to match their AUM. And so if you are a manager that has capacity available, that doesn’t already have a competitor in an SMA, you are in a very attractive cohort for them to come after you as the AUM grow. So AUM grow from their side, pressure grows for them to deploy capital, you become more attractive. So I’ve seen this change, to be honest, over the last six months.”

I spoke about this when I looked at the AIMA Emerging Managers survey.

The deployment problem is structural. AUM has grown faster than the pool of hireable portfolio managers, and garden leave means even a successful hire is a year away from trading. External managers with clean capacity are the only supply that scales at the speed the AUM is scaling.

If you have capacity, a real track, and no competitor already sitting in an SMA with the same house, your negotiating position is better than it was in January. And it is always an SMA, never the fund.

How the Institutional investor happened

I asked how he landed the first large institution, It’s the question every reader has.

“So there is no secret sauce. The secret sauce in this business, people tell you, is get the first large reasonable institutional allocator into your fund. Good luck with that.”

“The way I made that happen is that I cultivated the relationship with this specific investor for a year before the fund. We had a bi-weekly call. So he was already doing due diligence on me, before I even launched the fund. And he found me through research. So I have this research superpower, that really turbocharges relationships for me. And he found me there. I told him I wanted to launch a fund. And he’s a hedge fund investor. So we started talking about various things. And then he became a client of the research. And then over time he decided he wanted to look into the fund closer and closer. So basically, I’ve had this relationship for three years before he even decided to invest.”

Then the part that emerging managers refuse to listen to:

“I don’t know, otherwise, how can you pull in a large allocator quickly? Of course, with performance you can, but I would recommend people to really work on these relationships. If you pull up a 12-month return of 15% with a Sharpe of 2 or whatever, it’s not going to be enough unless you’ve already built the relationship for a year before with a bunch of allocators that are this type of large guys that once they come in, they basically unlock the snowball. But it’s a very slow business. Slow sales cycle, a lot of relationship work. And only like this you can reach the point where perhaps there is a hope of getting the escape velocity that you need to scale up.”

Fifteen per cent with a Sharpe of two, on its own, is not enough. Which should worry anyone currently telling themselves that a good year fixes their fundraising.

His research is how the relationship that eventually anchored the fund began, three years before there was a fund to anchor.

Luck, and the equation

I asked whether he thought it was luck, or whether there were things he did that multiplied his surface area.

“At the end, if you look at the possibility of hitting the first large ticket that allows you to have some hope of escape velocity, the chances of this are effectively the result of an equation. It’s early luck in your P&L, and in the equation goes the size of your reach and quality of your reach.”

I disagreed on the ordering. P&L is not one input among several, it is the first filter. Without it none of the reach matters. He accepted that and took it somewhere better:

“Yes. And therefore you need to be lucky. And this is something that is extremely important for people to understand. The path dependency of this business, launching a hedge fund, is incredibly high.”

Path dependency is the right term. A bad first year costs you that year and the following one, spent proving it was noise. Sometimes people have a fantastic first nine months and then wet the bed inside the first year, and if it is big enough they will spend the next year proving themselves all over again.

Here is his own path, which is the best illustration in the piece:

“I’ve been running the same strategy for eight years before starting the hedge fund. And then we start the same strategy in hedge fund format. And the first seven months, we are down, I think, six or seven percent, something like this. I run a 10 vol strategy, so this is not crazy, it’s a shallow drawdown, but it can happen. So you have a drawdown soon, out of the gate, immediately. So you can imagine what it means. The pressure is very high because you know that people aren’t going to have a lot of patience with a new fund that goes through a drawdown. Then, the 12 months after that, we have put up 16% net in 12 months, which for my vol is a very, very, very good P&L. And so you realize how you first are unlucky, then perhaps later you’re punching a bit above your body weight. It just happens. There’s bad luck and good luck. It’s part of the process.”

Eight years of the same strategy before launch. Down six or seven per cent in the first seven months. Up sixteen per cent net over the following twelve. Same process throughout. The strategy did not change between the unlucky part and the lucky part.

“People should be aware that launching a hedge fund as a business is basically like an option. And you’re going to bleed theta. Time is going to work against you because you have expenses. Luck can work against you. And it’s very likely that the first few years, for a reason or another, maybe you don’t have the right P&L, maybe you don’t have the right reach, maybe you don’t have the right quality of reach. Many, many reasons out there for which you can fail. Namely, you can’t scale in the first few years.”

You sell options to your early investors. You are also long one yourself, and yours is bleeding time value every month you do not scale.

And it will take a long time:

“I consider myself in the lucky camp, to perhaps have reached some possibility of escape velocity at some point. But generally speaking, I would expect this to take much longer. I would expect this to take minimum three years.”

What is left, once you accept you cannot control the P&L

“A lot of people focus on the hedge fund launch and they think that all they can control is their P&L. And the reality is that unless you have a Sharpe of three, I’m sorry to announce that the P&L is going to be what the P&L is going to be.”

“What you can control is the process that leads to your investment strategy. I assume that you already have a process in place and you’re just going to put it at work when you launch. What you realize is: out of your process is just one path of P&L in that specific 12 months, and you can’t control it. It can be high, it can be low, it can be negative. You don’t know.”

Then closest thing to a to-do list in this entire conversation:

“What you can control is: have you hired the right people? Do you have the right operational setup? How are you reaching out to investors? Do you have a distribution mechanism? Do you publish research? What’s your communication style? Are you sending out letters that are like, oh look, basically I hide bad news and I only tell you good news? Are you sending letters regularly? Are you providing insights? During IDD and ODD, are you 100% honest, or are you trying to hold back? All these things you can control. You can control all of them. And they are so important in increasing the chance of success.”

I would add the behavioural layer to that, because it is the part allocators talk about privately and rarely write down.

You can control how you show up, regardless of what the market is doing to you. Whether you answer investors quickly, and whether an investor believes that if something goes wrong you will make their life easier when they have to explain it to their board, or harder.

The same goes for bad news. Imagine a proper storm in the market, a real hit to the portfolio, a drawdown. How do you communicate it? What does your handling of it tell an investor about you?

What to do now if you’re an emerging manager

None of this requires an allocator’s permission and you can do this right now:

Answer the trades ops questions. If a trade goes into the wrong account in the wrong direction at eleven this morning, when do you find out?

Write the succession down. One name, someone who can already trade the book, in a document. If you cannot name that person, you have found the thing that will stop you at the last hurdle after ten interviews.

Assemble the pack that you know is coming. References nominated and pre-cleared. Background checks done. Policies current and agreeing with each other. Then measure yourself against the standard: twenty questions in, answered with documents attached, inside an hour.

None of that is glamorous. It’s also cheaper than that Mayfair office.

And for the opportunity to come ask us questions LIVE, Alf and I are running a Webinar to discuss this topic on October 2nd at 1pm UK

Claudia Quintela & Alf Peccatiello Live Q&A · Zoom · Luma

Register Here for Live Session

Come and join us LIVE. This event is pre-register only and has capacity limits.

See you there.

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Three ways to work with me:

1. A fund manager who wants to work with me on the asset-raising side? Apply here.

2. Allocating to emerging managers? Get in touch.

3. Want an hour on your own situation, no ongoing commitment? Book a consulting call.

This publication is provided for educational and informational purposes only. The views and opinions expressed are those of the author and do not necessarily reflect those of any third party.

Nothing contained in this publication constitutes investment, legal, tax or other professional advice, nor should it be relied upon as such. Nothing in this publication constitutes an offer, invitation, recommendation or solicitation to buy or sell any security, fund or other financial instrument, or to engage in any investment activity.

By Cláudia Quintela and Lewis Kilroe, Managing Director of East Emblem.

Lewis spends his days inside due diligence documents. He sent me one of his data requests a few weeks ago, the kind an allocator sends a public markets manager once diligence has properly started, and asked what I made of it. His covering note:

“This is by no means everything but makes up a decent core of the expectations. You’ll notice a lot of these docs are absent from a large number of emerging managers, and this list is probably a little bit more than the bare minimum.”

I had seen it before, or near enough. I sent one of my clients something very similar months ago and it took several rounds before they understood that their answers were not answering anything. Engineers at heart, they had built the portfolio and were writing from inside its systems, without ever asking themselves what an investor was supposed to get out of the document.

Why this issue now? The schools are back, everyone is back at their desk, and managers and investors are in a go-go-go mood. If you want operational due diligence meetings in the first quarter of 2027, the first meetings that lead to them are happening now, and this is what you need to have ready by the time they do.

Those first meetings are with the investment team. The documents also go to a different team. Lewis’s answer to my question about what happens after the DDQ puts it bluntly: The investment team meets you several times. Operational due diligence meets you once or twice, and the documents are most of what they ever see of you. The investment team liked you. The DDQ is where you meet the people who can say NO.

What follows below names the risk areas you should focus on and leaves the line items out. I will take the timing and what the delay costs you. Lewis talks about the documents, because he reads these for a living and I do not.

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Nothing on that list belongs in a first meeting

A full data request turns up after somebody has met you two or three times, likes the people, and is now willing to pay, with their time or their money, for the diligence.

What you need before then is smaller, and almost nobody has that ready either. Lewis puts the floor at a fund deck and a strategy deck. Then the track record, which gets asked for in Excel, in SMA space usually gross of fees and net of trading costs, because investors want to compare trading talent like for like and taking the fees out is the only way to do it. Many will ask for dailies too.

Send a fact sheet instead and you have added a week to your own process.

Then there is the answer I hit most often: “Available upon request”. If somebody has asked you for a policy, that was the request. Saying it is available on request tells them the document does not exist, or that nobody at your firm has read it since it was bought. This usually happens when there is an external provider who will not release their policy, so the manager passes that back rather than pushing. It was asked. That was the request.

Lewis puts it more bluntly. If you are not providing items, another manager is, and the allocator does not have enough information to justify spending more time on you.

What is in one of these data requests, and why most answers fail, is his territory. Over to him.

What is actually in an institutional data request

First, the sequence. The allocator’s investment team screens managers against their parameters on the track record and the pitch book. Get through that and they bring in operational due diligence, in-house or external, and that is when the DDQ and the data request go out. ODD reads what comes back, then does the full review. Investment consultants run it differently, some doing the ODD first on behalf of a client, others only the investment due diligence with the operational work left to someone else.

The first half of the request is data.

Firm AUM at the latest valuation point and at the same point one and two years back. We are reading the direction. If it is flat or falling, the reason needs to be in the document.

Headcount with a full time and part time split. Transaction volume by instrument type, daily, monthly and annually. Every service provider with the date you appointed them.

Together that is a snapshot of how the firm has grown and where it is heading. If the optics are against you, put the reasoning front and centre, because this is where you get to tell the story yourself. Leave the gap and it is very easy for an allocator to say “we will pass this year, they are not ready”, or “I am not confident they will still be here in twelve months to manage our money”.

Insurance gets forgotten, and it is non-negotiable. Managers who defer it to $500m AUM defer the allocation with it. Broker cover, errors and omissions, directors and officers, cyber, each with the coverage value written in, at firm level and again at fund level, because each entity needs to be insured.

Then ownership, and your investor concentration in dollars and as a percentage of firm AUM. And most of all, how much of your own money is in the fund. Investors want to see skin in the game. If you will not put a decent part of your own net worth behind the strategy, the allocator has to wonder why they should. Saying you cannot afford to invest in your own fund does not fill that gap.

The second half is documents, under nine risk areas.

1. Governance and Ownership Structure

2. Employees

3. Fund Structure and Terms

4. Compliance and Regulatory Monitoring

5. Risk Management, firm and fund

6. Investment Process and Due Diligence

7. Operations, Valuation and Cash Controls

8. IT, Cyber Security and Business Resilience

9. Oversight of Service Providers

Only one of those nine is about how you invest. The other eight are asking whether there is a firm here, or a talented person with a Bloomberg terminal and some ambition.

Allocators are buying the firm as much as the returns. Performance matters, and it will not carry a firm with no infrastructure underneath it. If the capital cannot be safely managed, the investor will find a firm where it can. Look like an amateur operation and you will be treated as one. Every document you hand over should add to their confidence that you can hold their money.

The granularity is the part managers underestimate

Conflicts of interest reads like one policy and is at least five: personal dealing, material non-public information, gifts and entertainment, external directorships, expert networks.

Operations procedures break into ten separate processes covering the full life of a trade, from idea generation and execution through matching and reconciliation to NAV sign-off.

IT and cyber security runs to at least nineteen items on its own, and it is increasingly where allocations die. No annual penetration test and no phishing test, no allocation. A firm running Google Workspace on its default settings, with no enforced access control, is the quickest thing to pass over whatever the returns look like. Workspace can be made institutional. Most managers do not do it, or do not realise it needs doing. If you cannot protect the business or the client data, investors will invest with a firm that can.

There is a line for an alternative data policy, which most emerging managers have never written and now need. Web scraping, and whether any of it could be construed as material non-public information. Nobody takes chances with that one.

You can provide every item on the request and still write answers that fail. Most are written as a chore. The good ones use the space to show how the firm runs. Treat it as a clear look through into your firm, written to leave the allocator confident that you know what you are doing.

Evidence

A standard data request will include more than two dozen requests for evidence.

A policy says what you intend to do. Evidence is what the process produced when it ran. You can buy a policy in an afternoon. The evidence shows you are doing what you say you are doing.

The trade error policy is asked for alongside the errors log. The investment guideline breaches log is a line of its own. The penetration testing policy comes with the results of the most recent external test. Compliance training wants proof the training happened and proof your staff certified afterwards. Disaster recovery wants the results of the last test and the report that went to senior management about them.

A policy you never test is a claim. Testing it proves the operating environment works, and that your staff have read the thing and can follow it.

The governance section asks for charters documenting purpose, composition, frequency and decision-making mechanisms, then the minutes and board packs from the last four meetings. A manager who set up a board because a lawyer said to, met once, and did not follow the responsibilities written into his own charter, cannot produce four.

Five years of audited financial statements for the firm, not the fund. The last three years of regulatory review findings with the remediation plan and the open and closed items. The most recent internal controls report for the fund administrator.

Run the firm as a firm and most of this is already in your files. Otherwise you are writing it from scratch, at speed, while somebody waits. And while they wait, another manager is sending them what they asked for and their diligence moves on.

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The template problem

Templates are the obvious place to start, and there is nothing wrong with starting there.

Some of them are a headache to complete. A standard DDQ template covers every strategy in every jurisdiction, so a decent chunk of it will have nothing to do with your business. You cannot delete those sections, because deleting them looks evasive. So you write N/A. Eighty pages of DDQ, twenty of them N/A.

The reader has set aside an hour and spends twenty pages of it on nothing. It is a boring read, and boring the buyer is a strange way to sell. And it leaves investors wondering whether you could tell the difference between what mattered and what did not.

Managers fail on contradictions more often than gaps. Your valuation policy says one thing and your investment policy says another. A business continuity plan bought in a different year describes a firm you are no longer running.

The DDQ is the spine and everything hangs off it, so every document has to agree with every other document, and four templates bought at different times will not agree. One contradiction and confidence in the whole data room goes with it. If the allocator cannot tell which number is current, they will assume none of them are. And if the attention to detail is missing from your own documents, why would they trust it with their money?

Write your own, on top of the template or instead of it. Ten bespoke documents, current and specific about how your firm operates, are worth more than fifty generic ones, because the reader has a fixed amount of attention and every N/A page wastes some of it. If you have no documents yet, the absolute minimum is a pitch deck and a DDQ, with the OM alongside them.

Treat the DDQ as a living document. The more documents you hold, the heavier the review and update becomes, which is real when four people are wearing every hat in the firm. In practice it moves when the AUM moves or the people change, which for an emerging manager is most quarters. I reviewed one recently that was three years old. It was a tough read, and it told me more about the culture than it did about the fund.

And the template is not the form you will be handed. The request that started this piece is ours. Every allocator has their own.

What a good DDQ answer looks like

A DDQ answer is a summary of what you do, not the policy pasted in.

Take AML, where most emerging managers outsource. The answer is: outsourced to a named provider, who run the initial checks and escalate to enhanced due diligence on defined triggers. Four lines. Investors will ask for the underlying policy if they want to validate it.

It goes wrong most often in the fund structure section, where people paste the legalese out of the OM about management fees or the investment objective. We have the OM. We want the sentence that shows you understand your own structure well enough to describe it.

I read every DDQ and every OM that crosses my desk, and I can tell which ones went through a chatbot from the flatness of the phrasing. Lately I can tell which model too. Claude writes shorter, snappier, more abrupt sentences than ChatGPT. Some allocators are not permitted to run your documents through a model at all, so somebody is reading it properly whether you wrote it for a human or not.

Think of a market stall. Fruit polished and looking fresh, clear signs, and you buy an apple. Same apples in a box looking a bit mouldy and you keep walking. Make it look good, then make it digestible.

Back to Cláudia, to close:

I get roughly five inbound approaches a week and I take a first call with about one in ten. Some of that is fit, but a lot of it is that the materials have stopped being distinguishable from each other. Pages filled to the edges with no white space, and language with no author anywhere in it. Black backgrounds on fact sheets and websites, which I find harder to read. I open a document now and my first reaction is oh, another one of these, made by ChatGPT or Claude.

If somebody sent me a pink presentation I would remember it, and I do not like pink.

If you run managed accounts, subtract

If you are raising through a platform/SMA rather than a fund, some of what Lewis has just described comes off the list. Fund structure goes, and the directors and the PPM with it. Service provider selection largely goes too, because the platform/investor has already appointed the custodian and the administrator, and you inherit them.

Execution stays. You still trade with your own brokers, and platforms usually approve two or three rather than mandating one. On the large platforms, custody is mandated, fund administration has more give, and the prime brokers sit on rates negotiated at group level. Managers get cheaper stock borrow than they could have got alone, then go back to their own PB and ask to be looked after on the strength of it.

When I see a very early stage manager already on a tier one prime, I want to know what the catch is. Long prior relationship, or what am I missing about their deal flow?

The clock is ticking

If onboarding drags, that is time you are not trading, and in a good market you will feel it.

I have been onboarding one manager for three or four months. I started talking to another at the same time and they were done in six weeks. The first group still have not sent the contract back. At some point the question stops being about the contract and becomes: if you cannot do this properly, what else can you not do?

Something standard should go out the same day, or the next. A set of documents should already exist, finished, before anyone asks. The decks and the track record. The policies that do not change from one request to the next. None of that is bespoke, so a delay there has no honest explanation.

Something that needs work can take a few days. Your dailies might be missing a fortnight. An exposure cut you do not normally produce has to be built. That is fine.

