Revere Capital, a UK-US business that is specialist boutique in the emerging manager space with specialist research, investment and marketing capabilities, talks to this publication about its work and the state of the market.

Editor’s note: This publication recently met with the firm Revere Capital Advisors, a US-UK business in the hedge fund space providing research and analysis for clients such as wealth managers. Speaking to WealthBriefing were Camilla Balmer, managing director in London, and Yvonne Barker-Layton, also in London.

Can you set out a bit about yourselves and what you did before joining Revere?

Camilla Balmer is managing director at Revere, based in the London office. She has worked at Revere since 2008, and during this time has been raising the profile of early-stage managers in the institutional marketplace. She has also over the years worked very closely with early-stage managers to assist them in all of their marketing needs since inception. This includes working with them on their marketing and sales strategy, aiding in the business development of their funds and distributing their products. Prior to joining Revere she spent five years at Henderson Global Investors in London, where she acted as European marketing manager. At Henderson, she led the creation and delivery of targeted marketing campaigns, relationship management for all European sales offices, and the implementation and delivery of annual marketing plans across Continental Europe.

Yvonne Barker-Layton is a director at Revere, also based in the London office. Prior to joining Revere in 2011, she was managing director of marketing and client service at Seveneast, a Swiss-based independent wealth manager. Before joining Seveneast, she worked at the emerging markets specialist Renaissance Investment Management as head of international marketing and client services. She was also a member of the communications board of the Renaissance Group. At Renaissance, Barker-Layton set up a new international client service and marketing department covering Europe, Africa and the Middle East. In 2004 Yvonne joined Fauchier Partners (BNP Paribas Group) as head of client service and marketing. Prior to this, she held the position of institutional business manager and marketing associate for the fund of hedge funds business at Gartmore Investment Management. She started her career at Deutsche Asset Management in 1998.

Give a brief overview of Revere's history and how it started out

Revere Capital Advisors is a boutique emerging hedge fund manager specialist based in London and New York. The firm was founded in 2008 by several former senior executives and board members of the Man Group, including Daniel Barnett (ex-finance director), Harvey McGrath (ex-CEO and chairman) and John Kinder (ex-head of global sugar trading and operations). The firm is led by CEO Dan Barnett, who is based in the New York office. Revere’s research and investments team offers clients access to comprehensive research and advice on early-stage hedge fund managers in Europe, North America and Asia. To complement this research and advisory offering, REM Marketing Solutions provides a marketing and business development consultancy service for early-stage hedge funds, bespoke to their requirements.

The company has always focused on the emerging hedge fund space, seeking to present the next generation of most talented hedge fund managers to the investor. At its formation, Revere was looking to build a stable of some 10-12 managers of uncorrelated strategies, striking commercial agreements with the funds, in exchange for sales, marketing, and distribution of the products, as well as corporate and administrative expertise and advice. As the hedge fund industry evolved over the past couple of years, so has Revere, and today it has an experienced team of professionals who provide investors access to a qualified universe of emerging hedge fund managers, as well as comprehensive investment research and advice on the space. To complement this offering, a separate team at Revere also provides a specialist marketing and business development consultancy for early-stage hedge funds.

How big is this firm now? How many people does it have?

The London and New York (HQ) offices have a total of 13 people.

What are the main lines of its business, and why? 

Research has shown that hedge funds often outperform in the emerging stage of their life cycle, subject to market conditions. They are more nimble and better equipped to react to changing market environments, and a smaller capital base enables funds to access less crowded and less correlated opportunities, generating more alpha. Revere applies a comprehensive and structured selection process to identify a select group of the most compelling new managers in this optimal performance period, when the manager has limited distraction, a high degree of determination and a large opportunity set. This has always been at the heart of everything Revere does and has been part of the business model since inception.

REM Research & Investments: Revere’s experienced research team has constructed a universe of promising and viable emerging hedge funds using a process-driven approach. After broadly mapping this large and often opaque universe through proactive, continuous and organised sourcing, the team then filters the funds to those which justify further analysis, identifying relevant strategies and skilled teams, before carrying out a targeted assessment of early-stage risks to determine the highest conviction managers. Clients are able to directly access the REM Research & Investments team, their qualitative research on funds within Revere’s universe and the wider emerging manager space.

The team actively supports clients in the ongoing analysis, selection and monitoring of early-stage funds, acting as a natural extension of an in-house research capability. Depending on an investor’s specific needs, the team will consult on fund selection and portfolio construction, and can provide independent research on target funds. The team is also practised at working as sub-advisor to investors, assisting in the construction of bespoke emerging manager portfolios.

