Successful emerging managers watch the dollars—and value admin support

Managing revenue and understanding the budget during a start-up is vital because every dollar you spend is money taken away from the business that could be spent better elsewhere, said the emerging managers panel at GAIM Ops Cayman, which is taking place this week.

Managers who had successful launches under their belt also informed delegates what they would do differently if they were launching again today.

One emerging manager said the reason he was staying at a more economical hotel, while visiting Cayman, wasn’t for the good fish tacos, but because you really have to understand your budget. If there is a shortfall you need to know about it.

“Our revenue situation is challenging and has not increased so we stay very lean,” another manager said. “We limit the number of counterparties we work with, even though the portfolio manager and traders want options to trade with, so we pick the ones we really want to use.”

Discussing the minimum level of assets under management required to get new funds to a sustainable level, the number of $100 million was suggested for a straightforward long/short fund with a small headcount.

For structured credit strategies which are more complex, the panel thought that $250 million to $300 million was more appropriate for sustainability.

The ability to leverage administration support can be a major help in a situation where headcount is low and you are likely to have people at the firm performing multiple functions.

When asked what was the first non-investment hire the managers would make, they were unanimous in pointing to a controller-type person who can do the day-to-day work and back up the chief financial officer (CFO), especially if you are looking to expand to offer managed accounts.

“I am the CFO and also the chief commercial officer,” one panellist commented, who said he uses a third party to advise on compliance issues.

“If you wear two hats, make sure you are ‘on it’ from a compliance perspective,” he added. “There are lots of good options from service providers for support.”