Missing your own date is a problem. If it will take you a week, say you will send it on Thursday, and send it on Thursday. That is better than promising two days and taking a week. Whatever you say you will do is what you do.

As a manager, you are losing momentum every day you sit on documentation follow up. How long you take is a filter that is running whether you know it or not.

Open the last DDQ you sent, or the one you would send tomorrow, and find one number in it that is no longer true. There will be one. Go and fix it.

Lewis and I are turning the full request into a working document, with the reasoning against each section rather than the line items on their own. If you want it, reply to this email and tell us roughly where you are with your own: what you already have, and what you were last asked for that you could not produce. It will take a while, and it may come as a live session rather than a file, but everyone who replies gets it.

And if you want Lewis to have a look at your DDQ or dataroom pack, you can reach him at lewis.kilroe@eastemblem.com.

In the next issue I will go through the example of a manager who has gone through all these hurdles to secure his first large institutional allocation. Stay tuned for that issue.

Cláudia and Lewis

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I was talking to Kieran in a podcast studio, and he asked me a question:

What does an allocator pick up about a manager after that manager has walked out of the room.

It is a fair question but I struggled to give it a single answer. So I gave five, in no order of importance, in the order they arrived.

When I finished, he pointed out that I had not mentioned performance once.

He was right.

1. You are running the portfolio and the company, and you have not admitted it

A clear separation between running the business and running the investment portfolio. Call it the CIO and CEO divide.

I see people who want to do both and who have not realised how much is involved in the day to day running of the business. They have not got a strong enough partner beside them to go on this with.

This comes up in allocator conversations more than any other thing on this list. Especially when I call the allocator to get specific feedback in the aftermath.

I wrote about this one on its own a few weeks ago, in the second job you didn’t sign up for.

2. You came to market too early

This is about the business side, and whether you have thought the structure through. It has little to do with the length of your track record.

A few examples:

• You do not yet know what your regulatory framework is going to be. What licences you need.

• Whether you are going to have a fund or manage accounts.

• Where you are based and what that means for both.

Where you are based and which vehicles you are going to offer belong in an investment conversation.

If those are unresolved, you are asking someone to have a conversation you are not in a position to have yet, and the allocator does not know if you fit within their guidelines or structure.

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3. Your timeline is naive

New managers ask about timelines constantly.

What is the timeline. When can you launch.

Take someone trading OTC markets who is going to need ISDAs and who believes they will be up and running in three months.

Good luck negotiating ISDAs in three months. It could take six. It could take a year.

Even negotiating IMAs can be lengthy, and that’s why some large institutional investors send you a draft contract for you to eyeball any potential issues before it goes to Investment Committee.

There are several parts of the business where managers are naive, and this is one of the loudest, because the timeline is the first thing you say out loud and the first thing that gets checked against reality.

4. You have no runway plan on paper

I say this constantly and I am going to keep saying it.

How long until you break even. Break even on the fixed fee alone, not on performance fees. What is your plan to survive that period.

Then what is your plan to grow past it:

• Who do you hire.

• What does the business look like at 50 million, at 100, at 250, at 500.

Life happens and plans change. Yet, it’s a good strategy to walk into a first investor meeting with that framework already on paper. And you can always ask investors what they think of your plan. You might pick up something useful.

5. You cannot explain the process in simple terms

I mean the machine that produces the decisions.

What is the order of things, and what happens when. What are the decision trees. Who does what.

The process can be enormously complicated and still be explainable in a sentence. Your ability to explain it is separate from how complicated it is.

Who does what is one of the important elements of a process, and answering it takes you straight back to the first item on this list.

• Where does the buck stop?

• Who has oversight over whom.

• Where do the responsibilities lie for each part of the business.

• If there’s disagreement, who decides?

I’d like to add an additional layer here, which people often forget. What you say in the meeting, how you say it, the body language you use, and the way you and your colleagues interact if you bring them with you. Does that nuance translate into the same message you’ve put on paper?

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Why performance was not on the list

There is a reason I did not mention it.

First, every manager who walks through the door believes they have fantastic performance, and the devil is always in the detail.

Second, since you got the meeting, I’m assuming the performance was there and not a red flag for the investor to start with.

The question Kieran was asking is what happens after that meeting, and what you got wrong in it.

But I want to turn the question around, because the interesting version of it is not about you.

If the only reason an investor gives money to a manager is performance, what happens to that investment the month the manager has bad performance?

Chase performance alone and the investment stays exactly as long as the performance does. Nobody has performance all the time, through all the cycles. There are always periods of underperformance.

So the performance question that actually matters is whether an allocator understands fully when you are supposed to perform and when you are not, and whether they can explain that to their committees. The expectation they have built of you has to be what you actually do.

That is what you are being assessed on. The predictability of your behaviour around the return and business operations (and if you’ll allow me, the interpersonal side of things, how easy will you be to deal with, or how big of a pain in the neck).

Which is why how someone deals with a drawdown says a great deal about them as a person, and about the firm as a firm.

I had a well known London investor years ago whose first question was always whether the manager had ever had a big drawdown and recovered. He loved that. His reasoning was that if you have lost someone else’s money, you have learned a lesson, and you did not do it with his money. So he would always ask: “Tell me about it. What did you learn?”

It is the right question. You lost money. Why. Were you expected to lose money there, or did you lose it in a way you were not expecting. How did you address it. What changed.

It might be that what changed is nothing about the exposure. You are still expected to lose money if that situation repeats. But how you react to it is different. You may decide to manage the risk differently, so the total output is slightly different even though it is still a loss.

“We have never had a down month” is not exactly the answer the investor is looking for on this one.

The caveat

I am not an investor. I have never written a cheque for an investment in my life.

I would still rather say that out loud than pretend otherwise.

That conversation ran an hour and a half. We also got to trust, fee structures, what actually happens inside a due diligence process and so many other topics.

Watch the full conversation on Fly on the Fund Wall.

Go and listen to it.

A big thank you to Kieran and Darwinex* for inviting me.

And please do not be pissed off with me if you love light blue shirts and navy Patagonia gilets.

Cláudia

*You can read more about Darwinex here and here.

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An investor found me on LinkedIn. We got talking, he told me what he was looking for, I put one manager in front of him, and three months later he invested.

A couple of weeks ago I had to have a “tough” conversation with the same investor. I told him, smiling, that he cannot expect that every idea I put in front of him will be a great one. If I put one good idea in front of an investor in a year I have done a good job. Expectation management is important.

His answer is at the end of this email. But our exchange sent me back through the rabbit hole of my investor call recordings.

I have been recording these calls for over a year. Across those calls I present for 17.5% of the meeting. On a half-hour call that is five minutes of me describing what I do. The rest of the time we are both asking questions.

One investor asked me thirty-two questions in a single half-hour call. A little over one a minute.

Five questions recur, in roughly the same order, from one investor to the next. I thought this was interesting enough to share with you as a BTS (behind the scenes) of what capital introduction looks like before any ideas can be put in front of an investor.

1. What do you cover?

Which strategies, and at what size. Region comes in the same question.

This is standard mandate screening. My answer is liquid trading strategies, mostly FX, futures, commodities and macro, usually reachable through a managed account, with a sweet spot around $50 to $100 million of assets. Capacity constrained strategies and the odd Equity L/S with an unusual (non commoditized) angle. Nobody wants to hear about a good commodities manager when commodities sit outside the box they are allowed to fill.

This is usually followed by the structures offered by the managers: fund only? SMAs for what minimums? First Loss? Alpha Capture? Any fee or liquidity constraints?

2. How does your model work, and which side are you on?

One allocator asked me straight out which side I was focused on more. Another wanted to know whether I get paid from the manager’s side of the business. How I structure my pay comes up constantly.

They are checking two things. First, that they are not paying me a fee for my service, and if the managers pay me, whether that bends my incentives. Second, whether any investor ever does pay me, and under what framework. The answer to the second one is the bespoke search against a specific mandate, where the investor wants to take the whole capacity and we agree terms upfront.

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3. How do you find the manager?

This is the one I get most.

The majority of managers find me, or come through a recommendation. This newsletter and the writing around it have turned into a real source of dealflow. Beyond that I put constant effort into knowing people the large prime brokers do not touch. If I am fishing the same water as Goldman and Morgan Stanley, I cannot bring an investor an idea they could not have got free from their own coverage. My ideas are only worth something if the sources are different.

4. How do you vet them?

I do not pretend to do investment due diligence on managers.

Everyone I represent is regulated and clears KYC, and most arrived through somebody I have known for years. I check references and counterparties before I take anyone on. I have walked away from managers whose numbers I could not verify, and from ones where the informal references came back very grey.

5. What have you got for me right now?

Nearly every investor call arrives here in the end.

My standard is deliberately low. One good idea a year and I have done my job. They see hundreds of managers, and one is a decent return on the relationship. If I am showing them the same names every prime broker is showing them, I am wasting their time and mine.

That is also what decides who gets on my book. High Sharpes with hard capacity limits, frequently sitting somewhere other than London or New York. A strategy that caps out at $300 to $500 million is invisible to a desk that has to place a billion, and that is why an allocator picks up my call.

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Count what those questions are about

Coverage, model, sourcing, vetting. Then, and only then, what have you got.

Now notice what is absent. No investor has ever asked me how big my list is, or for a headcount of the managers on it. And not one has asked me what my best idea is, which is a question I get constantly from managers about investors, and the one I flatly refuse to answer.

The size of the book is the thing this industry sells hardest, and it does not make the agenda.

That tells you what is scarce for investors: they have more managers to meet than hours to meet them in. What they are short of is somebody whose “No” they can trust. An allocator runs out of hours before anything else.

Some of you reading this newsletter are investors. Tell me your constraints, vehicle, ticket size, liquidity, what you already hold, and I will stay quiet until something fits what you’ve asked for.

Some of you run money and are used to getting interrogated at investor meetings. I don’t have an investment track record myself, but I’m not exempt from questions either. I thought you would like to know that you are not alone and I also have to prove myself before I get any meetings booked with investors.

What he said

Back to the man from LinkedIn.

He laughed, we both did. Then he told me to send him as many ideas as I want, even the ones I have not filtered. If I just want his opinion before I take them through KYC, send them over.

Investors spend that call auditing where I find people and how I screen them, and here is one telling me to skip the screen and send him the raw list.

There are two ways to read that and I cannot choose between them. Either the questions were always about where the names come from, in which case the sourcing is the whole product. Or they are the price of entry, and once you have paid it they start trusting the person, so the filter stops mattering as much.

I do not know which one it is. I am not going to pretend otherwise in a newsletter.

If you allocate, tell me which of those two describes you. If you run money, the same thing happens one step down. Whoever brings you into the room gets audited before you do, and you are somebody’s answer to question five.

Reply and tell me which of these questions surprised you most.

I read every reply.

Cláudia

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A couple of weeks ago I got on camera for an hour and a quarter, which for me is a small act of violence. I love writing. Video makes me want to crawl under the desk, and I said as much out loud on the recording. I did it anyway, because the conversation turned out to be one of the better ones I’ve had about what it actually takes for an emerging manager to raise early capital and survive long enough to spend it.

I sat down with Søren Hæstrup of Coherra. He ran his own hedge fund for almost 20 years and now works on, in his words, “how we can get closer to allocators and understand them better by using data rather than requesting their time.” That last clause is the interesting one. Most managers treat an allocator’s attention as something to extract. He treats it as something to spend carefully.

Søren and I go back 25 years, to my UBS days, when he was the manager raising and I was the one putting him in front of investors. Then we lost touch for the better part of two decades. We found each other again because we had both, separately, started posting on LinkedIn. He watched an interview of mine, sent me a message the same day, and here we are. Hold onto that, because it’s the argument the whole hour keeps circling back to.

I’m not going to recap the conversation. That would defeat the point. The full thing is here. What I want to do is tell you what to have in your head before you press play.

Start with the odds.

At UBS I watched a lot of managers launch, and the bank’s own arithmetic about them was blunt. You back a spread of early-stage managers knowing that one becomes a cash cow and four become dogs. That’s a revenue view rather than a survival rate, but it decides who keeps getting called back and who doesn’t. Then there’s the pattern that stings more. Talk to anyone on the sell side and they will tell you about a manager who was, for a while, the client, the one everybody wanted, and who then simply disappeared. None of that arithmetic makes it into a launch deck. It should.

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My favourite client is a neon yellow elephant riding a bike in a pink tutu.

That is the most honest way I can describe the hedge fund manager I do my best work with. Around $50M under management, so roughly at breakeven. Two years of live track. A Sharpe north of one and a half, usually closer to two. Capacity-constrained, so they cap out somewhere around $300 to $500M and know it. And based nowhere near London or New York. On the call I explain why that last detail carries most of the weight. It tells you what they’re optimising for, and it isn’t only AUM.

The reason I can describe them in that much detail is that I sat down and decided who they were. Most managers never decide who their buyer is, which is why the pipeline fills up with whoever happened to turn up.

Running a hedge fund is two jobs. You only trained for one.

Søren put it plainly: “it’s two different things to run a business and run a portfolio.” The second is the one nobody warned you about. You become a jack of all trades overnight.

Look at what you’re walking away from. Inside a big firm your computer dies on a Monday, you press a button, and IT is at your desk ten minutes later. You don’t book your own flights or file your own expenses. There is a department whose job is to make your slides look good. The name on your business card opens doors before you’ve said a word. Then you leave, and every bit of that machine is gone. Who runs payroll. Who handles compliance.

The resentment does more damage than the distraction. A portfolio manager buried in work they hate starts resenting showing up every day, and that leaks into how they show up to everything else. So separate the person who runs the money from the person who runs the business. Of all the mistakes we covered this was my first, and it is the one that quietly closes funds that were never in trouble on the trading side. How you do it when you can barely afford one hire is on the call.

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A name on the door does not make a business. Clients make a business.

Get comfortable selling or accept that no capital is coming. There’s no version where you sit quietly and get found. Not any more.

This is where Søren said the thing I’ve been chewing on since:

“Today you will see more successful firms with not as good a track record than you will see successful firms with a good track record if they are not visible. It’s simply so competitive, and the demand for being found and do also your investor relation obligations has changed a lot.”

Søren’s business is video distribution for the industry, so he profits when managers decide to become visible. Mine profits when they get in front of allocators. Discount us both accordingly. I’d still take the observation seriously, because he ran money for decades before he sold anything to anyone, and because I watch it play out from where I sit every week.

Returns are no longer the whole product, and the bar has moved, part of it to whether anyone can find you at all. For most portfolio managers this is the hardest ask of the lot, because selling sits about as far from what they are good at as it is possible to get. Doesn’t matter. You still have to do it.

When you’re in a drawdown, the instinct is to go quiet. Do the opposite.

You will have one. Everybody does. And the moment you least want to communicate is the moment it matters most. Over-communicate through the bad months, because the question a prospective investor is really trying to answer is who you are when you’re losing money. And whatever you do, don’t stop reporting to the manager databases because the numbers are ugly. Everyone knows that trick. A gap in your reporting says drawdown louder than the drawdown would have.

Whatever you think the raise will take, double it.

This one was Søren’s. In his day it was 18 months from first engagement to institutional allocation. Today, he reckons, it’s easily 24. My answer was cruder: whatever you think it is, double it, and build your runway for that number rather than the one you’re hoping for.

Then he put his finger on the part that actually breaks people:

“The problem often is that you get a lot of positive responses during those, let’s say, 24 months. So you feel like, oh, we are almost there. So you have so many disappointments along the way, and you just have to know that that’s completely normal. But it’s hard not to get excited about a positive response and imagining, okay, there’s going to be an allocator meeting in three weeks. We should know by then. And you don’t.”

If you tell me you want to raise in three months, I’m the wrong person and it’s a short conversation.

The meeting is the easy part. The follow-up is where people lose it.

You finally get in front of the right investor at the right time. The meeting goes well. They ask for your DDQ and your return attribution, and you walk out already knowing it will take three or four weeks to pull together. By the time you send it, the deal is gone and nobody has told you. You control the speed and the quality of your response even on the days you can’t control the numbers, and in a market where everyone is fighting for attention, that’s the part that separates people. Build the pack before you take the meeting. Most of it is standardised anyway.

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Someone asked which counts for more, a backtest or a live track.

I have never seen a bad backtest. Draw your own conclusions, then go and hear what allocators actually do with the gap between the two, and where your own record really sits on their scale.

Treat every investor meeting as a 20-year relationship, including the ones that go nowhere.

People move jobs and firms. The allocator who can’t touch you today may be somewhere that can in a year’s time. And a flat NO can still be a conduit, because the person who passes on you might walk out of the room thinking someone else should meet you. So the question worth asking yourself is what they’ll say about you once you’ve left, which is a different question from whether they can tell you apart from the last five managers they saw. Be worth talking about, then stay in touch. Staying in touch when you have nothing to sell is the hard bit, and there’s one question you can ask before you leave the room that makes it far easier. I give the exact wording in the conversation.

Managers are very analytic about the markets. Less so about everything else.

Søren’s diagnosis, and he’s entitled to make it because he was one of us:

“Often hedge fund managers tend to be very analytic about the markets, and less so about a lot of other things.”

That is the whole case for writing things down. On the call I go through the second-brain system behind the near-600 investor and manager meetings I’ve documented in the last fifteen months. Every meeting transcribed, every conversation searchable, so that “I don’t remember” turns into “that allocator clears through X and passed in March on liquidity.” You automated the portfolio years ago. The raise is probably still being run on memory.

The investors you want are watching in silence.

You write, nobody likes it, and you feel like you’re talking to a wall. Then the email arrives. It’s happening to me right now, every week, several investors and tens of managers, almost all of them people who never once left a trace. By the time they book the call they’ve read enough to have qualified themselves. That costs you nothing but time. I wrote about the lurkers here, and the webinar is another hour of the same evidence.

Which brings me back to where I started. I hate video. Søren and I found each other again after twenty years because we were both, separately, doing the uncomfortable thing in public. That is our entire mechanism.

The full conversation with Søren is here. Then do the two free things I left them with. Be visible, and record everything you do as IP. Both are free, and neither requires anyone’s permission.

We ran fifteen minutes over and still never got to AI, which Søren says is an hour on its own. Another time.

Reply and tell me which of these you already know you’re getting wrong. I read every one.

Cláudia

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A manager I started working with recently sent me his prospect list, and one thing jumped out: it was a wall of large, institutional names. So I asked him why he’d gone that way.