REM Marketing Solutions: The team works closely with new fund managers, assisting them in understanding the requirements of their prospective client base, and in reaching an institutional standard in their business and products. There is demand in the marketplace for help with marketing (excluding distribution) in the early stages of a fund’s life, before a manager is able to bring a dedicated resource in-house, and before he/she meets with potential clients. Services available to hedge fund managers include the review, development and creation of marketing materials, pitch critique, DDQ and RFP writing, product positioning advice and introduction to key providers for early-stage managers in compliance, legal, web design and public relations.

Where are the clients? Are they from particular regions of the world?

The clients are currently in Europe and North America, but the team at Revere will travel to and work with clients in any regions, globally.

How would you describe business conditions in your sector at the moment? What sort of trends are you seeing? 

·         Conditions have clearly improved since the 2008 credit crisis and we are continuing to see great talent coming to the market.

·         More investors are providing capital to new managers (not including seeders).

·         Day-one investors are typically (and always have been) family offices and funds of funds.  We also see a slowly growing number of endowments, foundations and pensions seeking out day-one opportunities.

·         But there is still more talk about interest in emerging managers versus actual investments; capital-raising remains challenging for new launches.

·         Founders share classes (reduced fees for early investors) are a very common and attractive feature, and are offered by the majority of new managers.

·         Seeders are on the decline and seeding requires more of an opportunistic one-off approach today.

·         The most compelling launches today go live with whatever capital they can gather and focus on investing.  This requires patience and confidence.

·         There is no recognisable trend across strategy or asset class.

·         The exodus of bank-based teams seeking to launch hedge funds continues.

·         Start-up activity very recently has slowed down a bit due to the adverse market conditions.  Many planned launches have been delayed into 2013.

What sort of products and services are your clients being asked to provide? For example, what sort of things are private banks and family offices calling for?

An increasing number of clients have found and are finding that investments into the large and more established hedge funds are not providing them with the sufficient returns or transparency that they expected. They have also grown increasingly disillusioned with the standard fund of funds, which has charged double the fees but not produced the performance to justify them.  In the emerging hedge fund manager space, more and more clients want direct access to the managers and visibility on the funds, with discounted fees for committing and investing early on.

Many family offices have broadened the research and investment capability in-house, but still may not have the experience at looking at smaller, younger funds, which is where REM Research & Investments comes in. Family offices and HNW individuals come to Revere as experts in the early-stage hedge fund space, and are looking to access interesting niche, sector-specific funds to complement other investments in their portfolios which can differentiate them from their peers. Clients continue to look for new talent globally, with continued interest in Asia and emerging markets.

How has the economic and financial market environment affected the change in the focus of Revere's business? 

With regards to REM Marketing Solutions, the difficult asset-raising environment for early-stage hedge funds has led to more and more managers looking for help and advice with marketing, and reaching an institutional grade before approaching investors. The scarcity of seed capital but yet still an increasing number of high-quality launches means that managers need to be prepared and informed when approaching these groups, as well as other institutional clients, who expect higher standards than ever. REM Marketing Solutions was launched in response to this demand in the marketplace, and is very pleased that it is able to formally offer this expertise to managers.

As for REM Research & Investments, investors continue to move towards investing directly into hedge funds, and away from going through fund of funds, therefore investment research and advice are crucial for many investors if they do not have the resource internally. Revere is in a position of neutrality, impartial to strategy and regional location of funds, purely looking for the most talented managers in the early stages of their life cycle.

Investors have been cautious of these changeable markets, but continue to look to smaller, more nimble managers who are in a better position to generate alpha and often now provide better transparency than the larger funds. With increasing regulation and strenuous operational requirements, the team spends a considerable amount of time focusing on a manager’s operational and business infrastructure, and aims to demystify many of the perceived risks associated with early-stage investing in hedge funds.

In, say, five years' time, where do you want to see this business in terms of size, service and range of client? 

Our goal is to be seen as the recognised leader in the emerging hedge fund manager space. Our firm will continue to grow in size to service our existing and prospective institutional client relationships, and offices will be opened as and when we see the demand and interesting opportunities arise in other regions. 

What do you see as the main opportunities and risks ahead? 

The main opportunity is to capture and service the growing appetite and need for access to young, talented investment managers. The biggest risk for these managers is the time and capital required to build a superior track record and brand name in a marketplace that is, itself, young and just beginning to grow in terms of sophistication, analysis and measurement. We will continue to support, advise and inform both early-stage managers and investors alike, in order that interests are aligned and requirements met. Our firm will continue to evolve in response to clients’ needs, as we have previously done.