The crowded fundraising environment weighs heavily on managers who have recently created their own funds, even those with a proven track record.
In 2021, a banner year for private markets, new fund managers — including experienced managers from established funds — received just 5.7% of total capital raised in these markets, according to data that Preqin shared with Institutional investor. That percentage has been declining for much of the past decade, according to Preqin.
Fundraising should generally be easier for new fund managers who have worked at established investment companies. But according to Mathieu Boisvert, founding partner and CEO of Bastion Asset Management, rising operational costs have made it difficult for even more experienced managers.
“Operational requirements when starting a new business [have risen] in recent years,” he said. II. Not only has inflation placed a greater burden on new managers, but tighter regulatory controls have made it more difficult “to have an institutional platform to present to investors,” he said.
“Now the current market environment makes it even more difficult to launch a new strategy,” Boisvert said. “[Every] Type of [allocator] heal their wounds in one way or another in their wallets. Usually, [they’ll] fix what’s wrong or decide on existing investments, instead of looking for new investments.
Besides the crowded fundraising environment, other factors can also play a role in preventing new fund managers from receiving capital. “A good portfolio manager is not necessarily a good business manager,” said Charles Lemay, partner at Walter Global Asset Management. Lemay is also president of the Emerging Manager Board of Canada, a non-profit advocacy organization in Canada. He added that some experienced managers might not have the ability to manage people, develop business plans or pitch to investors when starting their own funds.
Andrea Lamari Walne, general partner of Manhattan Venture Partners, said that, unsurprisingly, fundraising is even more difficult for managers without prior investment experience. “Being an emerging manager is the hardest thing right now,” she said, adding that a pedigree from one of the big names like Sequoia or Andreessen Horowitz always helps new fund managers attract new fund managers. capital.
Boisvert agreed that track records are important in today’s environment. In July, his cabinet was selected by the Québec Emerging Manager program, which grants mandates and offers mentoring to new founders of investment companies. Before Boisvert co-founded Bastion Asset Management in January, he had already proven himself managing funds for institutional clients. The connections he has built up over the years have helped the company secure financing from QEMP, according to Boisvert.
“It’s very hard fundraising environment,” Lemay said. “People with little investment experience trying to start their own store are going to be extremely discouraged unless they’re really lucky.”