His answer, roughly, was that these were the people he’d ended up in front of. No decision had ever been made about who he was actually selling to. For most of the firm’s history the pipeline sat empty and unqualified. When we looked closer, his existing investors had a completely different profile from almost every name in his pipeline.

Here was a manager doing everything right on the investment and operations side, and barking up the wrong tree on capital formation. He had simply never decided who his ideal investor was.

Most emerging managers I meet can talk for an hour about how they make money. Ask them who is most likely to actually invest, at their size, this year, and they go quiet.

I’ve sat in close to six hundred meetings in the last fifteen months, and this is the most common mistake I see: the manager has never decided who their buyer is. The pitch is fine, the numbers are good, and the pipeline is still stuffed with names nobody chose. They were the groups who happened to get in touch, or who the manager ended up next to at an event. Some were names carried over from a previous life at a bigger firm. Nobody picked them. The pipeline just filled with whoever showed up.

I call it the “barking up the wrong tree” problem. You spend a year in warm, polite meetings with people who were never in a position to back you, and you call it a live pipeline. It costs you assets and revenue. More than that, it costs the two things you can’t rebuild: your time and your energy.

Four things you are actually qualifying

An investor meeting can be dead before you walk in, and you might be none the wiser. A prospect only counts when four things are true at once:

• Eligibility. Is the investor permitted to invest in something like your fund or strategy?

• Capital. Do they have money to allocate now or in the near future? Not last year, and not in theory.

• Mandate fit. Does your strategy match something they are actively looking to fill?

• Authority. Can the person across the table actually move a decision?

Miss one of the four and you have a pleasant conversation that was never going to close. A credible institution with no live mandate, or a keen individual with no capacity to invest, is not a real prospect.

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Ask before you accept the meeting

You can qualify most of this before the meeting, and most of it without ever asking the investor. What you’re trying to work out:

• What type of investor is it? Family office, fund of funds, wealth manager, pension, endowment, seed investor, proprietary or personal capital.

• Do they invest directly, or advise another end investor?

• Which strategies sit inside their mandate right now? Asset class, liquidity, geography, leverage, target return.

• Do they allocate to emerging managers, and how do they define one?

• What do they want out of the meeting?

The answers tell you quickly whether you are talking to a buyer, a consultant, an intermediary, or someone quietly gathering information.

Ask in the room

Once you are in front of them, let the investor talk first. Open questions pull more out than directed ones. Then get specific.

Mandate and fit:

• What role would this strategy play in your portfolio?

• Which strategies are you actively looking to add this year, and why?

• What return, volatility and drawdown parameters do you require?

• What would immediately rule a manager out?

Capital and capacity:

• How large is the programme this allocation would come from, and how much of it is still unallocated?

• What is your normal first ticket, and do you have a minimum manager size?

• What percentage of a fund or manager are you allowed to own? A £20m minimum ticket can rule you out of a £30m fund, because the allocation would own too much of it.

• Managed account, fund, or either?

• Do you need other investors in before you will commit?

Emerging-manager appetite:

• How many emerging managers have you backed in the last three years?

• What is the smallest manager you have ever backed?

• Would you invest before I reach your usual size threshold?

• Do you require a minimum length of track record?

• What do you accept as a track record?

Decision and process, which often matters more than the investment conversation:

• What is the usual process, start to finish, for you to invest in a manager?

• Which people and teams are involved?

• Who owns the final yes, and is there an investment committee? How often does it meet?

• Who runs investment due diligence, and who runs operational?

• How many managers are you considering, and what would you need from us to move forward?

Timing:

• Are you looking to allocate within a defined window?

• What is the usual timeline for an allocation?

• Is this a new allocation, or are you replacing someone?

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The one question I would never skip

Have you ever done day one? Not “do you do day one”, because plenty of people will say yes to that. Ask it in the past tense. Have you actually been the first institutional cheque into a manager with no outside assets, and when was the last time?

If the answer is yes, ask why those particular managers got the day-one cheque. If the investor already knew them, or was invested in their previous fund, then it was never really a cold day-one bet, and that piece of information is crucial for you.

If they say “We’d certainly consider it,” or “in the right circumstances,” the answer is almost certainly no.

You are probably in an information meeting rather than in front of a buyer when they:

• Won’t describe their mandate or their typical ticket.

• Can’t tell you who actually makes the decision.

• Claim broad interest across strategies that have nothing in common.

• Have no defined allocation window.

• Want your proprietary detail before they’ll share the basics about themselves.

• Have never backed an emerging manager, or need AUM and infrastructure far beyond where you are now.

None of this is a reason to be rude, or to skip the meeting. Early on you take everything, because you need the reps and you learn the market by sitting in it. The point is to know what you are in, and to spend your sharpest energy on the people who can actually move.

Own money versus someone else’s

Broadly, two kinds of people sit across from you. One is spending their own money and answers only to their own conviction. They can be first, and if they believe you, they simply do it. The other is deploying someone else’s capital, with a committee behind them and career risk if a first-time manager they championed blows up. That second person can stay warm and interested for eighteen months and never be your first cheque. Both are worth knowing and building into your pipeline. Only one is worth chasing right now.

As you take on more meetings, you’ll meet the friendliest faces who may never invest. They matter too, just not as pipeline. They’ll open a door or hand you a reference, and that is worth a great deal.

Before you leave the meeting

One final question separates a real prospect from a polite one, and it is the strongest way to close any first meeting:

“Based on what you’ve heard, is this a good fit for what you’re looking for right now? If so, what are the exact steps, and what would you like to see from us?”

A genuine investor gives you a clear answer, even when that answer is “not yet.” Someone who was only ever collecting information won’t.

A run of warm meetings feels like momentum. It’s the most expensive illusion in fundraising, because it burns the one thing an emerging manager can’t rebuild: the belief that the process is going somewhere. Stop confusing a pleasant conversation with a live one. Fewer first meetings, more second calls.

If you made it this far, do one thing right now. Write one sentence: the investor most likely to write your next cheque, at the stage you are today. Then look at your last ten meetings and count how many fit it.

Reply and tell me the number. If you can’t write the sentence at all, that’s the real problem, and it’s the most fixable one you have.

Cláudia

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Why the best emerging managers are misreading social media and what it’s costing them

By Claudia Quintela and Melanie Goodman

A respected hedge fund journalist recently called one of the sharpest macro writers working today an “influencer.”

The writer in question runs serious money and publishes genuine research. He is not selling a course. He is not flogging a trading signal to retail. He is telling you what he sees in the market and how he thinks about it. And a senior figure in the industry looked at that and reached for the most dismissive word he could find.

I chose not to publish the specific post here to protect both parties. But I had to sit on my hands. Because the instinct behind the word “influencer” is exactly the instinct keeping good managers invisible, and it is wrong.

This piece is about that instinct. Where it comes from, and what it is costing you. I will make the strategic case, because I have watched how capital actually moves for long enough and I have now watched it move toward me through a channel I used to dismiss. Melanie will handle the mechanics, because building authority on LinkedIn is what she does for a living and I am not going to pretend otherwise.

The operator is not an influencer

There is a distinction the industry keeps refusing to make, and it matters.

An influencer sells you something. The product is financial, retail, and the audience is the revenue. A brokerage referral, a paid community, a “system.” The content exists to convert strangers into customers of the content itself.

An operator is running a business, building a fund or allocating capital, and happens to write in public about what that work teaches them. The content is a by-product of the real job. There is nothing to buy. There is only a mind, shown working.

The operator is not a creator. The operator is a practitioner who decided to stop hiding the practice. That is a different thing entirely, and conflating the two is lazy.

Bill Ackman is the obvious example at the top of the market, a public figure whose influence now runs heavily through his own platform rather than through a journalist’s framing. On the smaller hedge fund side, Alfonso Peccatiello, “Alf,” built a following most hedge funds would envy on X writing macro, then moved his main work to Substack and LinkedIn. Neither of these men is an influencer. They are operators who understood where the conversation moved.

The reason the slur stings is that everyone in our generation was trained to feel it. Which is the real problem.

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We were trained to disappear

Look at how people of our cohort were trained to operate.

Be discreet. Say nothing that has not been vetted. Influence happened in rooms and over dinners, across a handshake and a business card. Visibility was vulgar. The serious money was quiet money and quiet meant credible.

That world has not gone. It is shrinking, and the people who will decide your fund’s future increasingly did not come up in it.

The senior name signing off still remembers business cards and the Financial Times over breakfast. The people feeding them the shortlist do not. The analyst whose read of you reaches the decision-maker before you do. The next-gen heir starting to steer a family office. They built their view of the world on a screen, reading and watching, on YouTube and Reddit and LinkedIn and X. They research a manager the way they were raised to research everything, quietly and online, months of you before anyone raises a hand.

They will find you before they ever meet you, the way they find everything, by searching and reading from a distance. Most of the verdict is in before you learn they exist. If you are not there to be found, you are being skipped, and you will never know you were.

So the discretion that once signalled seriousness now mostly signals absence. You are being missed.

LinkedIn is where these decision-makers are. Not all of them, not always, but enough of them that refusing to be there is a choice with a cost and most managers are making that choice without ever calculating the cost, because it feels safer to say nothing.

Silence feels safe.

The inbound arrives already convinced

I did not arrive at this as a believer.

I am not a content person. I do not write about platforms or growth. I started writing in public reluctantly, under no name at all for the first year or so, because I was embarrassed. I am still not especially consistent. I am trying to write three times a week on LinkedIn and put real effort into long-form, and that is the whole programme.

And the inbound has been relentless. Investors and managers both. Through the website and the booking links.

The surprise was the stage at which it arrives.

People reach out having already consumed hours of what I have written. They arrive at the first meeting feeling like they know me. I am treating it as a first conversation, because to me it is. To them it is nothing of the sort. They had read me for months and decided I was worth their time before I knew they existed. The qualification happened without me.

That compresses everything. The slow, expensive work of a first meeting is establishing who you actually are, and whether you are someone they can sit across from for years. You cannot reliably do that in an hour. You can do it across months of someone reading you, without spending a single one of those hours yourself.

Melanie tells the same story from a networking event, where strangers approached her certain they had met, because they had been watching her videos for months. She had no idea who they were. They felt they knew her completely. That asymmetry is the entire opportunity.

The result, for me, has been investors arriving with a mandate and asking who fits it, and managers arriving so aligned on how they run and how they communicate that we are working together within weeks. Fast, in a business that is not supposed to move fast.

I am being deliberately vague on the specifics, because some of this is confidential and all of it is somebody else’s business. But the pattern is consistent enough that I no longer think it is luck.

Why hedge fund content works on a different clock

This is the part nobody seems to get right, so I want to be precise about it.

Most of what gets written about social media for finance is really written for venture and venture investors behave in a way that is almost the opposite of hedge fund investors, for a structural reason that has nothing to do with personality.

VC is closed-end. There is a fund, it is raising, the window shuts. The deals are time-sensitive. Miss the round and you miss it. So VCs broadcast. They post that they are in a city this week, hunting actively, because the rush is real and being visible feeds the funnel.

Hedge funds are evergreen. The structure is open-ended. The fund is, in principle, always open. Which means nobody has to rush, ever. An allocator can come in now or in eighteen months, and coming in later, once you are proven, often carries less risk. There are incentives for seeders and early backers, but there is no “in now or never in.” So the investor waits. They wait until they are fully convinced you are worth the dedication of their time and capital.

That single structural fact changes the entire content game.

It means hedge fund investors do not advertise themselves. They have no reason to. There is no round closing. So they lurk. They watch you, with no intention of raising their hand, for as long as it takes to be sure. And they reach out only when they have seen enough, in their own time, when something you wrote finally tips them.

In hedge fund land, it pays to lurk. Going first carries no reward, so the smart capital stays silent and observes. Which means your content is not performing to a crowd that claps. It is performing to a gallery you cannot see, who will never react, and who are forming a verdict anyway.

This is where managers get it backwards. The metrics will look quiet, and that is fine, because you are not playing to the visible audience. The silence is the mechanism doing its job. The only thing that moves a lurker is the accumulation of evidence over time. One post does nothing. A year of posts builds conviction.

This is why the impatient give up at the exact moment it starts working. They are reading a closed-end playbook in an open-ended world.

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The two things stopping you, and why neither holds

When I push managers on this, it always comes down to two objections. I have made both myself, so I am not unsympathetic. They are still wrong.

“I don’t have the time.”

You are a founder doing ten thousand things. Fair. So let me put it in terms of cost.

You will fly to Miami in January for four days of conference. Build in the prep, the travel, the recovery, the follow-up, and you have spent the better part of three weeks of your year on it. For an upside that is capped: you meet whoever is in the room, and that is the ceiling.

Now compare that to setting up a content infrastructure once and letting it run. Record your investment committee meetings with your colleagues and talk about what came up. Say what you are seeing in the market this week. Describe your actual day. You do not need to perform. You need to be consistent, and the polish comes later. The work mostly already exists; you are just declining to show it.

Keep the conferences. Just build the always-on version first, or your priorities are inverted.

“It’s embarrassing. It’ll make me look low-value.”

I understand this one in my bones. I hid behind no name for over a year. The fear that being visible online is beneath a serious person, that it cheapens you, is real and it is widely held.

It is also a misread of who is watching. The downside of a low impressions post is nothing; almost nobody sees it and you are no worse off (momentary personal disappointment aside). The upside is that the one allocator who matters reads it and remembers. A post seen by three hundred people is worthless if it was the wrong three hundred, and priceless if one of them runs a mandate you fit. You are leaving a trail for the people already looking for someone like you.

The metrics will lie to you

While we are here: stop watching impressions.

Reach across LinkedIn is broadly down on where it was eighteen months ago. People who once pulled five thousand views now pull five or six hundred and panic. That is normal now. Melanie will tell you the same, and she lives in this data.

I have had posts hit fifty thousand on a following of a few thousand. I have had posts disappear. Neither told me much. The only questions worth asking are whether the writing is pulling the right people closer. Newsletter subscribers. Inbound from someone who matters. A viral post that floods you with irrelevant connection requests from the other side of the world is a vanity metric. The quiet post that one allocator screenshots is the one that pays.

Consistency beats spikes. “Your posts keep coming up” beats one good day. The compounding is the point, but it is invisible until it is not.

If you won’t say what you are, you don’t exist

One last strategic point before Melanie takes over on how to actually do this.

A lot of managers are so afraid of the label that they refuse to plainly state what they do. They will not write “hedge fund manager” or “allocator to emerging managers” anywhere a search engine can find it. The result is brutal and simple: when someone goes looking for a hedge fund manager in Milan, or an allocator in their strategy, you are invisible. You have optimised yourself out of the search.

Say what you are. Clearly, in the places that get indexed and read. Being findable is the bare minimum for being considered at all. If the lurkers cannot find you, they cannot lurk on you, and the entire machine never starts.

How you actually build that presence, position it so the right people find you, and keep it running without it eating your week, is Melanie’s territory. Over to her.

Set up so the right people can find you

Claudia is right that the people who will decide your fund’s future are already looking at you online. Most allocators and family office analysts will glance at your LinkedIn profile before they commit to an hour on a call or a flight to London. A vague or generic profile, or one obviously written for job-hunting, gives them a reason to move on.

An absent one gives them nothing to move towards.

Think about how a family office analyst actually searches. They do not type “inspirational macro thinker.” They type “emerging hedge fund manager global macro London,” or “allocator to emerging managers family office Zurich.”

If you do not appear in that search, you have opted out of a conversation you never knew was happening.

A clean operator profile has little to do with polish. Its job is to let serious capital find you and understand you inside two minutes.

Your headline decides whether you surface at all. “Partner at XYZ Capital” tells an allocator almost nothing. “Emerging hedge fund manager. Global macro. London.” tells them who you are, what you run, and where, which is exactly what they searched for. Combining role, strategy and location is the single highest-return change most managers can make to a profile.

Your About section should state your mandate and who you serve, in one or two short paragraphs. It needs to answer three things.

1. What you run or allocate to, in high-level terms.

2. Where your capital comes from, whether that is family offices, institutions or ultra-high-net-worth individuals.

3. How you think about risk, liquidity and time horizon.

Mirror the language you already use on your website and in approved materials. You do not name individual private funds, you do not quote performance and you do not promise outcomes. You describe how you operate.

Your experience should read like the front page of a due diligence pack rather than a curriculum vitae. An allocator reads it to assess you, the way they would read a screening memo. Each role should summarise the firm, your function, the strategy focus and the type of investor, in two or three sober lines. Use the language your deck uses. Avoid anything that reads like a pitch.

Your Featured Section is where a lurker finds something to read. If an investor lands on your profile and there is nothing to click, they cannot build conviction. Three to six pieces is enough: a research note, a macro commentary, an investor letter, a panel clip, a Substack article. One hedge fund client of mine moved from no inbound at all to regular conversations with family offices after we did nothing more than pin his existing quarterly letters and a talk video. The thinking was already there. It had simply never been visible.

Your profile should connect plainly to your firm and make you reachable. Link your current role to the firm page. Describe the business neutrally in your About section. Point to the firm site from featured. Then keep the basics in order: a professional headshot, an understated banner, a sensible headline, a custom URL (crucial in 2026 for AEO and SEO) and visible contact details. One allocator I work with has a simple rule. If they cannot reach you in two clicks, they shelve the idea and move on.

An allocator has perhaps two minutes between meetings. A profile that covers those points is one they can forward to an investment committee without hesitation. Anything less leaves you depending on luck and conferences to do the work a profile should be doing for you.

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What an operator actually posts

Once your profile stops hiding you, the question is always the same.

What can I say without looking like a marketer or stepping on compliance?

You do not need to become a content creator.

You need to let the work you already do reach the public record. For most operators that means one or two posts a week, drawn from what is already on your desk.

The posts that earn attention from serious capital tend to fall into a few types. There is the short market lens: what you are watching this week and why, written the way you would explain it to a sober allocator. There is the occasional framework post: how you think about risk, liquidity, sizing or manager selection, without numbers. There is the view from inside the investment committee: a question that split the room, a decision that took longer than it should have, a trade you walked away from. If you sit on the capital side, there is the allocator’s perspective: what earns a manager a second meeting, what ends the conversation, what you wish managers understood.

None of that requires performance data or trade specifics but all of it signals how you think.

One London allocator I work with started sharing anonymised versions of the questions they put to managers at a first meeting. The inbound that followed was better qualified. Fewer calls went nowhere.

Tone is the guardrail. You are not performing but are writing the way you speak in a serious investor meeting: precise, caveated, rooted in process rather than drama. There is a simple test before you post anything.

If the lines would sit comfortably in an investor letter, they will sit comfortably on LinkedIn. If they would look absurd in that letter, they are influencer content… and you already know it.

