DIANE HARRISON 1

HARK! The Allocators Sing

HARK! The Allocators Sing...

2017 will be a hard year for allocators and investors to get excited about hedge fund performance versus US
equities. Hedge funds returned on average about 6% in the first 11 months of 2017, significantly lagging the stock
market, which was up over 20% for the same first 11 month period.

Hedge fund defenders will say that hedged portfolios are not designed to keep up with a soaring stock market, but
that song often falls on stubbornly deaf ears. However, December seems a good month to remind investors why
alternative investments still have a core place in every portfolio. Here are several arguments in favor of including
alternatives from some of my industry articles published throughout 2017:

Jan 2017: FOCUSING ON THE FEW TO FIND RESULTS

If we assume that the overpopulated hedge fund industry has been an aggregate lackluster performer, and that this
universe comprises approximately 14,000 funds, then roughly 250 or so funds existing today are providing
substantial benefits to their partners. This power group generates performance regardless of what fees are being
charged, what segments of the market they exploit, and what current regulations are burdening them.

Feb 2017: ALTERNATIVES ARE STILL IMPERATIVES

Although not shy in voicing their frustrations and disappointment with most alternative products, investors are
nevertheless more committed than ever to being invested in the sector. Perhaps they have finally truly embraced the
mantra of diversification and risk modification these products are meant to provide to portfolio management. While
they still want to see wholesale improvements within alternative offerings, they are believers in the long-term
allocation process, and managers must work to win them.

Mar 2017: STEMMING INVESTOR REDEMPTIONS

In terms of investment management, attracting investor capital and keeping this capital is more easily achieved
through creating a positive and encouraging environment. Smart fund managers will create detailed and informative
communication channels for their partners, including regular fund updates, insightful analysis on timely market
topics, and a flexible range of options for investors to choose how to receive this information. While a funds
performance can and will vary, consistency and dedication to the communication process should not. Make being an
excellent communicator a lifestyle choice as a fund manager, and investors will reward this good behavior with
loyalty.

April 2017: WHEN COMMUNICATION FAILS

A red herring is commonly considered as something that misleads or distracts from an important issue. Its used
typically by one party to divert attention from the real topic of interest of the other party. Historically, the term refers
a particular dried red fish which has a strong and unpleasant odor. Investors are particularly sensitive to this
avoidance tactic when they are unable to get answers to the issues that are most important to or concern them. If

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HARK! The Allocators Sing

alternatives managers attempt to distract investors from getting to the heart of a sensitive issue, almost assuredly
they will suffer the consequences. As Italian lore goes, the fish stinks from the head.

May 2017: INVESTORS DO NOT HAND OUT PARTICIPATION MEDALS

Successful investors are definitely not helicopter parents. They like winning and fully subscribe to the notion of
rewarding alternatives managers who can deliver results. Investment management winners need to add
differentiated value. Establish a clear market point of view that delivers value to investors, and make sure the
investment practice mirrors this strategy. The alternatives markets are littered with the corpses of fund managers
who said one thing to investors and proceeded to do an entirely different thing with their fund assets. Dont be the
fund with 75% of your clients assets sitting in a money market for months or years, awaiting the next great
opportunity, all the while collecting fees of 2 and 20 for this privilege of earning next to nothing.

June 2017: THE BOOK TOUR APPROACH TO LAUNCHING A FUND

The only thing harder than running a successful alternatives fund is launching it. Getting noticed in the crowded and
naturally skeptical alternatives market can be a Herculean feat without a plan of implementation. It goes without
saying that having a great investment strategy, financial backing, and well-crafted infrastructure are all critical
components of a successful fund launch. Here are a few additional pointers on how to capitalize on these elements
by cribbing from another cutthroat process: that of a successful book tour:

Contribute to financial web forums and become a thought leader

Start a blog
Record yourself
Build a warehouse of investor recommendations
Strengthen your distribution efforts .

