Preqin – Building On A Database
The previous and following articles in this series cover lead generator companies in the hedge fund business who make great efforts to explain that they are not database companies. Preqin is a database company that is trying to add some value beyond that restrictive label, so is coming from a different direction from the other two series subjects, Murano Systems and Brighton House Associates.
Preqin provides data and information on the private equity, real estate, hedge funds and infrastructure sectors. The company started in London in 2002 by making efforts to track private equity information (hence the name) – deal flow, terms, funds, and investor activity. The market intelligence gathered was turned into publications and a database. It was the investor activity that led to Preqin collecting hedge fund related information – there was a lot of overlap among the investors in private equity and hedge funds.
Preqin collated the information the investors (investing institutions, endowments and family offices) gave them into their core hedge fund product, which is a database they call Hedge Fund Investor Profiles. Most alternative investment databases that are sold to marketers are lists of potential targets for the marketer’s product. And the usual database/list/directory does not make much effort go beyond being a database of contacts.
A contact database typically would have a cursory company profile on a list of targets i.e. North American Family offices. This data can be found in the public domain from phone directories to websites, and the value of a contact database is that a company or person has taken the time to gather up the data and break it into specific lists or categories. The value is in the aggregating of the data. The company profile might have a company name, address, phone number, general area of interest, perhaps some historical information, and the name of the acknowledged head of the organisation.
The Preqin hedge fund database is different from the typical directory-like contact database because it is refreshed on an on-going basis, and carries time-sensitive information. A directory of investor names you can buy relatively cheaply on the internet is an accumulation of all the information gathered to that point – it is a snapshot of standing data and information. Some of the information will be fresh, some will be quite ancient.
Preqin have a dedicated team of analysts proactively contacting industry professionals, monitoring regulatory filings, making FOIA requests and tracking news sources to make the their data and information on all firms, investors and service providers up to date. The analysts speak to investors at least twice a year, and try to make contact with the larger investors four times a year.
The analysts ask investors in hedge funds what their investment plans are for the next twelve months. There are two levels of interest captured on the database – actively looking now and tracking a strategy. The information held on the Preqin database is always first-hand, and because of the contact frequency, unlikely to be more than six months old. This is important in a couple of regards – the investment strategies sought and followed will change over time, and the staff doing the seeking and following will change. Each month around 400 database entries are updated.
Then there is the breadth. Because of the resources applied – 25 to 30 analysts in total – and the period over which data has been gathered, Preqin has a database of investors in hedge funds which is as extensive as any. A directory or list of investor names by category might run to a few hundred fund of hedge funds or pension plans. The Preqin database has 3300 investing institutions, and the firm is currently adding 500 new names a year. For example, at the moment the firm is engaged in a project to identify and contact Foundations, in the process 70-80 names are being added each month.
Of the three providers covered in this series of articles Preqin has the most finely tiered offering by price. At the top of the range is the Premium version of Preqin’s Hedge Fund Investor Profiles. This gives complete access to all data held for $4,250 p.a. and lists the name, type of investor, background, location, assets under management, current and target allocation to hedge funds, current areas of interest by location and strategy, description of investment plans and key contacts of the investing institutions.
Only the Premium product is downloadable to Excel or the in-house CRM of the client, and can be accessed by 5 users. The Premium product contains consultant information – who works for whom. This is considered essential information in the current hedge fund marketplace as a large part of the industry’s flows are now either mediated by a consultant or advised by consultants. So hedge fund managers looking for the bigger tickets will buy the Premium version of the Preqin Investor Profiles. As it is, about 70% of Preqin’s clients for hedge fund products take the Premium product.
The Standard Access to Preqin’s Hedge Fund Investor Profiles costs $2,150 p.a. and it enables users to search for investors by location (e.g. list all endowments and foundations in Toronto, Canada), and find investors with specific investment plans (for example, ask who is interested in investing with hedge fund of funds). Another feature is that users can view investors by firm: that is, view which Investors have previously invested with particular hedge fund managers. This can help indicate the biases and investment style of potential clients. So a pitch can be tuned to the sort of thing that the potential investor is known to like, and the fund can be differentiated from unsuccessful investments in the past in the same investment style.
The Standard Access comes with a couple of compromises compared with the Premium Access service of Preqin. The database can be interrogated but not downloaded or linked to a CRM system, and only one user can access the database at a time. The top-tier of investors on the database can be separately purchased in the form of the Preqin Hedge Fund Investor Review, which is an annual product. The 2012 edition features profiles and analysis for the 1,000 most important investors in hedge funds worldwide, and is keenly-priced at $795. The Review contains listings of investors with a preference for the 10 most important fund strategies.
Preqin offer a couple of entry level products: the Emerging Manager Download and the Fund of Funds download, both priced at a great value $1000 one-off cost.
The Emerging Manager Download contains contact details for over 890 institutions that have expressed an interest in investing in emerging managers, making the Emerging Manager Download an excellent way of targeting the high potential investors for a smaller fund. Investors include the full array of hedge fund of funds, public pensions, endowments and family offices and foundations. This Excel download contains details on nearly 3,000 specific contacts at investing institutions including name, position, e-mail and telephone number – sufficient to ensure a new hedge fund manager can contact at least a colleague of the relevant person.
Historically funds of funds have been the biggest allocators to hedge funds and are a necessary investor base for hedge fund managers to hit to raise capital. With the Preqin Fund of Funds download of over 600 allocators the marketer or PM of a hedge fund can searched by strategy, location and typical investment size to pinpoint the firms who may be interested in their vehicle. The Fund of Hedge Funds Excel download contains contact details, including direct phone number and email address, for more than 2,300 individuals at the 600-odd multi-managers from around the world. As the firms listed range in size from $10 million to $60 billion they will vary from the nimble to the lumbering, but filtering of the list by individual strategy, region and typical investment preferences tags should throw up a very workable long-list of potential investors.
Preqin has also recognised the increasing influence of consultants to flows in the hedge fund industry in its product range. The Premium version of Hedge Fund Investor Profiles contains consultant information, and in addition there is a dedicated product – the Preqin Alternatives Investment Consultant Review ($695). The 2012 edition contains profiles for over 350 different investment consultancy firms.
Consultant profiles within the Review contain information on the types of services offered, asset classes covered, key financial information, direct contact information for relevant contacts and details showing which consultants are being retained by 1,560 institutional investors from around the world. The review identifies key trends in the consultant universe plus information on the market’s make-up. Of particular relevance for owners or marketers of single manager hedge fund businesses the Review shows which firms operate a buy-list, which firms consider first-time managers, and what they look for when considering new opportunities. The Review is also relevant to investing institutions looking to benchmark their current consultants or to investors considering the services of consultants.
The other directory-like product from Preqin is the Sovereign Wealth Fund Review, which costs $595 and provides a detailed analysis of sovereign wealth funds and their activity in all different asset classes. The Review contains useful analysis plus full profiles for over 60 sovereign wealth funds worldwide. Of all investors in hedge funds SWFs are perhaps seen as the most desirable – they have stable long-term capital, are professionally managed or advised, and can write very large tickets.
The first article in this series covered lead generator Murano Systems and the next article will feature Brighton House Associates. The final part will also draw some distinctions between the three and how they are positioning themselves, and so will come back to how Preqin is trying to compete more directly with the pure lead generators.