Cadence and the no-time problem

You are a founder or a portfolio manager with no spare hours. You do not need many. You need rhythm.

A realistic operator cadence is one or two short LinkedIn posts a week, each drawn directly from work that is already happening: an investment committee discussion, a risk memo, a call that raised an interesting question, a note from a conference. On top of that, one longer newsletter piece a month, which becomes the spine of everything else.

The way you sustain this is to treat content as a by-product rather than a project. The raw material already exists in your notes, your minutes, your slides and your call summaries. Once a week you turn one of those into a post, which takes about ten minutes. Once a month you gather a cluster of those themes into something deeper.

The compounding happens while you get on with your actual job. In an evergreen structure, that familiarity does not close a round. It makes you the obvious name when a family office finally decides to allocate to your strategy.

The minimum that still works is modest. One weekly post and one monthly long-form piece. More is welcome. That alone is enough to leave a trail worth following.

Handling what comes back

Do this even moderately well and things start to move.

The inbound will not arrive as a tidy list of allocators.

It arrives as a jumble of serious capital, peers, vendors, recruiters, retail investors and coaches. Treating all of it the same is how you lose your week.

A simple triage holds up well:

• Priority: allocators, family offices, institutional investors, strategic advisers.

• Defer: interesting peers, media, and longer-term relationships that may matter later.

• Decline: clear sales pitches, irrelevant strategies or geographies and anything that plainly is not a fit.

Respond promptly and properly to serious capital. Reply briefly and politely to everyone else, perhaps with a link to your newsletter and an honest “not a fit right now.” Do not let your direct messages become your calendar.

Volume can be deceptive here and it is worth bracing for. The post I made on my birthday a few weeks ago reached around two hundred thousand people. It took three minutes to write and was nothing more than a photo and a few lines. The connection requests that followed were mostly irrelevant, from people and places with no bearing on my work, and I declined most of them with a short standard reply. It produced no clients. The reach was the least useful thing about it.

The requests that matter look unremarkable by comparison. Someone has read you for months, on LinkedIn and in your newsletter, and arrives already convinced. Your task is to recognise those messages and move them into a serious channel: a call, a meeting, a proper due diligence process. The asymmetry Claudia described is the whole point. They know you. You are meeting them for the first time. Treat that as the advantage it is.

The LinkedIn and Substack flywheel

Most people in finance treat LinkedIn and a newsletter as separate worlds. For an operator they are two halves of the same decision.

LinkedIn is your discovery layer. It is where a chief investment officer first sees your name in a comment on a peer’s post, or a family office analyst notices a market note someone has shared. It is where they watch your tone and your consistency before they have any intention of contacting you.

Your newsletter is where the real diligence happens. It carries the pieces that are too long or too specialised for the feed: the macro letters, the allocation frameworks, the manager-selection philosophy. It is also the one part you own. If LinkedIn changed its rules tomorrow, or restricted your account, your subscriber list and your ability to email it would still be yours.

The loop runs in one direction. You publish a substantial piece in the newsletter. You take three or four LinkedIn posts out of it over the following week: a chart, a short excerpt, a question you posed to investors, a single takeaway. Each post points gently back to the full argument, with the link in the comments or your featured section. The people who care click through, subscribe and read you in full. Many will never react. They will watch. Months later, when their mandate and your strategy line up, they surface, having effectively pre-qualified themselves.

The platform you send from matters more than most managers expect. My weekly email goes out to around five and a half thousand people and opens at roughly 52 to 53 per cent. My Substack posts reach a far larger list and open between 20 and 30 per cent, which is normal for a publication of that size. The point is ownership. An engaged, owned email list will almost always outperform a borrowed feed, and it is the asset you can rely on when everything else shifts.

Your LinkedIn audience is rented. Your newsletter audience is yours. The flywheel exists to move the right people from the rented feed to the owned list, and from there into conversations that change the trajectory of your fund.

This is the system I build with clients in my CPD-accredited LinkedIn training, and write about in The Link Tank: a presence allocators can read for months, and a home base they trust once they decide to reach out.

Claudia, to close.

The people who will decide your fund’s future are already reading you. They will not tell you they are there. They will not react, and they will not clap. They will surface, fully convinced, on a Tuesday you have long forgotten you posted anything at all. The only question that matters is whether there was anything there for them to read.

Start before the next conference, not after it.

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The fifth AIMA and Marex emerging manager survey came out this week. 180 managers, 50 allocators, and a headline the industry is already repeating back to itself: an encouraging picture, appetite rising. The report uses the word “encouraging,” and it is not wrong to.

I read the same 42 pages and came away with a different sentence. Getting in front of an allocator got easier this year. Deserving the money got more operational and more expensive, and the channel that used to carry your raise is being swapped out underneath you. One got easier. The other got harder. Take only the headline, and you will spend the next year working on the half that already sorted itself out.

Take the findings one at a time.

Allocators will look at you sooner

The average track record an allocator says they need fell from 1.52 years to 1.27. Almost three in five investors, 58%, now say they will look at a fund with a year or less of history. The average smallest fund a plan will consider dropped again, from $106m in 2024 to roughly $94m, close to a third lower than the $151m of 2022. Time from first meeting to allocation eased from eight months to seven and a half.

Take the win. It is a real loosening, and it is the clearest good news in the report. A shorter track record is no longer the wall it was. I have argued the number was never what allocators were really buying (Issue 5), so if you have been sitting out of the market waiting to clear some imagined three-year bar, the data says stop waiting.

But a meeting is not an allocation, and the survey is blunt about what stands between them.

What gets you rejected moved to your least favourite part of the business

Operational due diligence is the number one reason allocators pass, at 86%, up from 83%. Fear of investment style drift jumped from 72% to 84%. “Unrealistic targets or poor business plan” rose from 66% to 80%. Fees, the thing managers agonise over, sit well down the list.

Read those three together. The reasons allocators say no have moved off your numbers and onto your operation: whether it is real, and whether there is a business under the strategy. I covered this in Issue 7, so I will not repeat it here. The point today is smaller. The survey says it in the allocators’ own answers: rejection is hardening around your operations, the part of the job you find most boring, at the same moment the track-record bar gives way.

That is the trade the headline hides. They lowered the requirement you were ready for and raised the one you have been avoiding.

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Looking institutional early is a cost you carry before the money arrives

Clearing that operational bar costs money, and the survey shows the bill rising. It frames earlier institutionalisation as maturity, and points to average breakeven AUM climbing about a fifth, to $82.9m. The smaller managers are hiring sooner and building operations sooner, at an AUM that does not yet pay for it.

The report calls this maturity. From your side of the desk it is overhead. You are being asked to look like an institution before you can afford to run like one. Headcount at the smallest firms crept up. Their cost of running, as a share of assets, sits above the wider field. None of it is optional any more, because the 86% above says the allocators are checking. So you carry an institutional cost structure through the exact stage where you can least afford it, on the promise that it is what earns the next allocation. That promise is probably true. It is also expensive, and the survey is cheerful about it in a way you cannot be.

How capital finds you is being rewired

Say you carry the cost and clear the diligence. There is still the question of how an allocator finds you at all, and this is the finding almost no one is quoting.

The share of allocators sourcing new managers through personal networks collapsed from 65% to 40% in two years. Over the same period, capital introduction through a prime broker rose from 22% to 30%. The warm intro, the someone-who-knows-someone that has carried first-time raises for decades, is thinning as a channel. The institutional pipe is taking its place.

For a solo manager, that rewires the plan. If your plan to raise has always been “work my network,” the survey is telling you the network is doing less of the work than it did, and the channel replacing it is one you may not be plugged into. Family offices are the partial exception, still leaning slightly more on personal networks than the rest, 43% against 38%. For everyone else, being findable now means being inside the prime broker capital introduction machine, or building a way in that does not depend on who you happen to know already. That is a strategic question, not an admin one, and it is the first one I would ask if I launched today.

You are buying something your investor did not order

There is one more place managers are spending to look modern, and the survey says the buyer did not ask for it. Two-thirds of managers now use generative AI at least in the front office, and 42% run it across the whole business. Only 8% of allocators say they expect a manager to use AI at all, and 34% say plainly that they judge you on pedigree and opportunity, not on your tech stack.

So the buyers did not ask for it, and a third will look straight past it. That does not make AI a waste. I have argued before for automating the raise rather than the alpha (Issue 6), and I stand behind every word. It means the burden is entirely on you to show the tool bought you something real, especially if it shows up in your fee. They buy results. Whether you used AI to get there does not come up. Do not confuse the two because the headlines did.

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The actual state of play

The report’s word is “encouraging.” Mine is “repriced.” Both are true, which is why the headline is so easy to misread.

One of the survey’s own respondents put it in a single line: “Managing the money is the easy part. Raising the money is still the hard part.” Everything above is why that is still true.

Appetite is up. The door is more open than it was two years ago. And in the same breath, the survey says the reasons you get rejected have shifted to operations, and the channel that used to carry your raise is quietly being swapped out underneath you. Easier to get the meeting. Harder to be the kind of manager who keeps the money once it arrives.

If you read the survey this week and felt relief, read it again with a pen. The good news is real. The bill is in the parts nobody is quoting.

Which of these four did your fund run into this year? Reply and tell me.

Next week I am doing something new for this newsletter: handing half of it to someone else. and I are taking on the question this survey leaves wide open. If the warm intro is fading, how does serious capital actually find you now? The short answer is that the people who will decide your fund’s future are already watching you, and they will not tell you they are there. Why the smart money lurks, and what it is deciding about you while it does, next Thursday.

Cláudia

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. Twenty-five years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

Ten years ago, a manager offering you a managed account was telling you something. It usually meant they needed the assets badly enough to run your money on your terms, in your name. You didn’t want it. As one investor put it recently, a managed account was the last resort and you stayed away from the manager who was giving you one.

That signal has now flipped completely. The most sought-after single-PM talent in the market actively wants managed accounts, and it’s not because they have to take it. The structure that used to mark a manager as desperate now marks them as a serious entrepreneur who has left a pod to run their own book.

If you are an emerging manager, the question is no longer whether you’ll be asked about managed accounts but whether you understand what actually changes when you sign one, because almost everything written about this structure describes the benefits to the person on the other side of the table, the investor.

This is the piece I wish managers had in front of them before their first managed account conversation. It is equally useful if you sit on the investor side and are weighing whether to allocate this way. Most of what follows is the same set of facts read from two seats.

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What a managed account actually is

Strip away the acronyms first. You might have heard it called any of these: separately managed account, an SMA, a segregated account, or a dedicated managed account on a platform. They may differ in the plumbing, but the core idea is identical.

In a commingled fund, the manager controls the vehicle. Investors buy units. Their money sits alongside everyone else’s, and the manager decides, within the fund documents, what happens to it.

In a managed account, the investor owns the account. They appoint the manager as investment adviser and delegate trading authority. The assets never leave the investor’s ownership. That single distinction, who owns the assets, is where every other difference comes from. Transparency, control, liquidity, fees, the exit mechanics, all of it traces back to ownership sitting with the allocator rather than the manager.

KPMG framed the original driver years ago and it still holds. Demand for transparency, liquidity and asset segregation rose after 2008 and the fraud cases that followed. Institutional investors, now around two-thirds of total hedge fund assets, wanted control rather than a redemption queue and exposure to their co-investors’ behaviour. The managed account answered that, from the allocator’s perspective.

That history matters because it tells you who has been driving this conversation, and it is not the managers.

Why this stopped being a niche

Unless you came from the FX and managed futures world, for most of its life the managed account was a structure for very large allocators writing very large tickets. That is no longer true, and the numbers are worth knowing because they will come up.

J.P. Morgan’s institutional investor survey found hedge fund SMA usage rose from 19% of investors in 2012 to 36% in 2018. Their 2018 manager benchmarking study found 56% of hedge fund managers already ran at least one SMA or fund of one. Managers between $1bn and $5bn averaged three of them. Above $5bn, nine. A large share of institutional hedge fund capital already moves this way.

The direction of travel has only sharpened since. BNP Paribas reported treasury efficiency as the single most cited reason allocators now use SMAs, with capital allocated this way growing materially over the last two years. AIMA, which published its first managed account guide in 2016 and an updated one in 2026, calls the current moment an SMA renaissance and points to prime-broker data showing managed accounts taking a rising share of new launches. IQ-EQ goes further and says nearly half of all new hedge fund launches now begin life as an SMA structure.

Two cautions on those figures. The forward projections, Goldman’s call for the space to grow by several hundred billion by 2027, J.P. Morgan’s estimate that most new launches will be SMAs, are forecasts cited second-hand, not realised data. And the “nearly half of launches” figures come from surveys run by the firms that service these structures, so treat them as directional rather than gospel. The cleanest hard numbers are the allocator surveys, and they all point the same way: this structure is moving from the edge to the centre.

So when an allocator raises a managed account, they are slotting you into a governance framework that a large part of the institutional market now runs by default.

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What changes when you allocate through SMAs

If you sit on the allocator side, the managed account hands you control. It also hands you a pile of operational work you never had to think about inside a fund. The people running the most sophisticated platforms in the market are surprisingly candid about how much of this caught them off guard.

Start with the language. Allocators think in AUM. You write a $100 million ticket into a fund and everyone knows what that means. A managed account doesn’t work that way. You allocate in gross market value, long market value plus the absolute value of the shorts, and you set the GMV to land on the risk profile you want. In managed futures and FX you size in notional, and each notional can run at a different volatility, with different margin and collateral demands depending on the strategy. So which number is the ticket? How do you explain a $200 million GMV allocation, or a $100m notional at 10% vol, to an investment committee that has spent fifteen years thinking in fund AUM? Re-educating your own IC on how to even size the ticket is now part of the job.

Then the parts of the machine the fund used to run for you: financing and prime broker balances. In a managed account you own the unencumbered cash and you have to decide what to do with it. Do you sweep it, deploy it, take some risk with it? Should you move balances between counterparties? Do you even have the staff to action any of this? It becomes new operational territory.

And the relationship question underneath this. Once you are running meaningful size through a prime broker via managed accounts, you become a material client. Are you managing that relationship properly, so that you can extract the value you deserve from it: research, capital markets access, new issue allocations, the things prime brokers used to reserve for the largest pod shops in the world. Who owns that relationship with the prime brokers? You as the investor, the platform if you chose to operate an SMA through them, or the managers directing the flow?

One thing does get easier: operational due diligence. From the allocator’s perspective, a managed account can make for a far more streamlined ODD process. The allocator owns the structure, has autonomy over the service providers, and has full transparency over the portfolio. This means portfolio holdings, cash, leverage, risk limits and exposures can all be monitored directly. A lot of the traditional fund-level DD questions become less relevant when reviewing an SMA because the structure already answers them.

But the core operational risk still sits with the manager: governance, trade operations, compliance, technology, controls. Any operational DD still has to cover those in depth. The managed account removes a category of fund-level risk but it doesn’t make the manager risk-free.

This is where an allocation teaches you things a fund never will. In a fund you get month-end visibility and a number. In a managed account you watch the manager trade in real time, every day, through the drawdowns as well as the good runs. You see what they actually do against what they told you they do, which inside a fund is almost impossible to verify intra-month. And because most events don’t politely wait for month-end, you see how the manager handles the messy intra-month moment: the position that moves against them, the bad week. How they communicate under that pressure, how they behave when it isn’t going their way. You learn someone’s true colours fast. You will learn more about a manager in a few months in a managed account than in several years inside a fund.

The economics, and the financing edge nobody mentions

The headline most managers hear is that managed account fees run lower. I have personally seen SMA fees ranging from 1.5% and 15% to 0 and 15% and anything in between those two. The devil is always in the detail. I have seen structures with monthly, quarterly or yearly crystallisation of the performance fee, each yielding significantly different cash flow outcomes for the managers running them. I have also seen $50m managed account structures with 0 management fee and a $200k a year cost pass-through to cover systems. If you’re a manager, the fee is not the only number to pay attention to. Yet most of the managers I speak to are very focused on the fee alone.

And once you cut one deal, you have set a reference point. Grant a $50m account 0 and 15 with a cost pass-through and the next allocator will want to know why they are paying more. Most-favoured-nation clauses make that explicit and tie your hands on every account that follows. Before you agree generous terms to win the first ticket, work out what they commit you to across every ticket after it. The cheapest account you ever sign can quietly reprice the whole book.

For the allocator, the saving runs deeper than the management fee, and it is worth understanding even from the manager’s seat.

Inside a managed account a large institutional allocator implicitly borrows at around Fed funds plus 20 basis points through the structure. It is the cheapest funding available to them anywhere. If you used to allocate via external multi-managers, consider the impact of a second pass-through of performance fees and netting that a commingled multi-manager structure imposes, and the saving becomes explicit and calculable. One large US public fund modelled this for their board: Fixed costs, variable costs, financing terms, the leverage they would run, and the saving generated vs allocating via external multi-manager/pod funds. They put the annual number in the tens of millions of dollars, including reduced interest expense from running more capital-efficiently.

For smaller investors with different access to funding, the savings won’t be as large but just the cross-margining between different managers enabled by managed accounts will be a considerable saving.

That is what you are negotiating against. The allocator pushing for a managed account is capturing a financing and structural advantage that dwarfs the fee line. Understanding that changes the conversation from defending your headline rate to working out where the real value sits across the whole arrangement, including ticket size and the cost of serving the account.

It also gives you something to price against. If the allocator is capturing a financing and netting advantage worth multiples of your fee, that is a number you can point to when you negotiate ticket size and the cost pass-through. You are asking to share in a benefit the structure creates for them, and that is a reasonable thing to put on the table.

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What changes when you sign one

As a manager, this is what actually changes when you start trading a managed account instead of a commingled fund. You run the same book. In almost every case the allocator just wants the strategy you already run, pari passu with your other capital. They are not asking you to do anything special. What changes is everything around the trading book.

Transparency becomes total. The investor sees what you buy and sell, daily, often close to real time. Your positioning, your sizing, your timing, the actual shape of how you trade, all of it is visible to a sophisticated observer. For a concentrated long/short book with a handful of large positions, or a systematic strategy whose logic can be reverse-engineered from enough position data over time, that visibility may carry a cost. Decide before you sign whether near-real-time transparency changes how you can run the strategy at all.

Your edge becomes a double-edged sword. One benefit of running on institutional infrastructure is that you have the same tools as everybody else. One drawback is that you have the same tools as everybody else. The same factor models, the same crowding signals. The same transparency that lets an allocator manage your risk also folds you into a pool where everyone can see whether the same edge is showing up across other managers at the same time.