July 2017: BOOM OR BUSTARE ADVISORS READY FOR THE BOOMERS TO RETIRE?
Boomers have long been in the trend-setting vanguard of the past half century, with their population dominance
shaping the growth of many sectors of the US economy. As the boomers begin to exit the workforce and enter the
retirement phase of their lifespan, they will undoubtedly continue to exert outsize influence on the general
population. Financial advisors will need to adapt their services and approaches to keep up with this segment in ways
that are focused on these large-scale needs. Advisors particularly need to align their financial planning tools with the
murky waters of healthcare costs. There will be little to guide advisors as healthcare struggles to accommodate such
a significant demand on services that boomers create. Compounding this issue will be the complexities of a global
financial dance that US interest rate policy continually seeks to navigate.

August 2017: SITUATIONAL AWARENESS: INVESTMENT PERSPECTIVE INTENSIFIED

Situational awareness means honing your ability to analyze the surrounding environment as an automatic practice
while carrying on regular activities. From an investment perspective, sharpening ones overall desired investment
goals and how best to achieve them is an ongoing and dynamic exercise in diligence and critical thinking.
Investment planning requires research, surveillance, analysis, and reasoned decision-makingmuch like military
planning. The achievement of a long-term successful investment plan shares more than a few traits with executing a
successful military operation. As plans change, course correction occurs, and variables waylay the best-laid goals,
this flux demands clear-headed redirection on a regular basis.

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September 2017: A PRACTICUM FOR AUM

Theres no denying that one of the biggest challenges small managers face is raising capital. To become large
enough to turn a profit and expand is a common migraine that keeps emerging managers up at night. Forget fretting
over last quarters performance: most of these managers obsess over not being able to add enough LPs to their
fund before they run out of cash. There are several means of accessing actual prospects for emerging manager
funds, with some give and take required to land the deal:

Talk to seeders
Find a personal angel who knows you to invest in your fund
Actively mine your referral network
Develop a very clear 1-minute explanation of your value
Consider taking on offshore investors.

October 2017: TALK FOR SHOW, BLOG FOR DOUGH

Despite being overused in finance, the golfing analogy Drive for show, putt for dough bears relevance in alternative
investments. While the bigger, flashier managers in alternatives often garner the most media and investor attention,
smaller managers have a real chance to exhibit their investment acumen through the power of a well-crafted blog.
Expand your investment voice beyond the numbers game of fees, rankings, and comparisons, and you can expand
the potential investment base.

November 2017: CHALLENGES AHEAD FOR 2018

November is a good time to take an industry snapshot survey of portfolio managers, wealth advisors, regulatory
professionals, and the like, and ask them a single question: What do you believe is the biggest challenge faced by
the alternatives industry for 2018? Some of the answers included:

Performance: alternative managers are going to continue to be pressured to demonstrate the value-add for
investors
Fee flexibility
Finding alternative pockets of value that are sustainable
Compliance with growing regulation issues
Investment ideas that can scale
Cybersecurity and the unknown risks it imposes.

As we move into 2018, alternatives managers will undoubtedly face a host of new issues and challenges in
delivering to the investment community differentiated value. Heres to best wishes for us all in the coming year!

Diane Harrison is principal and owner of Panegyric Marketing, a strategic marketing

communications firm founded in 2002 specializing in alternative assets. She has over 25 years of expertise in hedge fund and private equity
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marketing, investor relations, articles, white papers, blog posts, and other thought leadership deliverables. In 2017, Panegyric Marketing has
been awarded Global Fund Awards 2017 Financial Services Marketing Firm of the Year - NY, USA, Corporate Insider Business Excellence
Awards 2017 Financial Marketing Firm of the Year USA, and M&A Insider Awards 2017 Financial Services Marketing Firm of the Year
USA. A published author and speaker, Ms. Harrisons work has appeared in many industry publications, both in print and on-line. To read more
of her published work in alternatives, please visit www.scribd.com/dahhome. Contact: dharrison@panegyricmarketing.com or visit
www.panegyricmarketing.com.

PANEGYRIC MARKETING | DECEMBER 2017