Investors streamed out of the hedge fund industry in 2019, with more than $16 billion leaving in December alone, according to data-tracker eVestment.Small hedge fund managers are facing an uphill battle in raising funds, which many of them need thanks to the rising cost of technology, data, and compliance industry-wide. Conferences like the upcoming Context Summits in Miami hope to make it a little more manageable."There's an investor for every fund that's profitableit's just finding that right pair off."Click here for more BI Prime stories.Jon Caplis is remarkably optimistic about an industry that saw nearly $100 billion walk out the door last year.Caplis runs consultant PivotalPath, which tracks hedge funds on behalf of institutional investors, and sees "a lot of good tailwinds right now" for the $3.3 trillion hedge fund space.With big-name closures, investors' appetite for private equity growing, and a lagging launch environment, it may be hard to see any upside, but Caplis is confident in the quality of launches last year and the promise of relatively niche managers that are not well-known names."They are specialists, they know exactly what they are doing in their space, and they are a lot of opportunities that are event-driven and therefore idiosyncratic," Caplis said about some of the smaller hedge funds in the industry.They just need to raise enough money to stay in business. Increased costs for technology, data, and compliance have made it harder for smaller funds to launch, and for existing funds to compete with bigger ones.At this week's Context Summits conference in Miami, hundreds of hedge fundsprimarily smaller managers, though big-names like AQR, Kirkoswald, York Capital, and others will also be therehave paid to go on a series of speed dates with institutions, pensions, and more in the hopes of raising significant capital.For many managers, this way of fundraising is the only one that's justifiable."Raising money continues to be difficult, and that hasn't really changed very much in recent years," said Jeff Meyers of Cobia Capital, an equity hedge fund that is among the Tiger family tree.A conference like Context makes sense for a fund like Cobia because allocators "have to fill up their slots, and I think the bar is a little lower to get a meeting at the conference than it would be if we were trying to meet during the normal course of business."Shawn Kravetz, founder of Esplanade Capital Partners, said he's never actively tried to raise money or market his firm's two funds in the two decades he has been running the manager, but decided to go to Context this year to get his solar-energy fund in front of investors."At the end of the day, I am an investor, not a marketer. I don't think about flying around the world 24/7, pitching investors all day," he said. Context is a "highly concentrated and efficient way" to meet a lot of people, he added.But the problem with being one of an endless parade of meetings is you'll be compared to everyone else at the conference, said Mark Aldoroty, head of prime services at BNY Mellon's Pershing."You have to be prepared to explain why you're different," he said.Meyers said when Cobia attended the conference two years ago, the firm didn't wind up raising any money from the meetings it hadbut he is more confident this time around, thanks to a better stretch of recent performance. He is aware of the comparison factor Aldoroty mentioned, but still prefers Context to trying to getting dozens of meetings with investors when they are scattered across the country."Probably good to be their first or last meeting of the day, but you obviously can't control that," he said with a laugh.Even for funds that don't raise money, being at a conference will always help for networking, Aldoroty said."There's an investor for every fund that's profitableit's just finding that right pair-off."Join the conversation about this storyNOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
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