
Ask HN: How would you growth hack a hedge fund? - caruana
I work for a small technology advanced real estate hedge fund that has been delivering great returns to middle class investors for several years. I am wondering what HN members would do to promote their values, technology and integrity to a wider audience to grow their investor base?
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jklein11
Can you explain how you serve middle class investors?

Only accredited investors can invest in hedge funds. The requirements for
becoming an accredited investor, as described by Rule 501 [1] state that an
individual's net worth, excluding real estate must be over $1,000,000 or have
an income of over $200,000.

I think one of the biggest struggles to "growth hacking" a hedge fund are the
regulator requirements. [2]

1\. [http://www.ecfr.gov/cgi-
bin/retrieveECFR?gp=&SID=8edfd12967d...](http://www.ecfr.gov/cgi-
bin/retrieveECFR?gp=&SID=8edfd12967d69c024485029d968ee737&r=SECTION&n=17y3.0.1.1.12.0.46.176)

2\.
[http://www.investmentfundlawblog.com/resources/marketing/mar...](http://www.investmentfundlawblog.com/resources/marketing/marketing-
restrictions-private-funds/)

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caruana
The fund is a RRSP eligible investment in Canada (I think the equivalent of
401K in USA?). We are not currently serving the American market, sorry, I
should have mentioned that but I think the growth management would be similar
in both markets.

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nugget
Are you really a hedge fund in that you actively hedge your positions or are
you just an actively traded long-mostly fund that calls themselves a hedge
fund because it's a trendy label? What benchmark do you compare yourselves to?
Are you sure you haven't outperformed the market simply because REITs have
been such a strong asset class since 2010? It's extremely unusual for any
actively managed funds to consistently beat their benchmarks net of fees, and
those that do, typically have no problem attracting huge amounts of capital
(to the point where they lose their ability to outperform). A Random Walk Down
Wall Street by Burton Malkiel
[[http://fave.co/29ZnkN6](http://fave.co/29ZnkN6)] is a fantastic book for
anyone who wants to learn more about why this is.

~~~
caruana
I don't want to get in a debate about what a hedge fund is, but while the term
"Hedging" is the practice of reducing risk, the goal of most hedge funds is to
maximize ROI. The term hedge fund comes from the historical tendency of the
first "hedge funds" to hedge against the downside risk of the market by
shorting the market (as where mutual funds can not usually take a short
positions). In today's terms, hedge funds employee many different investment
strategies so it isn't accurate to say hedge funds just hedge risk. Hedge fund
managers usually make speculative investments and can sometimes carry more
risk.

The funds is bench marked to Credit Suisee HF Index, Citibank Prime +5%, S&P
500. It is beating the bench mark since inception and that historical
statement is verified by our auditors. Your point regarding "attracting huge
amounts of capital" holds true when a fund reaches a certain size, typically
greater than $120M, getting to that point is where a lot of the work happens.
The point from start to autonomous growth must be managed with extreme care
and diligence, it is imperative that a growing fund manages their growth to
not try and grow faster than their operations can support. -- Which is what
I'm asking HN, I am soliciting opinions and experiences from smart people,
maybe growth hack is the wrong term.

I agree that as a fund grows it definitely gets harder to scale, and at this
time, we haven't begun to scale at our full potential, so that point remains
in the central view of the risk committee.

Thank you for contributing your opinions.

~~~
zhte415
> I don't want to get in a debate about what a hedge fund is, but while the
> term "Hedging" is the practice of reducing risk, the goal of most hedge
> funds is to maximize ROI.

So you're not a hedge fund.

>The funds is bench marked to Credit Suisee HF Index, Citibank Prime +5%, S&P
500.

What a crazy combination of benchmarks.

~~~
jklein11
I'm no hedge fund expert, especially ones based out of Canada, but I think
it's based on the fee structure. Hedge funds typically get 2% AUM and 20% of
the return. I don't see any reason to think that isn't the case.

Those funds make sense to me for a real estate focused hedge fund that is
primarily used in retirement accounts.

Just my $.02

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floki999
An RRSP in and of itself is not a fund type. Similarly to a 401K it is an
account which holds investment positions (e.g. Mutual funds, ETFs, single-
stock positions).

As for 'growth hacking', that's really not a mindset I would recommend for any
investment strategy. First, think of the asset class (real-estate), the
investment strategy and the securities/investment products involved: can you
scale them up and be as profitable? If you can demonstrate that you can, then
growing the AuM shouldn't be too hard. 'Growth hacking' sounds like smoke and
mirrors - I wouldn't recommend that terminology with investors.

~~~
caruana
Agreed, that growth hacking was the wrong terminology, I think I was being to
aggressive with the description.

Yes, an RRSP is not a fund and like you said, a vehicle to hold an investment
position. I was not trying to insinuate that an RRSP was a fund and I will
edit my previous comment.

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floki999
Caruana- as a more constructive comment, I would say your question is more one
of marketing retire than investment strategy. In that sense, one advice I
would give is to focus on customer education. The majority of funds, whether
they are institutional funds or retail funds, do a poor job of educating
clients. Especially with technology involved - a client who understands, is
comfortable and truly engaged about your technology will probably stick around
longer in the not-so-good times. From a sales point of view, education is a
differentiating factor. My 2 cents, Canadian.

~~~
caruana
Great comment, thank you. I love the idea of education as a differentiating
factor, so my question would be, "from a customer's perspective, does the
educational material have to be original content or would it be better to
reference 'non biased / not affiliated' material?

~~~
floki999
It could be a combination of both, but I would suggest developing some
original content along with reference to independent references perhaps. In my
view, taking the time to develop original content sends the message that the
company/fund cares, and is not recycling external material. Plus, you control
the quality of the material. Retail investors, especially, are bombarded with
infomercial fluff that has no value. Good quality material can only make you
more credible.

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rajacombinator
I would leak stories to the press about how we have a secret internal fund
that generates mind blowing returns year after year thanks to our army of math
phd geniuses but is closed to the public. (Yet conveniently publishes its
returns publicly.) Yea, that's what I would do.

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swanson
I would reach out to the MrMoneyMustache/Ramit Sethi's of the world if you can
offer a compelling pitch to their target audience (24-40 years old, tech-
oriented) about why I should start funneling some of my investment dollars
into your fund (vs Vanguard target date).

Other options: ad targeting people that are customers/users of Vanguard,
Betterment, Wealthfront, Robinhood, Simple, etc

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sultad
organize operational risk before you enter your next phase of growth using a
system like [http://www.predictiveops.com](http://www.predictiveops.com)

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izyda
Could you go into detail about how you are technically advanced relative to
your competition?

Would be curious to hear what that entails / differentiates you from other
investment firms in the same space. The alternative data space taking off
among hedge funds is pretty interesting, and I'd be interested to hear how a
real estate fund approaches it.

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max_
Make it a DAO
[https://en.wikipedia.org/wiki/The_DAO_(organization)](https://en.wikipedia.org/wiki/The_DAO_\(organization\))

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55555
scraping and cold email for lead gen leading to sales calls to potential
investors.

