This “Amazon For Hedge Funds” Offers Free Access to Allocator & Hedge Fund Information

Talk around artificial intelligence in finance has been largely focused on trading, but we’re starting to see new, unsung use cases pop up across the market. In an interview with Hedge Fund Alpha, AlternativeSoft CEO Laurent Favre explained how his firm is using AI in its platform that provides hedge funds with free access to allocator information.

He also shared his predictions for future AI use in finance beyond just trading along with the biggest difficulties with capital raising.

Challenges with capital raising

Raising funds has always been one of the toughest challenges for hedge fund managers, Favre noted that managers have a limited amount of time to reach $300 million in assets in order to survive. They can’t hold over a year or two at less than $300 million because they have to pay their employees. Meanwhile, they have to spend on sales and marketing in order to raise the necessary funds.

“In order to do sales or marketing, what do you do? You go to conferences, or you use brokers, or you do cold calls, calls, emails,” Favre said. “However, this takes time, cold call[ing], we know this takes time with the due diligence. To reach out one by one with email is fine. And you need to track [your] record as well if you are a bit young, 12 months, 24 months, it takes time all this. So you know that you will lose money in the first 24 months.”

AlternativeSoft offers a new way for hedge managers to market their funds, which is called a hedge fund market place. Favre said the hedge fund joins the marketplace to connect with 150 potential allocators there.

“I will compare that to like Amazon, who are selling books, or like a conference where there are already 150 allocators,” he added. “Imagine you are a hedge fund, you have a 24-months track record, you have $300 million, and you want to go a bit higher. Otherwise you will lose your guys. So you have two choices. You can go to a conference: you have to go, you have to pay, you have to meet each allocator. Or you can go on a page: you publish your page, and you show it, and you can be potentially seen on the screen by 150 people.”

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Amazon for hedge funds

When Amazon started, it was just for books, and AlternativeSoft is currently just for hedge fund managers. The e-commerce giant didn’t offer just a new way to buy books. It also enabled people to preview the content online.

“It was the first thing that you were able to go on Amazon for the books and have a preview of the book,” Favre explained. “You were sitting on your chair. And then if you don't like the book, you were able to see another one without going in the library and taking time. So you were saving time, and you had as well reviews because some people were writing the reviews. ‘Wow, this book is so cool,’ or ‘This book is so bad.’”

AlternativeSoft also offers a place for allocators to read reviews of hedge funds before they invest.