Risk guidelines get agreed upfront, in writing, before you trade. Many managers underestimate this. Net and gross exposure, GMV, concentration limits, sector constraints, the drawdown you say you’d never expect to hit. It all goes in the investment management agreement before a single trade. In a good investor/manager relationship you set this collaboratively, but the risk guidelines are real and contractual. You can’t sell naked options if the IMA says so. You have termination clauses if your risk, intra month and not at month end, reaches certain limits, or if you deviate from your investment strategy.

Someone can hedge over the top of you. On the more advanced platforms there is a dynamic hedger that can take a position the allocator considers too large for your book and lay a targeted hedge against it to fit you inside their overall risk construct. You are still running your strategy, but you are running it inside a risk envelope that someone else is actively managing, with weekly risk calls covering credit, liquidity, factor exposure and the hedging overlay.

Allocation and best execution stop being your private business. Run the same book across a fund and three SMAs and you have to prove, not assert, that everyone is treated fairly. Who gets filled first, and how you evidence that no account is being favoured. This is the machinery that makes pari passu actually true rather than a word in a deck. Allocators ask about it and regulators expect it. A thin allocation policy looks fine until the day a fill is small and contested.

Your regulatory footprint can change. Taking on managed accounts can pull you into obligations you did not have running a single fund, depending on where you and the allocator sit: registration thresholds and the reporting regime you fall under. None of it is necessarily a problem. All of it is the kind of thing you want to know before you sign, not after a regulator asks.

You should agree, in advance, how you’d be fired. This is the cleanest and most adult part of the structure, and it surprises managers. In a great managed account relationship an exit playbook is agreed upfront. You sit down and agree a plan: the catalysts you’re playing for, and the level at which you’d walk. Usually the investor asks you directly what loss levels are expected and at what level they should terminate, and how that termination is triggered. You give them a level, and if you hit it you know what to expect. What most people hate in this industry is being surprised, and SMAs are built to reduce that risk. For a manager who trades well and communicates openly, that is a better deal than the traditional redemption cycle. For a manager who hopes to quietly trade through a bad patch, it is a far harder place to hide.

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The redemption question, read from both sides

Managed accounts are often sold to managers as protection from redemption contagion, and that is partly true and partly a trap, so it is worth separating the two risks cleanly.

In a commingled fund you carry contagion risk. A large investor redeems, you sell positions to meet it, and in stressed conditions that can feed on itself across the whole book. Gates and suspensions exist, but using them damages your standing with every other investor at once.

In a managed account that contagion dynamic largely disappears. The allocator owns their assets in a segregated account. If they leave, their assets are dealt with on their own, without forcing sales that hit anyone else. An investor can just sweep the unencumbered cash in the account and walk away without disrupting anybody’s business, where in a fund this would have meant a redemption notice and a forced liquidation.

But you have swapped one risk for another. You now carry bilateral termination risk, and depending on the notice period you agreed, an allocator will likely be able to exit faster than a standard fund redemption cycle would allow. Contained, yes. Contagious, no. But the redemption cycle is potentially quicker and entirely in the allocator’s hands. The notice period is one of the most important numbers in the agreement and one of the most negotiable too.

And agree how the exit actually runs, not just when it can be triggered. When an allocator leaves, who liquidates the book and who wears the slippage of unwinding it. A clean-looking notice period means very little if the wind-down itself is left unspecified. For anything less than fully liquid, settle upfront how positions are valued and unwound on the way out, because that is the moment a tidy termination clause turns into an argument.

Platform or bespoke, and why it decides your operational life

The single biggest determinant of how painful a managed account is to run, and almost nobody distinguishes this clearly enough, is whether it sits on an established platform or is a bespoke bilateral arrangement.

On a platform, the infrastructure already exists. Reporting frameworks, custodian relationships, risk monitoring, onboarding. Some platforms described getting a manager up and trading in weeks, not months. You plug into an architecture rather than building one.

A bespoke bilateral account is a different animal. Each allocator brings their own preferences on custodian, reporting format, risk framework and operational review. Different service providers, different terms, all of it managed internally, by you.

The biggest risk for emerging managers taking on too many SMAs too early. Going from one SMA to two does not double the operational burden. It increases complexity exponentially, as every mandate is bespoke. A five-person team running a flagship fund and three separate SMAs simply does not have the operational resource to support them properly, and pretending otherwise is the place emerging managers most often come unstuck. The more customised the SMA, the more infrastructure, governance and people the structure quietly demands.

Underneath that sits the trap that gets managers into the mess in the first place. The pull of AUM is strong enough that emerging managers will say yes to almost any SMA opportunity in front of them. But it’s naive to think an SMA is just another LP allocation into the fund. Each one is a separate operating relationship with its own service providers, its own terms and its own ongoing demands on your team.

One account is manageable. Run three or four bespoke managed accounts for three or four allocators with different standards, on a lean operations team, and the cumulative load becomes the thing that breaks you. The question you should ask as an emerging manager is: can I run this specific account, on these specific terms, at a cost to serve that is proportionate to the size and the strategic value of this allocation.

The emerging manager’s real opportunity, and the catch underneath it

For emerging managers the upside is real. The managed account has largely replaced traditional seeding as the way new strategies get anchored. Combined with outsourced operations, it lets a talented PM launch lean, sometimes solo, with institutional-grade infrastructure from day one, even well below $100 million. For a manager with real ability and no franchise yet, that is the most accessible on-ramp to institutional capital that has ever existed. The ODD relief I mentioned earlier is precisely why an allocator will back you earlier than they otherwise would. That is real, and you should use it.

The catch is that the same structure that lets you launch lean also hands enormous leverage to whoever is on the other side. The isolated, no-contagion redemption that protects the allocator is, from your seat, the ability to pull your capital instantly and cleanly with no franchise-level cost to them. The total transparency that de-risks them erodes any informational edge you have. And there is no commingled base underneath you on which to build a franchise of your own, because the assets are theirs, not your fund’s.

Watch who is actually buying emerging-manager talent through these structures. Increasingly it is not end allocators. It is other funds and multi-manager platforms. BNP found that 9% of managers already allocate to their peers through external managed accounts, with a further 18% planning to. A growing share of the demand for your talent via managed account comes from platforms that will run you like a pod, except without the pod’s safety net or its commingled franchise. The structure that frees you can also quietly turn you into someone else’s book.

So go in with both eyes open and fight for the few terms that decide whether the structure works for you.

If there is a first-loss or seeding variant on the table, that calculus sharpens further. The one term that matters more than almost any other is whether you secure the rights to your own track record at the outset. Build a record inside someone else’s structure without that, and you can walk away with nothing portable to show for it.

And a reality check on size, because it bites emerging managers specifically. J.P. Morgan found the average minimum allocation to open an SMA or fund of one was around $73 million, with more than two-thirds of managers requiring at least $50 million. Below roughly $30 million an SMA rarely pays for itself, and for the structure to be viable longer term you really want $50 million or more.

That floor is strategy-dependent, though. For liquid trading strategies, FX, and managed futures or CTAs, where the operational load is lighter and the book is simpler to run, managed accounts work at far smaller sizes, often from $5 to $10 million. The $30 million number is really a guide for equity long/short and the more operationally heavy strategies, not a universal floor. Anything below that and the operational and expense drag quietly eats the relationship. For most equity and credit strategies it is an institutional-ticket structure, not a route for small-ticket capital. If the economics of serving the account don't work at the size on offer, the structure is not your friend regardless of how strategically flattering the request feels.

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What to clarify before you sign, or before you allocate

Whichever side of the table you sit on, these are the points where ambiguity turns into trouble later. Get them explicit in the documentation rather than leaving them to assumption and goodwill.

Termination notice. The actual notice period for ending the mandate, and whether it is negotiable. This is your single most important defence against the speed of a bilateral exit. Read from the allocator side, it is your single most important source of control.

Information use. What the allocator can do with your position-level data. Can it be shared with advisers or consultants? Standard managed account documentation often leaves this unaddressed. Raise it regardless of how it gets resolved.

Investment guideline modification. Who can change the guidelines after the mandate starts, and on what timeline.

Trade allocation. How fills are allocated and averaged across this account and your other capital, and how fairness is evidenced. The thing nobody checks until a contested fill makes it matter.

Most-favoured-nation terms. Whether the fee and terms you agree here bind what you can offer, or refuse, every allocator after this one.

Reporting scope. What is required, how often, in what format, and how new reporting demands get handled later. Reporting obligations have a habit of expanding through the life of a relationship. Agree the framework for that expansion now.

Treatment of illiquid positions. If anything illiquid arises, how is it valued, and who governs the process between you and the allocator. This matters most for any strategy with exposure to less liquid situations, and it is the kind of thing nobody discusses until it is already a problem.

Tax and domicile. Because the investor owns the assets directly, the tax and withholding treatment can differ from a fund, especially across borders. Get it looked at before you sign, not at year end.

Regulatory impact. Whether taking this mandate changes your registration or reporting obligations.

Track record rights. Already flagged, repeated here because it is the one managers forget. If you are building a record inside this structure, secure the right to use it before you start.

Where this leaves you

The managed account is becoming the default wrapper for institutional hedge fund capital, and the trend is not reversing. For an emerging manager that is mostly good news. It is the most accessible on-ramp to serious capital that has existed in my time in this industry, and the stigma that used to attach to it has flipped into something close to a badge of seriousness.

But it is a structure designed, historically and operationally, around the needs of the person allocating, not the person managing. Almost everything published about it describes the benefits flowing one way. The fee saving you are offered is real, and smaller than the financing advantage sitting behind it. The transparency that wins you the allocation is the same transparency that erodes your edge, and the clean exit that makes the relationship adult is the same mechanism that lets your capital leave without warning. They are the terms to negotiate hard, because they decide whether you have signed an on-ramp or a cage.

If you are an emerging manager looking at a managed account request right now, forget whether managed accounts are good or bad. The real work is understanding what each specific arrangement asks of you operationally, and which terms you hold the line on. That is the conversation I have with managers before they sign. If you are in it now, you know where to find me.

One thing before you go. If you know a manager weighing their first managed account, or an allocator about to structure one, send them this. It is the piece I wish managers had in front of them before that first meeting, and it only reaches them if someone who has been on both sides passes it along. Forward it to the one person it would save from a bad term. Share it with anyone sitting at that table. That is the ask on this one.

Cláudia

P.S. If you have a managed account request on the table, or you're an allocator structuring one, this is the work I do. The terms that decide whether it works for you are the ones nobody sends over in advance. Email me and tell me which seat you're in. I answer every one.

An allocator you spent a year getting in front of asked you to send something. That was three weeks ago. You think it went out. To be sure you would have to open three tabs and check, and you have not, because the portfolio needed you and the follow-up did not shout.

Nobody chased you for it. That feels like relief and is the actual problem. The investor moved on. A meeting that took a year to earn, gone, and you will not trace the loss back to this one document, because by the time the calendar looks quiet it is eighteen months later and the cause is invisible.

In Issue 6 I argued that most emerging managers have automated the portfolio and left the raise running like it is 2015, and I gave you the maths on closing the gap. This issue is narrower and more useful to you. How to tell which part of your own raise is leaking, and what it looks like when the leak is sealed. Read Issue 6 first if you have not.

Where your follow-through actually breaks

Start with the follow-up, because it hides the most expensive failures and it is the cheapest thing to fix.

Your follow-up slips because the only place the question “did that go out?” lives is your head, and your head is full of the portfolio. Discipline is not the issue, whatever you have been telling yourself. The question simply has no owner that isn’t you, and you are busy.

The managers who do not lose meetings this way have taken that question off their own plate. Every call gets captured, every commitment becomes a task with a date on it, and something other than memory chases it. In my own practice a daily sweep does that, and I no longer wonder whether a document went out. The tool is not the point. The principle is: a promise you make on a call should not depend on you remembering it three weeks later.

Run the test now. Without opening anything, name the follow-ups you owe from this week and who they are to. The ones you cannot name are the ones already slipping.

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The investors you lose before they reach your pipeline

You think your pipeline leaks at the deep end, the no after six months of diligence. It leaks worse at the front door.

A podcast listener emails. A peer makes a warm intro. You mean to add them properly when you have a minute, and the minute does not come, so the relationship lives and dies as an unread email. That is the cheapest investor you will ever lose and you never even logged the loss.

What seals it is dull: a new name enters your system the day it appears, researched, with the people around it attached, rather than the day it becomes convenient. The next time that firm shows up in your week, you already know who they are and what they wanted.

Here is the check that stings. The allocators who have been quietly watching your fund for a year without engaging, can you name them? If not, you are only ever following up with the people who replied, which is the smallest and least interesting slice of your universe.

Why your CRM is the thing you avoid

You bought the CRM. You do not open it. Be honest about why.

It was built for a software sales team. One company, one product. A pipeline that ends in won or lost. Your business is nothing like that shape. You, or your managers, run several strategies. One allocator looks at several of them and stays in the conversation for years without committing. The record that matters is the intersection of investor and manager and strategy, and a standard CRM cannot hold it, so you stop feeding it, so it rots, so you walk into meetings guessing.

Match the structure to the way the relationships actually work and the CRM stops being a screen you dread and becomes a question you ask in plain English. I have not opened my own CRM interface in months. I ask it instead. That is the structure being right underneath, not a tooling trick.

If your CRM is a graveyard, the problem is its shape, not your willpower. Stop blaming yourself for not maintaining something built wrong.

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The half-life of an allocator’s interest

When an allocator finally says yes, send me the deck and the one-pager on the strategy, the clock starts, and it runs faster than you think.

Interest has a half-life. Materials that land the day they ask hit a warm reader. The same materials a week later hit someone who has taken four other meetings since and cooled. Most managers are a week late on everything, because every document gets built from scratch the moment it is needed.

Part of what I do for managers is produce the institutional profile that introduces them to an allocator. It used to take two days. It now takes about two hours, and not because I type faster. The manager’s data is structured once and the voice is trained once, so the document assembles rather than getting written cold each time. Your own follow-up materials can work the same way. Every document gets built from scratch, and that is the whole problem. The writing itself was never the slow part.

The check: last time an allocator asked you for something specific, how long did it take to arrive, and was it built fresh or assembled. Speed to materials is speed to raise.

Being the most informed person in the room

You are expected to be current on the market your investors care about. For a solo manager, staying current is a tax, and it is the first tax you skip when the week gets tight.

It does not have to be manual. The research and the market coverage that bear on your strategy can be gathered for you on a schedule, so the week opens with the relevant point already in front of you instead of improvised in the meeting. Servicing an investor well is mostly showing them you are paying attention to their world, not just pitching yours. That is a system you can build, not a talent you are born with.

The one thing you cannot hand over

Everything above is admin, and admin should leave your desk. There is a line on the other side of it that should never move, and the allocator across the table can see exactly where you have drawn it.

The model does not get to decide what you think about a position, or write the sentence in your investor letter that carries your actual view, or judge whether you trust the person opposite you. Hand it those and you have not got leaner, you have hollowed out the job.

Here is what the person reading your update is doing with it, whether they say so or not. If it sounds like someone with a view, that counts for you. If it reads like the other forty updates in their inbox, they conclude you did not write it, and then they wonder what else you have handed off. Your risk framework, maybe. Your due diligence. Your voice is one of the few things you own that a competitor cannot copy, so do not torch it to save twenty minutes.

_{Caption: The system that seals each leak: capture on the left, one source of record in the middle, what it hands back to you on the right, most of it on a schedule you never touch.}

_{Most of the boxes on the right run on a schedule I set once and now never touch. The morning briefing fires before I am awake. The call-to-task sweep runs at eleven every day. The market scans run on Fridays. None of it needs me to remember to do it, which is the whole point.}

The maths, on your AUM

Run this on your own fund. The senior IR hire and the content hire who would do everything above cost £220k to £330k a year all-in, in London or New York, before either introduces a single investor. That eats your management fee in a bad year and most of it in an average one, and you cannot make the hires until the AUM is there, and the AUM is not arriving fast enough because the work the hires would do is not being done. That is the trap most sub-scale funds die in.

The system that does the admin those two would have done costs a rounding error against their salaries. You are probably not even paying yourself what one of them would cost. So the choice is binary. Build it, or stay sub-scale while the managers who built it pull away from you.

Where to start

You do not need the whole system to begin. Start with defining which part of yours is leaking, and you have probably worked it out somewhere in the last few paragraphs. Pick the worst one.

If it is follow-through, put a single owner on the question of whether things got sent, and make it anything other than your memory. If it is the front door, log every new name the day it appears, before it cools. The order matters less than the starting.

Building the whole thing alone is slow. It took me eighteen months and a good number of dead ends, and the path is a lot clearer now than it was then. Setting this system up for emerging managers is part of what I do at Vibe, so if you would rather not learn it by trial and error, get in touch and we will work out which part of your raise to fix first.

Tell me which of the checks above you could not answer. That is usually where the money is leaking.

Cláudia

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. Twenty-five years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

Share The Emerging Manager

A few weeks ago I introduced one of the systematic managers I work with to a family office. Around $10m of potential allocation. A meeting that took a year of preparation to deserve and weeks of work to engineer. I followed up with the firm’s IR person to ask how it had gone.

The summary that came back was AI-generated. I could tell from the first sentence. It told me they had presented the strategy. The meeting had lasted X minutes. The conversation had gone well.

Nothing about the intel the IR person picked up in the room or the questions the family office actually asked. Nothing about which person had been more sceptical, and which had leaned in. No follow-up actions, no document requests. No notes on the exact phrase the principal used when he described what they were looking for. The most valuable hour of work in the manager’s quarter, summarised back to me as “the meeting went well.”

The firm is staffed by people who built that manager’s systematic engine. The engine pulls market data, decomposes factors, runs regime detection, sizes positions, and rebalances inside seconds. The people who built it are technical to the bone and allergic to anything that isn’t measured. They have brought that brain to one half of the business. They have not brought it to the half that pays them.

The IR person used AI to write a summary of a meeting, instead of using AI to capture the meeting properly. They are reaching for AI on the wrong side of the table.

You spent five months building the pipeline that pulls filings and transcripts and rebalances exposure inside a minute. Sentiment runs on a stack of social feeds underneath. You have Claude-coded the screen, the factor decomposition, the risk overlay, the position-level attribution. Your portfolio analytics tell you the win rate by signal and the drag from any name held more than thirty days past its catalyst.

But you are still spending eight hours on the last Friday of every month writing the investor newsletter. Your CRM, your data room, your investor portal, and your Outlook inbox don’t talk to each other. If someone asks you when you last spoke to each of your top-ten investors in your target list, you open three tabs and guess at two of them.

You automated the alpha. You haven’t automated the raise.

For an emerging manager, this is a P&L problem. The portfolio you are running may be excellent but the capital raising operation around it is still being run as if we were in 2015. That is an opportunity cost in both investor exposure and AUM.

In Issue 3 I argued that managers who raise capital treat every meeting as data. They review it before the follow-up. Today I’ll show you what that looks like once you stop trying to do it manually. This issue covers the diagnostic and the model that closes the gap. The mechanics, tool by tool, are in the next newsletter. Read this one first.

The Capital Raise Operational Audit

Eight questions. Run them on your own IR operation before you read the rest. Write the answers down. The ones you cannot answer fast are the gaps, and the priority order for what to build first.

1. Without opening anything, name the date of your last meaningful conversation with each of your top-ten investors in your target list. A conversation that actually moved something forward.

2. What is your conversion rate from first meeting to second meeting this year? How does it compare to last year, broken down by investor type? You can probably tell me to two decimal places what your alpha capture rate is on any given basket. The IR pipeline gets the same precision in the firms that have worked this out.

3. For the investors who passed in the last twelve months, point at the specific objection that each one mentioned, the actual sentence they used. If you cannot, you are optimising your pitch on guesswork.

4. When you committed to send something on a call last week, did the document arrive within forty-eight hours? What is your hit rate over the last quarter?

5. When you sit down to write the monthly investor newsletter, are you starting from a blank page or from a structured digest of what your investor universe has actually been asking about?

6. After your last podcast appearance, how many pieces of content came out of the recording? Did you arrive with pre-call notes that primed the conversation, or did the file go to die in an email or OneDrive folder?

7. Of the investors who have been silently watching your fund for over a year without engaging, do you know who they are by name? Most managers don’t, because their pipeline tracks only the ones who replied.

8. How long does it take you, with the tools you have today, to map the state of every investor relationship across your universe this month?

The managers who can answer these questions quickly have built the same connective tissue around their capital raising efforts that they had built around their portfolio. Most of that work is structural, and, thanks to AI, is now possible without adding headcount.

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Why this gap exists

The reason most emerging managers have not automated IR/Capital raising has very little to do with intelligence and quite a lot to do with where their early-career hours got spent.

A portfolio manager spends fifteen years building the analytical apparatus they need to run money. They code and model, automating the boring parts of the investment process. By the time they launch their own fund, the portfolio side feels native. Most of the manager’s prior experience with raising capital was in a firm where the IR team did it. The manager met the investor, the firm did the follow-up, the CRM was maintained by someone else, the monthly letter was drafted by communications and signed by the PM.

Now they are on their own. They are the IR team and the CRM admin. There is no junior associate because resources are scarce. The instinct that says “automate the bit you find painful” has not been pointed at this work yet, because it is not the work the manager finds intellectually interesting.

That is also why the gap is so dangerous. The portfolio side gets attention because the manager enjoys it. The capital raise side gets attention only when something is on fire, which is to say, when an investor has gone quiet for six months and the manager has noticed too late.

The cost of the gap is hard to see. A bad month in the portfolio shows up in performance, and you fix it. A bad month on the raise side shows up as a calendar that is quieter than it should be eighteen months later, and by then you cannot trace it back to a specific cause. Often, early-stage managers get stuck at sub-scale because their IR operation could not keep up with the investor’s pace of conversation, and the momentum drifted.

What allocators actually see

I sit in the middle of these conversations and the failure patterns are not subtle.

The follow-up rate from first meeting to delivery of promised materials is poor. Of the first meetings I have seen this year, fewer than half resulted in the promised follow-up arriving within seventy-two hours. Of those that did, a meaningful portion sent something generic that did not reference the specific conversation. The allocator notices, they just don’t say anything. They probably won’t take the next meeting.

A couple of weeks ago another manager I work with told me he wasn’t sure whether a follow-up document from a meeting six weeks earlier had actually gone out. He needed to check. Two weeks later, he came back with the answer. It had not been sent. The investor had not chased, which I read as the investor having moved on. Six weeks of silence on a relationship that had taken months to build, killed by a document nobody at the firm knew was supposed to go out. One meeting that took two months to engineer, wasted. There was no system to flag that the document was outstanding. There was nobody who owned the question of whether the follow-up had happened. That is the operational and systems gap.

The second pattern is the monthly newsletter that could have been written by any of the hundred other managers in that allocator’s inbox. Generic prose, hedged claims, no specific positioning, no acknowledgement of what has actually happened in the market that month. The signal it sends is that the manager has nothing to say, which the investor translates as the manager has not thought about it, which is the wrong conclusion to draw from a tired person who has not built the systems to make their thinking visible.

These are systems failures. Every one of them is the kind of thing that gets solved when the IR side of the operation is built with the same care the portfolio side already has. In Issue 2 I argued that allocation decisions sit on four legs, with performance carrying around a fifth of the weight and communication carrying a disproportionate amount of what remains. The communication leg is the one that breaks most often. It breaks because nobody built the system underneath it.

Two hires you can’t afford

The traditional answer to the gap is to hire. A senior IR person who knows the allocator universe, runs the pipeline, builds the materials, runs the follow-up. A content and comms person, mid-level, who handles the letter, the social, the website, the podcast pipeline.

The actual cost of those two heads in London or New York, all-in:

• IR head, senior, base of £90–130k plus bonus and benefits. All-in around £150–220k a year, more if you want someone who actually has the allocator relationships rather than someone who needs to build them.

• Content and comms, mid-level, base of £55–85k. All-in £70–110k, plus tooling.

Total burn for the two-person IR-and-content team: £220–330k a year before either of them has produced a single investor introduction.

For a fund running £40m of AUM at a 1% management and 15% performance fee structure, with most performance back-end-loaded, that headcount eats the entire management fee in a bad year and most of it in an average one. You can do that maths for your own AUM. The conclusion is the same one most early-stage managers reach independently. The hires are not affordable until the AUM that would justify them is already there, and the AUM is not arriving fast enough because the IR work is not being done well, which is the work the hires would have done. A catch-22 that ends most sub-scale funds.

The actual cost of the system that replaces those hires, properly built:

• One main AI subscription, monthly. Around £20.

• One research model, monthly. Around £20.

• One transcription and capture tool. Around £10–15.

• One meeting capture and recording tool, sometimes free, sometimes around £15.

• One workspace (Notion or equivalent) for the system of record. Around £8–12.

• One bridge layer (Make, Zapier, or Power Automate) for moving information between platforms. Around £20–40.

Total monthly cost: under £130. Annual run cost: under £1,600. Plus the time investment to build the system, which is real and which I will address next.

The order-of-magnitude difference is the argument. You are buying a different shape of operation, one where the work that previously required two heads is now compressed into one person plus the system. The hires come later, when there is revenue to justify them and the work has been scoped properly first. That sequence is the right one. The IR person in my opening was hired without that sequence being followed. The firm now has an IR cost line and a system that turns the most valuable hour of work in the quarter into a one-line summary.

Having an IR team is not a substitute for the system. The hire on top of the system is the right move in 2026.

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The honest cost

The version of this story most people are telling is that AI saves you time. It does not, in the way they mean.

I work more hours now than I did before I built this system. The scope of what one person can credibly run has expanded. Manager profiles I would not have offered are now standard. Investor research I used to skip is now baseline. My hours got reallocated to work that was not previously possible.

The trade is real, but it is not the trade the marketing material promises. You get an operation that competes on output with a team three times your size, and the hours stay roughly the same, because the ambition expanded to fit.

The reason to do it anyway is that the alternative, for an emerging manager, is to stay sub-scale. I bet you are not even paying yourself the £220–330k those two hires would cost.

So the decision is binary. Build the system, or fall behind the managers who already did.

The operating model

What most managers miss about AI is that it works more like a colleague than a productivity tool. Colleagues must be briefed.

A tool is something you open, type into, get an output from, and close. A colleague learns your business over time, remembers what you have said before, knows what your standard is for the work, and pushes back when you are wrong. The version of AI most managers experience is the tool version, because they treat every conversation as a one-off. The version they should be running is the colleague version, where the model has a permanent picture of who they are, what they do, who they serve, and how they sound.

The principle underneath all of it: AI is only as good as the context you give it.

Every workflow worth automating sits on top of two things. Permanent context the model already knows about your business, and a clear separation between when you are using the model to think and when you are using it to do.

Permanent context is what the model needs to know about you forever. The strategy, in plain language. The vehicle structure. The investor universe you target and the ones you don’t. The phrases you use and the ones you refuse to use. The way you sign off. The five things you always include in an investor update and the three you never include. Set this up once. Stop pasting the same context every time. The return on a properly built context file is the single most underestimated lever in the entire stack.

Thinking mode is the model when you are working something out. A strategic question. An honest read of a draft. The role here is critic. You instruct the model to behave that way explicitly, because the default behaviour is agreement, and that default will mislead you. The prompt I use, pasted at the bottom of any draft I am not sure about, is the same one every time:

Be critical. What’s wrong with this? What would a senior allocator find weak, unclear, or generic? List the structural problems. List the language problems. Don’t soften. Don’t agree with me unless you have a substantive reason. If parts are strong, tell me which parts and why.

That prompt, in those words or your own variant, will catch dozens of pieces a year you would otherwise have sent before they were ready. The model already had the capacity to say all of it. It was waiting to be asked.

Doing mode is the model after the thinking is done. Draft this. Format that. Pull the action items from this call transcript. Repurpose this newsletter into LinkedIn posts. This is the production layer. It only works once the permanent context and the thinking discipline are in place underneath. Skip those and you produce slop at scale, which is worse than producing slop slowly. Which brings us back to the IR person in my opening.

Why standard CRMs break on capital introduction

This took me the longest to get right, and the part I see almost every emerging manager underestimate. Most CRMs are built for a B2B SaaS sales model. Company, contacts, deals, linear pipeline, one product. Sales rep calls the lead, qualifies them, moves them through stages, closes. The data model assumes that the company you are selling to is one entity, and that the relationship terminates in a closed-won or closed-lost outcome.

Hedge fund capital raising does not look like that.

One manager runs several strategies. A flagship discretionary book, a systematic overlay, a managed account programme, a UCITS version of the same thing for European investors and a 40 Act focussed on the US market. One investor evaluates several managers, sometimes across several strategies inside the same manager. A family office may take the systematic strategy via the Cayman fund and decline the managed account, while remaining in conversation about the UCITS for years. The interesting record is the intersection of investor, manager, and strategy, not any of the individual entities.

Standard CRMs force you to either flatten the data, which loses the interactions you actually need to see, or build complicated workarounds that nobody maintains.

I have tried HubSpot and a couple of relationship-management products built for venture. None of them did what I needed, so I built it in Notion. Linked databases for Managers, Strategies, Investors, Contacts, Pipeline, Call Recordings. Each one is a many-to-many to the others where the relationship calls for it. A meeting record can be tagged to the manager, the strategy under discussion, the investor entity, the specific people in the room, and the follow-up tasks generated by the call. When I ask the model what the state of play is on a given relationship, it walks through all the databases and assembles the picture in plain English in fifteen seconds.

The key here is the structure and not the specific software used. Once the data shape matches the actual interaction shape of the business, AI can read across it. The interface to the CRM stops being clicking through views, and starts being a conversation. I have not opened my CRM UI in months. The records are still there but I stopped touching them directly.

The interface question matters. The IR person in my opening had a CRM. I have seen it. The records went in but the intel never came out. The records existed in the technical sense and were operationally useless. Wrong structure. Fix the data shape and AI reads across without help.

For an emerging manager, this is the part of the setup that requires the most thinking up front and pays back the most over time. Whatever platform you choose, the architecture matters more than the brand on it.

My own stack

The tools below are mine. They show how the operating model works but the principle is what matters. Replace any of them with an equivalent if it fits your stack better. If you want the picture without the prose, the diagram below ties them together. Skip to it and read on if anything looks unfamiliar.

Claude, the writing and reasoning model. Paid plan (Max), always. For an operation that depends on the same context being loaded on every conversation, the paid tier is non-negotiable. The reason I sit on Claude rather than ChatGPT is specific: the longer context window handles the sixty-page voice document and a full meeting transcript without truncation. Projects are cleaner than Custom GPTs for ongoing work. One Project per brand or per workstream. Each one gets its own voice instructions and its own working context.

Perplexity, research with citations. Where any research task starts. Perplexity gives cited sources in real time. It does not invent statistics the way most LLMs do. For a new regulatory framework or a sector you’re starting to position into, this is the entry point. The unexpected secondary use case is as a structured learning coach. Tell it what you are trying to learn and how much time you have, then ask it to build a sequenced plan you keep open week after week. The curriculum flexes around your week.

NotebookLM, research consolidation. Free tier is fine. Two real uses. Multi-source synthesis: drop a stack of macro reports and your own internal note into a notebook, ask for synthesis and points of disagreement. Output uses only the documents you provided, no web noise. Podcast preparation: drop every previous episode of the host’s show into a notebook and ask the model to analyse the host’s style and the angles they push their guests on, then predict the questions you will be asked. Most hosts will not give you a brief. This gives you one anyway.

Fathom, meeting capture, and why the transcript matters more than the summary. Every meeting that can be recorded gets recorded, with explicit consent (GDPR rules). The transcripts go into a Notion database. Most users rely on the auto-generated summaries and the bullet-point action items. The summaries serve a purpose. The real value is in the full transcript, the unfiltered version. What the investor said when they thought they were making small talk. The words they reached for. The questions they asked, and the ones they pointedly did not ask. The hesitations and pauses you can read against later. Over a year, you accumulate a corpus of every conversation you have had with every allocator in your universe. When the model is pointed at that data and asked what your investors have actually been asking about in the last six months, the output is specific.

This is what the IR person in my opening had access to, and threw away. A full transcript would have told her which partner asked the harder questions and which words the family office used when they described their gap. None of that came back to me. It was all there in the audio, and the AI was pointed at the wrong job.

Wispr Flow, voice to text everywhere. Cheap. Saves more hours per week than anything else on the list. For most managers, the bottleneck on writing anything is staring at the blank page. Wispr Flow removes the staring. You talk, it transcribes into whatever application you are in. First drafts of investor letters, Notion notes, social posts, internal memos. Editing in text is the easier problem. The bottleneck shifts from “what do I write” to “what do I cut,” which is a problem you already know how to solve.

Notion, the system of record. Paid plan. The base of everything. Every document, every transcript, every research note, every contact, every task, every content draft sits in one workspace. The reason this matters: AI is only as good as the context you give it. If your information is scattered across email, Drive, the laptop or desktop, the phone notes app, and a colleague’s head, the model cannot see your world and cannot help you. The CRM structure lives here. Without it, the rest of the stack has nothing to point at.

Microsoft 365, and the bank problem. I still run Outlook, Teams, OneDrive, the whole Microsoft 365 stack, because banking trained me on it and most of my institutional clients sit there too. It is also the worst major productivity ecosystem for connecting to anything outside its own walls. If you are setting up your stack from scratch, and your investor base is not insisting on Microsoft, choose Google Workspace. The third-party connectivity is materially better, and friction is lower across almost every dimension that matters for this work. If you are stuck with M365 for the same reasons I am, the path through is MCPs, the model context protocol connectors that let Claude and other models read directly from Outlook calendar, email, Teams chats, and SharePoint. There are now several that work with M365. Once they are configured, you ask the model what is in your calendar tomorrow and it tells you. You ask what came in from a specific investor in the last week and it pulls the thread.

Bridge layer. Make, Zapier, Power Automate, n8n. Once your model and second brain are connected, and meeting capture is running, you start hitting the limit of what they can do alone. Meeting transcripts need to live in a meetings database, and follow-up actions in a Task Tracker. New contacts who emailed you should end up in the contact database without you copying them across. Automations make all of this happen. Each automation is small but cumulatively they remove hours per week of manual coordination.

Every tool on this list earns its place by capturing context for the system or producing output. The bridge layer’s job is moving information between the two. Nothing is on the list because it is fashionable. If a tool you are already paying for does the same job, use that one. The tools are interchangeable. The architecture is not.

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Your voice is the moat

The IR person in my opening sent me an AI-generated summary. That summary stripped out everything specific about the meeting. It read like a hedge fund that wanted to sound like a hedge fund. The default voice of the major LLM models is articulate, smooth, vaguely American, faintly corporate, and completely interchangeable. The training data is mostly the public internet which skews male, tech-heavy, American, corporate, and self-congratulatory. The default voice is not your voice. If you do not override it, you publish someone else’s voice under your name. In Issue 4 I called this the sameness problem, and made the case that allocators recognise it within two paragraphs.

If you raise capital, and you write to investors, your voice is one of the few things you own that competitors cannot replicate. Performance can be matched, but the way you sound cannot.

The fix is voice training, done progressively. You build it once and the system carries it forward.

The starter version is a five-line voice prompt at the top of any fresh conversation. Who you are. Who you write for. What you never say. What you always say. One example sentence of your actual voice. Sixty seconds to write. The output shifts immediately. Write yours and paste it into your next conversation with the model. That single change is worth more than every productivity tool you have subscribed to and abandoned this year.

The permanent version uploads that context document as the instructions of a Project in Claude or as Custom Instructions on a Custom GPT in ChatGPT. Once it is loaded, every conversation inside that workspace starts with it. You stop thinking about voice. The model defaults to yours.

This is the work nobody wants to do. It takes a Saturday morning to build the first proper context file. After that, it pays back every time you write anything, and it shows up in every investor letter you send. The managers who skip this step keep wondering why their AI-assisted communications feel hollow. The voice in them is not theirs.

What AI is bad at, and the rule that survives every workflow

AI is not good at everything. Several of the things it is bad at are dangerous for a regulated business.

It confidently hallucinates numbers. Ask for an industry statistic and you will get something plausible and invented. Always ask for the source. If the source cannot be produced, treat the number as unverified. If the model gives you a quote, search for the quote before using it. Misattribution in a published letter is the kind of mistake that ends an allocator relationship.

Recency is another weakness. Most consumer models have a knowledge cutoff that puts them weeks or months behind today. They do not know who launched a fund last Tuesday. Use Perplexity or a model with real-time search for anything time-sensitive.

Context you haven’t given it is invisible. If your strategy has a nuance that does not appear in the prompt or the context file, the model assumes the generic version, which is usually wrong.

The thing that should worry you most as a regulated business: AI has no concept of compliance. It will cheerfully draft a marketing one-pager that breaches AIFMD or the SEC marketing rule. It does not know your jurisdiction. It does not know what your COO would let you say in writing. You have to know.

