Who started hedge funds
Small hedge fund quintuples assets via fintech startup
(Bloomberg) - Joshua Young started his hedge fund less than a year ago. Last month he hit the jackpot when a university foundation entrusted him with $ 20 million. In one fell swoop, that quintupled the assets under management.
How did a little Houston hedge fund called Bison Interests manage to catch such a large fish?
The answer is simple. The 32-year-old Young had created a profile on the SumZero website. The online portal allows institutional investors to find aspiring fund managers and select them based on the quality of their analyzes. Thanks to SumZero, Young got a chance, although he does not have access to a network of old-school acquaintances, through which investment decisions are often made.
SumZero claims to have helped establish hundreds of contacts between more than 12,000 listed fund managers and the 270 institutional investors who use the website. These include the family offices of several large technology managers.
"You can really get a sense of quality when you look at someone's performance, their analysis, their profile," said Divya Narendra, co-founder and CEO of SumZero, in an interview with Bloomberg. "A lot of people who are really smart don't have a brand, don't have a big network - and we can help grow the network."
SumZero, however, is still a long way from shaking up the existing ranking on Wall Street. But the New York startup is beginning to earn respect in the industry by bringing smaller hedge funds into the limelight with unique investment strategies.
Various studies have shown that smaller funds often perform better than larger ones. In view of the recent turmoil in the markets, the latter are on a rather meager balance sheet. But herd instinct and aversion to risk, many institutional investors prefer to put their money into the big players in the industry.
Companies with more than $ 5 billion in assets under management make up just six percent of all hedge funds - but they manage around 70 percent of all invested capital. This is based on statistics from the market researcher Hedge Fund Research.
SumZero didn't start out as a dating platform for Wall Street. Narendra, who previously worked for the Swiss bank Credit Suisse Group AG, launched the company in 2012 as a marketplace for stock analysis. Analysts could only see the work of others if they put their own studies online. Those who did not contribute themselves received access only against payment.
Over time, the company received calls from institutional investors who wanted to use the website to find promising fund managers. That was when Narendra began to see his company as a kind of social network.
The site seems ideal for young hedge fund managers like Joshua Young of Bison Interests. It was his unusual investment strategy that attracted the interest of the university foundation, as its managing director explains. He doesn't want to be called by name.
Most of the foundation's investments in raw materials revolved around overlapping positions in medium-sized to large energy producers, according to the information. Young's hedge fund takes a different approach - investing in smaller producers that are cheaper. The bet is that their value will increase as oil prices recover.
The Managing Director of the University Foundation admits, however, that it was not easy to convince his employer to work with Young. Nobody is fired for investments in well-known names like Greenlight Capital, he says. When it comes to investing in a smaller hedge fund that fails, that's a whole different matter.
Original article headline: Match.com for Wall Street Helps Small Hedge Funds Woo Big Money
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