The tricky tasks of capital raising and investor relations at hedge funds are about to get easier with the upcoming launch of Edgefolio, a new platform that aims to do for the hedge fund industry what online professional network LinkedIn has done for recruitment.
Edgefolio is the brainchild of Leo Gasteen, a former trainee at Norwegian hedge fund Sector. While working with the firm’s IR department, he noticed the team was using ‘pretty unscalable techniques’ such as cold calling and unsolicited emails to keep in touch with existing investors and reach out to new ones.
‘Fundraising statistics show that to raise one investment of $10 mn, you would need to place about 150 phone calls to get the meeting [with the investor] that will actually end up [investing],’ Gasteen explains. ‘Our goal is to turn that on its head and allow hedge fund managers to make one sales pitch that could get 150 pairs of eyes on their product.’
Gasteen did extensive research on both European and US regulations before embarking on his new venture, and set his mind on creating a new tool he believes ‘will empower all stakeholders in the hedge fund industry.’ He describes his platform, which institutional investors can access for free, as ‘a one-stop shop where you can do your analysis, networking, marketing and screening for funds.’
With an entry-level subscription, fund managers are invited to create a profile for their company. They can then use this as a bespoke IR portal where they can manage relationships with current investors and allow them access to their documents and updates. An upgrade to ‘premium plus’ will add to their profile a tailor-made video pitch produced by the Edgefolio team. ‘We wanted fund manager profiles to have a certain level of quality that we can reproduce: no video selfies filmed from a mobile phone camera,’ Gasteen jokes.
‘These videos are truly valuable for both parties because, from a fund’s perspective, [they provide] the ability to make that sales pitch once and reach thousands. And from the asset allocator’s perspective, it’s a way to qualify whether this is someone worth meeting.’ Other benefits include cost-efficiency and carbon-friendliness if manager and allocator are based in different countries.
Conceived as ‘a web 2.0 network’, the start-up’s product differs from static fund databases, such as Eurekahedge’s or Morningstar’s, which are centrally managed and ‘read more like phonebooks. With Edgefolio, hedge fund managers can actually take control of what’s put out there,’ Gasteen highlights. ‘Data entry is just the first step, the beginning of a journey where they can interact, learn and share ideas.’
Edgefolio also positions itself as a much cheaper alternative to the other marketing tools currently available. As a comparative, Albourne Castle, the advisory service offered by alternative investment online community Albourne Village, charges standard fees ranging from $240,000 to $400,000. Gasteen believes his offering will attract smaller firms: the 40 percent of all hedge funds that are managing $25 mn or less. ‘These funds are struggling to break even and are desperate for capital,’ he explains. ‘We wanted to help them raise funds, while not pricing them out of the market, which is why our product will be offered with a ‘disruptive’, competitive subscription fee.’
Reminding us that the hedge fund world has historically been a largely offline industry, Gasteen adds: ‘We are bridging the information gap between allocators and fund managers. For the past two decades, the sector has been under this veil of obscurity, so we hope the byproduct of our project will be heightened transparency.’