One rule survives every workflow described in this issue.

AI-assisted is not AI-responsible.

Your name is on the investor letter, your firm is on the marketing material, so you own the output.

What you do next

The next issue goes into the daily mechanics. How a single window replaces clicking through six tools. What the morning briefing actually looks like. The meeting-to-action loop. The content repurposing pipeline. How the Notion CRM gets queried in plain English. Read this one first. Those mechanics only matter once you have decided the gap is real.

Hit reply and tell me which of the eight diagnostic questions you could not answer. I read every reply.

Cláudia

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. Twenty-five years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

A manager told me last week he had three years of track record.

We spent the next fifteen minutes working out what he actually meant.

Some of it was a backtest. The rest split between a small live book from his last six months at his previous firm and personal capital traded on a brokerage account after he left. Three years, technically. Three quite different things in practice, and each one tells an allocator something completely different about whether you can make money in live markets.

The word “track record” gets thrown around as if it means one thing. It doesn’t. There’s a hierarchy of credibility, and where you sit on that hierarchy decides who will take your meeting and how seriously they’ll take it.

Most emerging managers overestimate where they sit.

The hierarchy

There are five levels. You probably sit on a lower one than you think.

Level 1: Simulated performance

Backtests and paper portfolios. Hypothetical returns generated by running your model over historical data.

They show an allocator you’ve done some research but they’re useless in showing if you can actually make money when capital is at risk. In 25 years of this work, I have never seen a bad backtest. Every one shows good returns and a Sharpe that looks investable. That’s the point of a backtest. You adjust parameters until it looks the way you need it to.

Allocators know this. An in-sample Sharpe of 2.0 almost certainly contains overfitting. Slippage and market impact at real scale will erode the result before live capital even hits the strategy.

If simulated performance is all you have, you are at the back of a very long queue.

Level 2: Prior employer performance

You ran a book at a previous firm. The returns are real, generated in live markets with real capital. That carries more weight than a backtest, but it comes with questions you’d better know the answer to before an allocator asks.

Attribution first. At your previous firm, what was you and what was the platform? If you were trading macro at a multi-strategy shop, you had a research team, a risk function, prime brokerage relationships and liquidity you will not have as a standalone manager. The returns came out of a machine. The allocator wants to know which part was the machine and which part was you.

Portability comes next. In some jurisdictions and under some employment contracts, you cannot legally claim your prior record. Some firms will actively block you from using it. Even when you can reference it, you may not be allowed to put it in writing. Verbally is one thing. Audited numbers on a fact sheet is another.

I’ve seen managers try to thread this needle by walking into a meeting with a printed sheet they refuse to leave behind. The problem is the phone in the allocator’s hand. A photograph on an iPhone is a record. If your previous firm finds out, you have a legal problem, and it will be your problem, not the allocator’s. Be very careful with this.

Then relevance. Trade a different strategy at a different scale, and the predictive value of the record drops. The allocator will think about this whether you do or not.

Level 3: Personal capital

You’ve been trading your own money. This matters more than most managers realise because it removes the other-people’s-money problem. When it’s your own capital, the psychology changes and the risk management changes with it. Allocators know skin in the game produces different decisions.

But personal capital raises its own questions. Where is the money held, and can the statements be independently verified or is the record self-reported? Scale matters as much: $100,000 of your own money is a very different proposition from $25 million of institutional. A strategy that works at one may not work at the other.

Two-year personal track records are real. They’re live. If you’re telling allocators it scales to $200 million, you’d better have a convincing explanation. The default assumption is that it doesn’t.

Level 4: Verified performance on a regulated platform

This is the level most managers don’t think to consider, and it’s where a meaningful number of allocators now look for evidence.

If you’ve traded a strategy on a regulated signal-aggregation or copy-trading platform, your returns are time-stamped and independently verified. The platform itself becomes the audit trail. You can show an allocator a record that wasn’t produced in your bedroom on a spreadsheet, without needing to incorporate a fund vehicle to get there.

It isn’t a fund. Nobody is going to pretend it is. For the right strategy types, particularly liquid systematic and CTA-style books, it’s a step up from personal capital. Especially when the platform itself is recognised and has institutional capital flowing through it.

Some of the most credible early-stage track records I see now come through this route.

Level 5: Audited fund performance

At the top is your strategy running in a regulated structure. An independent administrator calculates NAV and an auditor signs off on the numbers. Allocators look at the returns and know they didn’t come out of two guys and a dog in a garage.

This is the gold standard. It is also where the most embarrassing failures happen, because the gold standard only counts if you can show it. An audit you can’t produce doesn’t exist. I’ve watched investors run manager data through their own diligence and find that the audited numbers and the marketing numbers don’t line up.

It happens at the managed-account and platform level too. A manager reports an aggregated track record across an industry index or a multi-account programme, and an investor who actually had capital in it for six to twelve months tells me the return they personally received doesn’t match the published one. The published number can be technically accurate while the return any given investor saw was completely different.

If you have an audited record, be ready to produce it. If you reference an index or composite, be ready for someone who was actually in it to compare notes.

If you can stand behind your numbers without flinching, your conversations with allocators start from a fundamentally different place.

Where do you actually sit?

Be honest with yourself. The allocator will be.

If you’re on level 1, your priority is getting to level 3 or 4 as fast as you reasonably can. Backtests buy you research conversations, not allocations.

On level 2, document and verify what you have. Pull your trade logs and get the firm’s permission in writing if you can. Build a clean attribution narrative before you walk into a meeting where someone will pick it apart.

If you’re on level 3, get third-party verification. Independently confirmed statements or a live book on a platform that produces an audit trail. Anything that takes “trust me” off the table.

Level 4, read the room. Some allocators take platform performance very seriously. Some won’t engage until you have a fund. Know who you’re talking to before you assume your record will land.

And on level 5, everything around the track record becomes the actual question. Which is most of what this publication is about.

What track record alone doesn’t get you

If you read Issue #2, you’ll remember the four legs of the allocation decision: performance, business acumen, transparency and communication. Performance is one leg, not the table. The most generous estimate I’ve seen puts it at around 20% of an institutional allocator’s decision.

This is the part most emerging managers don’t internalise until they’ve lost a few mandates they thought were theirs.

While you’re building your performance record, build the following alongside it. Most managers leave them until later and pay for it.

Operational separation. Allocators run operational due diligence even at small scale. They want to see your compliance and administration handled by people who are not you. The investment function and the operational function cannot be the same human being. Outsourced administrators and compliance consultants are the standard answer at this stage.

Institutional-grade documentation. A thoughtfully completed DDQ and a written risk framework that lives outside your head. The offering memorandum follows when you’re ready to launch. These documents take longer than you think. If you wait until an allocator asks before you start writing, you’ve already lost momentum. The gap between “great meeting, send the DDQ” and the DDQ landing in their inbox should be hours.

References. Build the list before anyone asks for it. People who can vouch for your previous work and your performance. Former colleagues who watched you run risk. Allocators or investors from earlier in your career who can confirm what you returned to them and over what period. Allocators do call references, and they don’t only call the ones you give them. The people you do put forward should know you well enough to speak to specifics, and should know what you would want them to say.

Communication discipline. Before you have a single investor, start writing monthly. Track your performance and produce a fact sheet or letter every month as if 50 investors were reading it. This builds the muscle so that on day one of having real investors, your communication is already polished. It also creates a written record of how you think over time, which allocators will ask to see.

The story. Why are you doing this. What do you actually believe about markets that made you start a fund. Allocators ask. They can tell the difference between someone who’s thought about it and someone who’s improvising in the room. Get the answer clear in your own head first.

A CRM sits underneath all of this. If you don’t have one tracking every investor conversation and every follow-up, your pipeline is leaking already. Use whatever you want. Free tiers exist. There is no defensible reason to be running a capital raise out of a spreadsheet.

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Where this leaves you

Track record gets you in the conversation. It doesn’t close it. The allocator looking at your numbers is simultaneously looking at the operational stack around them, the documents, the communication discipline, the person sitting across the table.

If your track record is early-stage, that’s fine. Most managers start somewhere. What matters is knowing where you sit on the credibility hierarchy, and what you’ve built around it to make up for its limitations.

So, one question. What are you building right now, today, that an allocator will care about in twelve months and that isn’t your P&L?

If you can answer that in one sentence, you’re further ahead than most.

If you can’t, the track record won’t matter anyway.

Next issue I’m going to take you inside how I’m actually using AI across this work. Manager screening, DDQ prep, investor research, content production. The bits that have changed in the last twelve months are the bits nobody is talking about. Worth being on the list for.

Cláudia

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. 25 years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

I had a conversation recently with a manager who’s been raising for about a year. Discretionary macro. Solid pedigree. He’d left a well-known firm, set up his own shop, built out the infrastructure properly, and started taking meetings.

He was frustrated. The meetings were going fine, he said. People were polite. They asked good questions. But nothing was converting. He couldn’t figure out what was wrong.

I asked him to describe his strategy in two sentences.

He said: “We run a diversified macro strategy with a focus on generating uncorrelated, risk-adjusted returns across multiple asset classes using a systematic framework overlaid with discretionary judgement.”

I told him that sentence could have come from any of the last twelve managers I’d spoken to that month. Literally any of them. Change the name on the email and no one would notice.

He went quiet.

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The sameness problem in hedge fund marketing

Allocators meet somewhere between 200 and 600 managers a year, depending on the size of their team and how active they are. The vast majority of those meetings sound identical.

“Uncorrelated returns.” “Differentiated alpha.” “Robust risk management.” “Institutional-grade operations.”

These phrases have been repeated so many times that they no longer carry any information. When an allocator hears “uncorrelated returns” for the 40th time in a quarter, the words don’t register anymore.

And it’s not just the words. The pitch decks look the same. The fact sheets look the same. The way managers sit down and open with their background, then walk through the strategy page by page, then show the performance chart, then ask for questions. The choreography is identical across hundreds of meetings.

I was talking to an allocator about this. He told me something that stuck. He said that when he meets a manager who genuinely thinks differently, he can feel it within the first three minutes. Not because of what they say about their strategy. Because of how they talk about the world. How they frame problems. What questions they ask him. The energy in the room shifts.

And then he said: that happens maybe five times a year out of three hundred meetings.

Five.

What differentiation is not

Claiming differentiation is not differentiation. The claim cancels itself. If you have to state it, the evidence isn’t doing the job.

Performance alone is not differentiation either. If you’re running a macro book and you delivered 12% last year with a 1.5 Sharpe, that’s good. It’s also what six other managers on the allocator’s watchlist delivered. The numbers might get you on the list. They won’t get you off the list and into the portfolio. An allocator who’s comparing five managers with similar risk-adjusted returns isn’t choosing based on who has the marginally better Sharpe.

Asset class is not differentiation. “We trade FX” is not a differentiator. “We’re a macro fund” is not a differentiator. “We’re systematic” is not a differentiator. These are categories. They tell an allocator which bucket to put you in, but they say nothing about why you belong in the portfolio instead of the eleven other managers already sitting there.

Process clarity is the first thing allocators notice

From where I sit, the managers who stand out share a few things, and most of them have nothing to do with the strategy itself.

The biggest one is process clarity. The ability to walk someone through exactly how you generate an idea, size a position, manage the risk, and decide when to exit, in a way that is specific enough to be falsifiable.

I spoke to an allocator at a large multi-manager who had been doing due diligence on a particular macro fund for over a year. I asked him what convinced him. He said it was the process. Every manager tells you they have a process, he said. But when you push on it, most of them are improvising. You ask a specific question about how they handled a particular regime and you can see them constructing the answer in real time. That’s not a process. It’s a story about a process.

This manager was different. The allocator could ask any question, drill into any part of the framework, and the answer was immediate, consistent, and matched what the daily P&L showed. No gap between what they said and what they did.

That kind of differentiation doesn’t come from a slide. It’s a usually a product of having actually built something rigorous enough to withstand scrutiny.

The counterintuitive power of naming your weaknesses

This sounds like the last thing you’d do in a sales meeting. You want to impress. You want the allocation. Talking about what you’re bad at feels like handing someone a reason to say no.

Except the allocator already knows you’re bad at something. Everyone is. If you don’t bring it up, they’ll assume either you don’t know (which is worse) or you’re hiding it (which is worse still). The managers who name their weaknesses before being asked, and explain what they’re doing about them, immediately separate themselves from the 95% who present a polished, gap-free version of reality that no experienced allocator believes.

One manager I work with told a prospective investor in their first meeting: “Look, we’re a four-person team. If I die tomorrow, that’s a genuine risk for your capital. This is exactly what happens in that scenario, and this is what we’ve built to mitigate it.” The investor told me afterwards that in fifteen years of taking manager meetings, he had never heard someone volunteer key-person risk as the opening topic. He remembered that meeting and that manager.

Communication between meetings still separates you

I wrote about this in the last issue, and it bears repeating in the context of differentiation. Most managers’ communication with prospective investors is identical: a monthly fact sheet, maybe a quarterly letter, maybe an occasional email when performance is good.

What if your communication actually showed how you think? Not your returns, your thinking. A short note after a major market event explaining what you did and why. An observation about a risk you’re watching that most people aren’t talking about. Something that makes the allocator feel like they’re getting a window into your mind, not a marketing document.

That’s rare. And rare is what stands out when someone is sorting through three hundred meetings a year.

The identity question most managers avoid

There’s a deeper issue underneath all of this. Differentiation isn’t a marketing exercise but an identity question.

Who are you as a manager? Not what strategy do you trade. Who are you? What do you believe about markets that most people in your space don’t? What have you built that reflects how you actually think, not how you think allocators want you to think? What would you do differently if you didn’t have to worry about fitting into a category on someone’s spreadsheet?

The managers who struggle most with differentiation are the ones who built their pitch by studying what other managers do and copying the format. They looked at successful fund launches, reverse-engineered the marketing materials, and produced something that checks every box. The result is technically correct and completely forgettable.

The managers who stand out built outward from something real. A conviction about a market inefficiency. A way of managing risk that came from getting burned. A communication style that reflects who they actually are, not who they think an institutional investor wants to meet.

You can’t fake that. You can optimise your deck, refine your talking points, rehearse your pitch. You should do all of those things. But if the underlying substance is interchangeable with twelve other managers, no amount of polish will save you.

An allocator I respect once put it this way: “I’m not looking for the best version of the same thing. I’m looking for something I haven’t seen before. I’ll forgive rough edges if the thinking is original.”

So the question isn’t how do I make my marketing materials stand out, but rather: what do I actually believe, and am I willing to say it out loud in a room where the safe move is to sound like everyone else?

Most people choose safe. The ones who don’t are the ones I remember.

If you’re about to take an allocator meeting and this piece made you reconsider something in your pitch, hit reply. I’d genuinely like to hear what you’re rethinking.

Cláudia

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Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. 25 years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

I want to tell you about two meetings.

Same week. Same type of strategy. Both managers had respectable track records, clean infrastructure, reasonable AUM targets. On paper, roughly interchangeable.

The first manager walked in, opened his deck to slide one, and talked. He talked about his background (impressive). He talked about the strategy (interesting). He talked about his edge (plausible). He talked about risk management (thorough). He talked about capacity, fee structure, fund domicile, and the regulatory environment in his jurisdiction.

Forty-five minutes later, he stopped. Asked if there were any questions. The investor asked one polite question about liquidity terms. The manager answered it in detail. They shook hands. The manager walked out and sent me a message: “That went really well.”

The investor never responded to a follow-up.

The second manager opened differently. She said: “Before I get into anything, I’d love to understand what brought you to this meeting. What are you looking for right now, and what would make this a good use of your time?”

The investor talked for seventeen minutes. In those seventeen minutes, the manager learned that the fund was overweight equity long-short and actively looking for liquid diversifiers. That they’d been burned by a CTA that had great backtests and lousy live performance. That their investment committee had recently pushed back on a macro allocation because the manager couldn’t explain their process clearly enough for non-specialists.

The second manager then tailored everything she said to those three concerns. She spent 20 minutes, not 45. She showed three slides, not thirty. She asked questions throughout. She ended by asking about the investor’s process and what they’d need to take a next step.

She got the second meeting. Then the third. Then the allocation.

Same week. Same type of strategy. Completely different outcome.

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The monologue problem

I’ve been watching managers blow investor meetings for 25 years. The pattern is so consistent that I can usually predict the outcome within the first five minutes.

The manager sits down. The adrenaline kicks in. They’ve prepared hard for this. They know their strategy inside out. They’ve rehearsed the pitch. And they start talking.

They don’t stop.

Somewhere around the 20-minute mark, the investor’s eyes glaze over slightly. The manager doesn’t notice because they’re looking at their slides. By minute 35, the investor has mentally moved on to their next meeting. By minute 45, they’re being polite. When the manager finally asks “any questions?”, the investor asks something safe and non-committal because they’ve already decided this isn’t going anywhere.

The manager walks out believing the meeting went well because they said everything they wanted to say.

They said everything. They learned nothing.

This is the single most common meeting mistake I see. It’s not that they have the wrong materials or the wrong strategy or the wrong track record. The issue is they treated an investor meeting as a presentation when it should be a conversation.

The 30/70 rule

If you’re the manager in the room, you should be speaking no more than 30% of the time. I can almost guarantee you that if you aim for 30/70 you’ll end up at 40/60.

I can feel some of you recoiling at that. You’re thinking: I’m the one pitching. I’m the one with something to sell. If I don’t explain my strategy, how will they understand it?

They won’t understand it from a 45-minute monologue either. What they’ll understand is that you’re someone who talks at people rather than with them. And if that’s how you behave in a first meeting, that’s how you’ll behave when their money is in your fund and they need answers during a drawdown.

The 30/70 rule works because it forces you to do the thing that actually wins allocations: learn what the person across the table cares about, then speak directly to that.

Every investor has different priorities. Some are filling a specific portfolio gap. Some are under pressure from their investment committee to diversify. Some had a bad experience with a similar strategy and have very specific concerns they need addressed. Some are looking at 15 managers this quarter and will remember exactly one of them.

If you talk for an hour, you’ll never find out which of these applies. You’ll deliver the same generic pitch you delivered last week. The investor will receive the same generic experience they received from the manager before you.

If you listen first, you can tailor. Tailoring is the entire game.

What to do before you open your mouth

Let me be specific about this, because “ask questions” is the kind of advice that sounds obvious and is almost never implemented.

Before the meeting, prepare. Prepare your materials, but also prepare for the human on the other side. Research the person. Research the firm. Look at their recent allocations if the information is public. Check if they’ve spoken at conferences. Read anything they’ve published. With the tools available today, this should take you 15 minutes, not an hour.

