Using a Pitchbook to Market Your Hedge Fund
Marketing a hedge fund is one of the more difficult parts of running and managing a fund. Many times, managers will discuss investments into a fund through a face-to-face meeting with a potential investor. During this meeting, a manager will utilize a “pitchbook” as the central way of conveying the most important aspects of an investment in the fund. This article will provide an overview of the most common parts of a hedge fund pitchbook. We have also provided a sample pitchbook below.
Key Pitchbook Components
The following are the key components of the pitchbook.
Coverpage – the coverpage is the beginning of the pitchbook and usually identifies both the name of the hedge fund and the hedge fund management company. Many times the management company’s logo will also be featured on the coverpage. Some funds have a tagline. Some funds include a picture or a watermark for aesthetic purposes.
Inside Disclaimer – the second page should always include a disclaimer which is drafted, or at least reviewed, by an attorney (it is not ok to use a disclaimer you found in another pitchbook). While these disclaimers may seem to be fairly standard, there is important information which must be included in this disclaimer for your protection.
Strategy Overview/ Discussion – this is generally the meat of the presentation. Here you present your arguments to potential investors as to why they should invest in your fund. Feel free to take 2, 3 or 4 slides to get your main point across. Some items discussed in this section include: the objective and goal of the fund, manager philosophy, investment process, method of investment selection, portfolio allocation, etc.
Returns and/or Backtested Returns – how good are the returns of your investment program or proposed investment program? If you have performance results, you should include them in the pitchbook. If you do not have any live trading returns, you should include any backtesting which you have done. One or two slides here would be appropriate. If there are more technical aspects of your trading program which need emphasis or explanation, please feel free to use additional slides. All performance results, whether real or backtested, must include a disclaimer drafted by an attorney. This disclaimer will be placed at the end of the pitchbook; a note directing readers to the additional disclaimer will be placed on all pages where there are performance results.
Risk Management Procedures (optional) – many pitchbooks list the various risk management procedures of the management company. It is expected that this will become a more commonplace practice as investors become more diligent about understanding their hedge fund investmetns. Some popular risk management discussion points include: investment protocols, diversification criteria, position limits, concentration, manner of valuation, etc.
Manager Bios – this is the place where you get to talk about yourself – your background, accomplishments, awards, prior work history, personal items, etc. Many managers will use the same “bio” which is used in the PPM.
Key Investment Terms – this is a section which details the key terms for an investment in the fund. Typical items listed include: fund name, management company name, eligible investors, minimum investments, contribution and redemption provisions, lock-up period, management fee, performance fee/ performance allocation, service providers (lawyer, administrator, auditor, broker or prime broker).
Performance Disclaimer – the performance results from the earlier pages will need to be properly described and explained.
Final Page – usually the pitchbook will contain a final page which provides manager contact information.
Other Options – there are a number of other options you can add to your pitchbook. I have seen overview pages, organizational charts (usually for larger investment management groups), charts or graphs explaining the opportunity or the market, background theory (with or without chart), and discussion of operations and compliance.
The pitchbook should be designed as a supplement to your verbal presentation. You should not write in long paragraphs describing the details of your investment strategy. Bullet point the most important items you would like to get across to the potential investor – you don’t want the investor trying to read a paragraph about your strategy as you are talking.
Other power point considerations.
We have provided a sample pitchbook which can be found here: Sample Pitchbook Presentation. Please note that we have provided this pitchbook as one example of how you might go about creating one.
Pitchbook and Hedge Fund Formation Services
In addition to our general fund formation services, we can assist you with preparing a pitchbook. Already have a fund and need a pitchbook? We can help you draft a presentation. Please contact us to learn more about our services.
Other related hedge fund marketing articles include: