Hedge fund managers have a challenging job. Since the law prohibits hedge fund advertisements, the manager can't simply pay for a promotional campaign in the media to entice potential investors.
``Right now, many hedge fund managers hire third-party marketers to find investors,'' says Daniel McDermott, a hedge fund marketing professional. ``The problem there is each third-party marketer gets a percentage from each investment and the marketer typically has a small client base.''
To address these ``inefficiencies,'' McDermott founded Brighton House Associates LLC in January. Last Tuesday, the Hopkinton company released its technological solution, SalesDesk.
This Web-based software enables hedge fund managers and marketers to dramatically increase the productivity of their sales efforts and raise money from targeted investors faster than ever before, according to McDermott.
``We are spearheaded by a large team of internal research analysts who spend every day speaking with more than 20,000 hedge fund investors in our database all over the world in order to find out what these investors are looking for in terms of hedge funds,'' says McDermott.
``What the analysts do next is take these specific investor profiles and send them directly to our hedge fund clients. ... This allows our clients to track and manage these leads and contacts.
``Finally, we allow our clients unlimited access to our own proprietary database of hedge fund investors. They can see what's out there themselves at the same time we're working to find them leads.
``This is a three-tiered sales and marketing solution for the hedge fund industry ... that lets managers streamline the process of marketing their funds to the most appropriate investors by reaching only those who are most suitable for their style and focus.''
And there's no hedging on the advantages, according to McDermott. ``You're guaranteed exposure to the full spectrum of hedge fund investors around the globe,'' he says. ``You'll be able to access and contact every investor who is specifically interested in your product. If you weigh the cost of the product, if you close just one deal, it pays for itself five, 10 times over.
``There's also going to be a consistency of lead generation. Every day of every week of every year our clients will continue to receive qualified investor prospects.''
SalesDesk is the only on-demand tool that offers these kind of services, according to McDermott.
``On the customer relationship management side, there are large, one-size-fits-all solutions that are very cumbersome and complicated,'' he says. ``This is designed specifically for the hedge fund industry with the end user is mind.
``This market has hundreds of private marketers running around trying to raise money for hedge funds. There are almost weekly conferences where managers and investors go to try to meet each other. There are also quasi-capital introduction and marketing Web sites, but there's no one central solution, no provider that has best practices installed in terms of the next generation of hedge fund marketing.'' Until now. ``Someone had to do it,'' says McDermott, who adds that the software is easy to use and requires no IT support.
``As a hedge fund industry veteran, I saw firsthand the inefficiencies inherent in the traditional marketing process as managers and marketers were forced to use a hodgepodge of paper, PC-based applications, PDAs and sticky notes to track qualified investors in what had become an antiquated and expensive effort to raise assets,'' says McDermott.
``I founded Brighton House Associates to better connect managers and marketers with the complete universe of hedge fund investors around the world. SalesDesk was designed from the ground up to align fund mangers and marketers with fully qualified investors, while raising the level of efficiency and driving down costs as well.''
The company takes its name from the Brighton section of Boston where McDermott first lived after his marriage. The window displayed on the company's logo represents the picture window in the townhouse where the couple lived. They now reside in Hopkinton.
Before starting Brighton House Associates, McDermott was the managing director of Coastal Partners Ltd., a hedge fund marketing firm based in Rockville, Md.
A hedge fund is a private investment partnership that only qualified investors can invest in - they must have a minimum of $2.5 million in net worth to invest. ``The reason it's illegal to advertise hedge funds is because only accredited investors can invest and an advertisement would be seen as a public offering,'' says McDermott.
A hedge fund is allowed to use aggressive strategies that are unavailable to mutual funds, including selling short, leverage, program trading, swaps, arbitrage and derivatives, according to the InvestorWords Web site.
``Hedge funds are exempt from many of the rules and regulations governing ... mutual funds, which allows them to accomplish aggressive investing goals,'' the site continues. ``They are restricted by law to no more than (500) investors per fund, and as a result most hedge funds set extremely high minimum investment amounts, ranging anywhere from $250,000 to over $1 million. As with traditional mutual funds, investors in hedge funds pay a management fee; however, hedge funds also collect a percentage of the profits (usually 20 percent).''
Says McDermott, ``There's a common misconception about hedge funds. About 10 to 15 years ago, they were the playground for the wealthy. But now it's an industry dominated by institutional money. For example, 40 percent of the investors in hedge funds are pension funds.''
For SalesDesk, Brighton House charges an annual license fee of $25,000 per client with an additional user fee. The latter depends on how many users a client has and is thus determined on a case-by-case basis.
To test SalesDesk and receive feedback on the product, Brighton House signed on 35 paying clients. One such customer is West Mountain Partners LP.
``Brighton House's SalesDesk has made my sales efforts more productive and given me a new level of flexibility and efficiency,'' says Brendon D. Mahoney, the company's director of business development, in a press release. ``Before using ... SalesDesk, I was using an Excel spreadsheet and doing my marketing research largely by hand, but now my marketing programs are more efficient, I can take them anywhere I go because SalesDesk is Web-based, and I can reach more prospects, faster, worldwide. ... SalesDesk has made my job a lot easier.''
Managers have found investors through SalesDesk, according to McDermott. As for the amounts of money invested, he says such information isn't released to the public.
For the future, Brighton House Associates will be adding additional features to SalesDesk over the coming months. ``There will be a business intelligence and live reporting feature and we'll continue to expand the e-mail platform,'' says McDermott. ``Eventually, we'll explore additional markets to take it to because it's a solution with an application not just to the hedge fund industry but other alternative investment industries such as venture capital, private equity, and finally the larger financial services industry as a whole.''
(Bob Tremblay can be reached at btremblay@cnc.com or 508-626-4409.)
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BRIGHTON HOUSE ASSOCIATES LLC
Founder and CEO: Daniel McDermott
Employees: 15
Industry: Hedge funds
Company background: Located in Hopkinton, Brighton House Associates LLC creates solutions that address inefficiencies in the sales and marketing of hedge funds. Its Web address is www.brightonhouseassociates.com.