When you sit down, start with their agenda, not yours. Ask them: what brought you to this meeting? What are you looking for in your portfolio right now? How much time do you have? What would make this a useful conversation for you?

Those four questions change the entire dynamic. You’ve signalled that you respect their time. You’ve shown that you’re interested in their problems, not just your product. And you’ve collected intelligence that allows you to skip the 60% of your pitch that’s irrelevant to this specific person.

During the meeting, watch the face. This sounds basic. It’s not. If you’re presenting slides and the investor’s expression hasn’t changed in 10 minutes, you’ve lost them. If they lean forward when you mention a specific aspect of your risk management, that’s where you go deeper. If they frown when you describe your capacity, that’s where you stop and ask what’s on their mind.

I see managers who go to meetings alone when they should go in pairs. One person presents, the other person reads the room and they take turns. The reader watches the investor’s body language, notes when attention drops, notices which topics generate energy. After the meeting, the two debrief. This is the kind of thing that sounds excessive and is actually the difference between converting at 1% and converting at 3%.

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The feedback loop nobody builds

Here’s what separates the managers who raise capital from the ones who don’t: the managers who raise capital treat every meeting as data.

After each meeting, they log what happened. What questions came up. Where the investor’s energy was. What parts of the pitch landed and what parts fell flat. They do this in a CRM, not in their head. They review it before the follow-up.

After 10 meetings, patterns emerge. The same question keeps coming up. The same section of the presentation causes confusion. The same concern appears across different investor types.

A manager who spots these patterns and adjusts is a manager who gets measurably better with every meeting. After 50 meetings, they’re a completely different presenter than they were at meeting one.

A manager who doesn’t track this makes the same mistakes for six months and then tells me that fundraising is harder than they expected. It’s not harder than expected. It’s a numbers game with a learning curve, and they refused to measure either.

I had one manager, a year ago, who finally started recording every investor meeting with permission. After each meeting, he reviewed the recording and measured how much time he spent talking versus listening. First month: he was at 80/20. Eighty percent talking. By month three, he’d flipped it to 40/60. By month six, his conversion rate doubled.

He didn’t change his strategy, his track record, or his fee structure, just how he listened to investors.

The five questions you should always ask

I’m not going to give you a script, because scripted questions sound scripted and investors can tell. But there are five pieces of information you need to walk out of every first meeting with, and if you don’t have them, the meeting was wasted.

1. What is this investor’s process? How do they make allocation decisions? Is there an investment committee? How many stages? What’s the typical timeline from first meeting to allocation? If you don’t know this, you can’t follow up intelligently.

2. What type of managers are already in their portfolio? If they have six equity long-short managers and zero macro exposure, your macro fund fills a gap. If they already have three macro managers, you’re competing for a replacement slot, which is a very different conversation.

3. What recent allocations have they made, and why? This tells you what they’re actually doing, not what they say they’re looking for. Those are often different things.

4. What would they need from you to take a next step? Specific performance data? A DDQ? A call with your risk officer? An in-person visit? If you don’t ask this, you’ll guess. You’ll guess wrong. You’ll send 40 pages of materials they didn’t ask for and miss the one document they actually needed.

5. What concerns do they have about your strategy or space? This is the hardest question to ask because you’re inviting criticism. Ask it anyway. Better to hear their objections in the room where you can address them than to have those objections whispered in an investment committee meeting where you’re not present.

The real objective

The objective of the first meeting is to get to the second meeting.

I’ll say that again because it needs to land.

The objective of the first meeting is to get to the second meeting. It is not to get a cheque.

If you walk into a first meeting thinking you need to close, you will oversell, over-present, and under-listen. You will try to squeeze your entire story into 45 minutes because you think this is your one shot.

It’s not your one shot. It’s the opening of a relationship that might take 9 to 18 months to produce an allocation. A typical allocator meets somewhere between 50 and 100 managers to make a single new investment. Your job in meeting one is to be interesting enough, and human enough, that they want meeting two.

You earn meeting two by making meeting one about them. By showing that you’ve done your homework. By listening more than you speak. By asking the questions that most managers are too nervous or too self-absorbed to ask.

The presentation can come later. The pitch deck can come later. The detailed attribution analysis can come later.

First, be someone worth talking to.

Cláudia

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. 25 years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

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A few weeks ago I was on the phone with a macro manager. Good track record. Solid Sharpe. Two years of live returns on personal capital, clean and verifiable. He wanted to know why nobody was writing cheques.

I asked him to walk me through his last investor meeting.

He talked for 55 minutes. The investor asked two questions. He left feeling confident. The investor never called back.

This happens constantly. And the manager’s diagnosis is almost always the same: the performance wasn’t strong enough. If only the numbers were better, the money would come.

It won’t.

If you want to understand what allocators look for in emerging hedge fund managers, start here: performance is necessary, but it is almost never the thing that gets you the allocation.

Matthias Knab of Opalesque, who has spent years studying how funds actually raise capital, puts a number on it: roughly 20% of why an investor chooses a fund comes down to raw performance. The other 80% is everything else. Confidence in the manager. Trust in the systems. Belief that the business will survive long enough to compound.

That number will irritate some of you. Good. Sit with it.

And here’s the part that most managers don’t consider: even when performance alone does attract capital, it attracts the wrong kind. Investors who allocate purely on returns are the first to redeem the moment the numbers dip. They came for the Sharpe ratio. They have no loyalty to the business, the process, or the person running it. When a rough quarter hits, and it will, they’re already looking at someone else’s tear sheet.

Performance-only capital is hot money. It leaves at the worst possible time, and it takes your AUM and your confidence with it.

The managers who build durable businesses raise from investors who believe in more than the numbers. They raise from people who understand the strategy, trust the operator, and have conviction that the business will survive a flat year. That’s sticky capital. That’s the capital that compounds.

If you’re an emerging manager preparing for capital raising and you’re spending 95% of your time on your investment process and 5% on everything else, you’ve got the ratio inverted.

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What allocators actually assess: the four-legged table

I think about this as a table with four legs. Remove any one of them and the thing tips over. An allocator is assessing all four, whether they tell you that explicitly or not.

These four legs are not equal in weight. Performance accounts for roughly a fifth of the decision. The other three carry the remaining weight between them, in proportions that shift depending on the allocator, the strategy, and the stage of the fund. But all four need to be present. A table with three strong legs and one missing still falls over.

The first leg is performance. Returns, risk-adjusted metrics, drawdown behaviour, how you performed in different regimes, what capacity looks like at various AUM levels. You need this. But this is the leg most managers over-prepare. They show up with 40 slides of attribution analysis and a Sharpe calculated to the second decimal. If this is all you have, you’re sitting on a pogo stick, not a table.

The second leg is business acumen. This one catches people off guard. Allocators want to know: can you run a company? Do you have a hedge fund business plan with real milestones, not just an AUM target scribbled on the back of a napkin? Have you thought about breakeven?

And here’s the part that trips up almost every emerging manager I work with: can you define your breakeven using management fees alone, without assuming any performance fees?

Investors will ask this question. If you haven’t done the maths, they’ll know. And what they’ll conclude is not that you’re bad at spreadsheets. They’ll conclude you haven’t thought seriously about whether this business survives a flat year. A flat year will come. What happens then?

I had a conversation recently with a manager who’s in the process of moving his operation to Switzerland. Four employees. He didn’t just talk about the investment case for relocating. He talked about salary adjustments for cost of living, the legal costs of redomiciling, the regulatory implications, the timeline, and who on his team would manage the transition so he could stay focused on the book. That is business acumen. That is what makes an allocator lean forward.

The third leg is transparency. And I don’t mean the corporate version where you publish a monthly fact sheet with some numbers on it. I mean radical, uncomfortable honesty about what works and what doesn’t.

I know a macro manager who, during his due diligence process with a large multi-manager, showed them everything. The code. The models. The daily P&L. When they asked hard questions, he answered without flinching. He told them what wasn’t working yet and what he planned to improve. Their feedback afterwards was striking: they said they rarely meet someone who isn’t trying to bamboozle them.

That word. Bamboozle. It stayed with me.

Most managers are trying to impress. Polishing every surface. Allocators can feel it. They sit through hundreds of these meetings a year. They have a finely tuned sense for when someone is performing versus when someone is being straight.

The managers who raise capital fastest are the ones who tell investors where they’re weak. They explain what conditions will kill their strategy. They walk through losing trades with the same detail they use for winners. They don’t hide the operational gaps. They name them and explain what they’re doing about it.

The fourth leg is communication. This is different from transparency. Transparency is about what you disclose. Communication is about whether the person across from you actually walks away understanding what you needed them to understand.

This is the leg I see fail most often. By a significant margin.

Why hedge fund investor meetings fail

Most managers prepare for investor meetings by thinking about what they need to say. The 40-slide deck. The attribution analysis. The risk framework explanation. They rehearse the content.

Wrong objective.

Your job in that meeting is not to say what you need to say. Your job is to make sure the person across the table can walk out of that room and properly represent you to their investment committee. They need to be able to make a case for you. If they can’t explain your edge in simple language to their colleagues, you’ve failed. The strategy isn’t too complex. Your communication didn’t give them what they needed.

This is not about you. It is about the person sitting across from you. You need to equip them. Give them the ammunition.

Can you articulate your edge in a way that a non-specialist on an investment committee can understand? Can you explain your risk management framework in three minutes, not thirty? Can you write a monthly letter that someone actually reads on their phone at 7am, rather than filing it in a folder they’ll never open?

Think about the sheer volume. An allocator might receive thousands of fact sheets a year. Yours arrives in a group inbox alongside hundreds of others. The subject line is “Monthly Performance Update, February 2026.” So is everyone else’s.

One investor told me recently about a manager who sends a daily “thought of the day” email. Nothing about performance. Just a short observation on markets or macro or risk. He said he reads it every single morning. That manager is top-of-mind in a way that a quarterly fact sheet will never achieve.

You don’t need to send daily emails. But you need to think about communication as a strategic function, not an administrative task. If you’re treating your investor updates as compliance paperwork, you’re wasting the most powerful marketing channel you have.

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Where emerging managers get the balance wrong

What I see most often: one very strong leg, one acceptable leg, and two that are barely there.

The strong leg is almost always the investment process. They’ve thought deeply about markets, signals, risk management, position sizing. Of course they have. That’s what they love. That’s why they started a fund.

The acceptable leg is usually transparency, but only because they haven’t yet had enough meetings to learn the difference between strategic transparency and defensive transparency. Defensive transparency is when someone asks about your drawdown and you explain it with a slight edge in your voice because you feel attacked. Strategic transparency is when you bring it up before they ask, walk through what you learned, and show how the process changed. Same information. Completely different signal.

The two weak legs are business acumen and communication. Of the two, communication is the one I see fail most frequently. It is the most underestimated skill in emerging manager fundraising.

An allocator who meets a manager with strong performance but no business plan thinks: this person will blow through their runway in 18 months and I’ll have wasted my due diligence time on a fund that no longer exists. An allocator who meets a manager who can’t articulate their edge in simple language thinks: if I can’t explain this to my investment committee, I can’t recommend it.

Both of those are rational conclusions. Neither has anything to do with your Sharpe ratio.

The question you should be asking

If you’re an emerging manager reading this, the useful exercise is not to assess which leg is strongest. You already know that. The useful exercise is to identify which leg is weakest and ask yourself what you’re doing about it.

If it’s business acumen: do you have a business plan that includes AUM-based milestones, a breakeven analysis on management fees alone, a hiring roadmap, and a clear answer to the question “what happens if you have a flat year”?

If it’s transparency: can you walk through your worst month with the same rigour and composure as your best month? Do you volunteer the difficult information, or do you wait to be asked?

If it’s communication: could the person across from you walk out of your last meeting and explain your strategy to their committee in two sentences? How much of the meeting did you spend talking versus listening? When was the last time you reviewed a recording of your own investor meeting and honestly assessed how you came across?

The maths of capital raising are brutal. If you need 50 to 100 meetings to secure one allocation, and the average process takes 9 to 18 months, you cannot afford to walk into those meetings with only one leg of the table built.

Performance gets you the meeting. Everything else gets you the cheque.

Which leg of your table is wobbliest right now? Hit reply and tell me. I read every response, and I’ll tell you what I’d work on first.

Cláudia

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Frequently asked questions

What do allocators look for beyond performance in emerging hedge fund managers?

Allocators assess four dimensions: investment performance, business acumen, transparency, and communication skills. Performance accounts for roughly 20% of the allocation decision. The remaining weight falls on whether the manager can run a business, communicate honestly about weaknesses, and articulate their edge clearly enough for an investment committee to evaluate.

Why is performance alone not enough to raise hedge fund capital?

Strong returns may secure an initial meeting, but allocators need confidence that the business will survive a flat year, that the manager can operate professionally, and that the strategy can be explained clearly to an investment committee. Investors who allocate purely on performance are also the first to redeem when numbers dip, making performance-only capital unreliable.

What is a hedge fund business plan and why do allocators require one?

A hedge fund business plan includes AUM-based milestones, a breakeven analysis calculated on management fees alone (excluding performance fees), a hiring roadmap, and a clear assessment of what happens during periods of underperformance. Allocators use it to assess whether the fund can survive long enough to compound returns.

How many investor meetings does it take to raise capital for a hedge fund?

Industry data suggests emerging managers typically require 50 to 100 qualified investor meetings to secure a single institutional allocation. The average process takes 9 to 18 months from first meeting to capital being wired.

What communication mistakes do emerging hedge fund managers make?

The most common mistake is treating investor meetings as a one-way presentation rather than equipping the person across the table to represent you internally. Managers who talk for an hour without reading the room, or who can’t explain their edge in simple language, make it impossible for allocators to build an internal case for the investment.

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. 25 years across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London.

Hi.

I’m Cláudia Quintela and this is the first issue of something I’ve been meaning to start for a long time.

A fortnightly newsletter about what it actually takes to start, raise for, and survive as an emerging hedge fund manager.

Not theory. Not textbook stuff. What I see, week after week, sitting across the table from managers who are building and investors who are allocating.

A bit about me: I’ve spent 25 years connecting early-stage hedge fund managers with institutional capital. I started on FX trading floors at State Street, then UBS, then Morgan Stanley, one of the few women in a room full of men. In 2014 I moved to Blenheim Capital, one of the world’s largest commodity funds. In 2017 I left Blenheim eight months pregnant and launched Vibe Advisors, an independent advisory boutique that helps emerging managers raise that first £50 to £200 million.

I work with the underdogs. Managers the big cap intro firms won’t touch because they’re too early, too small, or too niche. Systematic, CTA, macro, FX. The strategies that need careful positioning and a long investor courtship.

I’ve been saying for a while that I should write about what I do for a living. The problem is I like working more than I like writing about working. So I kept pushing it off.

This week changed that.

I did something uncomfortable

I sat down with Ethan Kho on the Odds On Open podcast and talked, properly, about everything I’ve learned watching hedge funds launch, stall, and sometimes fail.

It was nearly an hour of conversation. No script, no slides. Just 25 years of pattern recognition laid out in plain language.

So instead of writing a polished first issue, I thought I’d do something different: let the conversation be the issue.

What you’ll find in the episode

The $5 trillion paradox. Global hedge fund assets hit a record $5 trillion in late 2025. Sounds like a boom. But 86% of that capital is controlled by just 550 managers. If you’re an emerging manager, you’re not competing for a slice of $5 trillion. You’re fighting over what’s left.

The mistakes I see over and over again. From unclear strategy definition to coming to market too soon, from missing business plans to terrible meeting etiquette. I walk through the specific errors that trip up managers at the company formation stage and the marketing stage, with real examples.

The fears nobody talks about. Managers are terrified of things they’ll never admit in a pitch meeting. The credibility gap. The economics not working at sub-$50 million. The capacity lie, where you claim $1 billion scalability because you think that’s what allocators want to hear. The managed account cage, where you have access to capital but zero control. I go through all seven.

What allocators really care about. Survivability, luck versus skill, operational risk, key person risk, edge durability, capacity honesty, business viability, and integrity. I break down the specific diagnostic questions investors use and what they’re really listening for when you answer.

The 1-5% rule. A typical allocator meets 20 to 100 managers to make one allocation. Your conversion rate from first meeting to investment is in the low single digits. Most managers quit after 10 meetings because they didn’t understand the maths. I explain why this is a numbers game and what that means for your sales strategy.

The pass-through economics problem. How multi-strat pod shops push costs onto LPs, run effective management fees of 3 to 10% versus your 1 to 2%, and why this creates a structural advantage you can’t replicate. And what you can do instead.

Sections of the episode

[00:00] The $5 trillion headline and why it’s misleading for emerging managers

[05:00] The concentration crisis: 550 firms, 86% of capital

[15:00] Building a business versus managing a strategy: the CIO/COO split

[25:00] The 1-5% conversion rate and the brutal maths of fundraising

[37:00] Capacity lies, managed account cages, and the fears managers won’t admit

[47:00] The allocator’s lens: luck, skill, and the “bus test”

Why this newsletter exists

I sit in an unusual position. I’m not a manager. I’m not an allocator. I’m the person in between, the one who sees both sides of the table.

Managers tell me things they’d never say to an investor. Investors tell me things they’d never say to a manager’s face. I’ve watched hundreds of these conversations play out over two and a half decades.

Most of what I know lives in my head, in meeting notes, in patterns I’ve spotted across hundreds of launches. I want to get it out of my head and onto a page.

This newsletter will cover:

• Fundraising reality. What actually works when raising institutional capital at the earliest stage.

• Manager mistakes. The patterns I see repeatedly, from seed round to first $100 million.

• Investor psychology. What allocators really think, how they make decisions, and what makes them say no.

• Operations and infrastructure. The unsexy stuff that kills more funds than bad trades do.

• The business of hedge funds. Fee structures, breakeven economics, capacity analysis, team building.

I’ll write like I talk. Short. Direct. With real specifics from real situations, anonymised where needed.

No jargon for the sake of jargon. No pretending the industry is something it’s not.

🎧 Listen to the full episode here.

I’d love to hear what you think. Reply to this email, or leave a comment.

If this is useful to you, share it with someone who’s thinking about launching a fund. They’ll thank you for it.

Cláudia

Cláudia Quintela is the founder of Vibe Advisors, an independent advisory boutique helping emerging hedge fund managers raise institutional capital. She has 25 years of experience across State Street, UBS, Morgan Stanley, and Blenheim Capital. MSc Finance, LSE. CFA charterholder. Based in London, originally from Porto.