A Short History of Cap Intro

The Rise & Evolution of Cap Intro: From "Speed Dating"to Independent Event Facilitators

On an unusually sweltering hot day during the Spring of 1994, I met with about 250 other investors, traders, trainees & allocators in the Hyatt Grand Central Hotel in New York (now sadly dusty and vacant) waiting for a fleet of buses to take us to the Yankee Stadium. Presumably, they wanted us to all get there rather than get way-laid by the attractions (& horrors) of the Bronx pre Mayor Bloomberg!

 

JP Morgan were our hosts and it was the biggest, brashest, most enjoyable & indeed most successful cap intro day I’d ever experienced. My eyes were opened as to the power of putting hedge funds with allocators for 1 on 1 speed dating, panel sessions (& seemingly endless shots at the end of the day)!

 

Back then, hedge funds were rare on the ground & the term alternative funds hadn’t been invented but the prime brokers had spotted the potential of winning their business (stock lending was just as inefficient then as it is today) and the game in town was how to add value to get the hot funds of the day onboard. Cap intro was considered the main tool given that it was self-fulfilling for the banks and primes – help a fund to grow fast and there’s more trading and financing business to be done.

 

Financial services in UK and Europe at the time were dominated, by comparison, with a pretty sleepy old boy network & New York was indeed the financial capital of the world innovating almost everything for good & evil! During that one day at the Yankee Stadium over $4bn was committed to over 30 funds. Bear in mind folks that this was very nearly 30 years ago…

Many managers started to see that building their own sales, IR and marketing infrastructure just didn’t make sense if their primes and other service providers put on cap intro events for them & they could keep more of their 2 & 20 pay structure. However, it was one thing getting interest from allocators but quite another keeping it. Hence the third-party fund marketing community also grew at pace offering consultancy, marketing and long-term distribution services to funds.      

 

A switch flicked. I had a sneaking feeling that this was my calling – honing and developing manager & strategy selection skills, embracing the professional exams, experiencing cycle after cycle on the buy and sell side were all part of the journey toward the genesis of DXB Partners (DXBP).

However, I could never have imagined that the dusty desert landscape of the Middle East in the 1990’s would be the fastest growing capital market of today & the region we call home. It was unimaginable that sovereign wealth funds in the Gulf would have over $1.6 trillion at their fingertips or that financial professionals would be migrating from New York, London & Hong Kong to Dubai like the Gold Rush to the West Coast in 1848 (let’s hope it lasts longer than 7 years)!

 

These days, the prime brokerage led days are still part of the calendar but have been supplemented by independent event facilitators who transparently host events large and small, mostly with a similar business model – a flat fee charged to funds to participate in the event with a success fee on capital raised. Investors and allocators generally attend without charge albeit subject to stringent qualification criteria. In this regulated world, we take a somewhat purist stance, believing that top managers want 1 to 1 access to smart capital more than they need gala dinners, celebrity speakers & after parties. However, for those of you who disagree there are a multitude of competitors ready to welcome you!       

    

I remember fondly those early days of cap intro & for all the technology of today, the ratings, the platforms, the DD, the ODD….the fact remains that people buy people – and face to face cap intro will always have a place at the head of the table for ambitious funds seeking cost effective relationships with world class allocators.