How to be a Successful Business Builder

Insights from Rahul Moodgal

During his five year tenure as the partner who headed Investor Relations and Business Development at TCI, Rahul claimed the crowns for single handily raising the most capital in the shortest period of time ($20bn in 3.5 years), the largest country fund launch in history ($1bn for India fund TCI New Horizon) and for the largest sector fund launch in history ($1.1bn for financials sector fund Algebris) in the investment management industry. Prior to working in investment management, Rahul was an academic and he studied at 19 universities in four countries – the UK, the US, Russia, and Japan. He is a graduate of the Universities of Keele and Cambridge as well as the London School of Economics. He is also a qualified counsellor, bartender, musician, English teacher, interior designer and DJ. Rahul is currently training to be a music therapist.

Today, Rahul works independently helping investment managers across the world build out their businesses. Currently he is a partner to one firm, where he works officially, but he is in discussions with several others to determine who he will partner with. He has also done numerous pro bono projects.

Rahul is also involved in multiple charities. He is a trustee of Whizz Kids (a charity for disabled children), trustee of the CrEdo Foundation (which deals with the mental health of young people), patron of Mulberry Bush (which launched the Rahul Moodgal Prize for Therapeutic Child Care in 2015 in his honour), patron of British Olympic Association / Team GB, patron of the Triangle Playground (the oldest playground in the UK that provides a play space for children in an area of inner-city deprivation in London), Chair of the the board of Scientific Adventures for Girls (Oakland, California) and an active fundraiser for the British Red Cross, particularly focused on their disaster response team.

Introduction

One thing that struck me right away about Rahul was the greeting card I received to my office after our first 10 minute introductory call. The card was handwritten with a short and sweet message that thanked me for my time. I have never received a card after a meeting, let alone a call. Even though I knew I wasn’t the only one Rahul had written to, I still felt special, important, valued, and impressed by Rahul. I was excited to start what would hopefully turn in to a long-term dialogue.

I didn’t know at the time that I would receive more cards, one pineapple themed after we met, and my favourite one which read “you are awesome”.

When I first heard about Rahul and his accomplishments, I didn’t know what to expect. I meet successful fundraisers daily, each with their own strengths and weaknesses, but what was I to expect from the man everyone refers to as the most successful hedge fund marketer in the world?

I expected I would meet someone inspiring and intelligent from a career standpoint and also a bit arrogant, perhaps condescending, and who wouldn’t be interested in speaking to me without at least 10 attempts at contact. Instead, my first message was responded to on the day and I eventually met someone down to earth, empathetic, and honest. Very honest. I can’t ever imagine being disappointed in someone like Rahul, because he is so much himself.

Every day I am asked the question “What makes a marketer successful?” Who better to answer this than the man who broke numerous fundraising records and can call on all the biggest investors in the world. Perhaps we can all learn from him, beyond his answers, from his story.

I am neither a manager, nor a client, nor someone who can provide a service to Rahul, and yet he still took the time to write me cards. Something so simple, but something that inspires so much positivity would seem to obvious.

Why doesn’t everyone write a card? Why doesn’t everyone strive to make other people feel important? Why doesn’t everyone go the extra mile to build relationships?

1. Rahul, what is your story?

19 universities in four countries?

“I was told by teachers that I wasn’t smart enough to attend university. I wanted to be a diplomat so worked hard, got good grades and went to Keele to study International Relations. I then went to Cambridge and did a Masters in the Economics and Politics of Development. After my Masters, Keele asked me to come back and run their Politics of International Relations Course and teach second year undergraduate students. Afterwards, I decided to do a PhD and become an academic. I went to LSE. My PhD focused on how regions with resources use those resources to gain political and economic leverage over central governments. I chose to focus on the relationship between the Russian Far East (the area between Siberia and the Pacific Ocean) and Japan. As part of that, I did some field work which included time in Japan and Russia. I was the first British and European student to ever study at the Far Eastern State University in Vladivostok (the most south eastern city in Russia.) I also studied Russian and became fluent at the time. The top guy in my field was at the University of Hawaii so I went there and then also spent a bit of time at Harvard, the University of Illinois at Urbana-Champaign, and the University of Washington in Seattle. I had a great time! Hence all the different universities.”

How did you get into fundraising?

“I got bored of academia. I had done some work with the United Nations in the interim too, but it just wasn’t for me. So, I applied to different jobs and one came up at a boutique asset manager called TT International. They had never had someone looking after clients and they thought that the skills needed to look after clients were similar to those required for teaching – they needed someone who is patient, who can explain the simple and the complex, someone who can write, and someone who is able to deal with people of different backgrounds. I was there for seven years and overtime I got more and more involved in the process of asset raising. I was never the lead asset raiser; I was looking after clients and helped the firm close the circle. I loved it - you just learn how the whole industry works. The unique thing about investor relations is that you need to understand all the different parts of a business because you have

to elaborate on all of that to investors, both prospects and existing. So that’s where I learned my trade, and overtime as the firm grew, obviously the number of people grew, processes grew, glass ceilings grew and so I went to work for a private Swiss Bank. I hated it! I lost my confidence. It stood for everything I did not value and so I resigned after six months.”

How did you start at TCI?

“While working my notice period at the private Swiss Bank, I was approached by a head hunter for a role at TCI. He was very principled and became and remains a dear friend. At the time he was the guy recruiting for all the hedge funds in London and he had a rule of not stealing from one guy to give to the other. If he helped you recruit he would never steal from you. I remember, he showed me the job description and I said “this is my dream job”. I went in, did five years there, had the time of my life. It was just insane how much money we were raising and how quickly we could raise it. We had investors from all over the world. From Hawaii to Australia, Iceland to South Africa. I did it on my own for two years and then I built a team – I had at the peak six people working for me directly and I was part of TCI management team.”

What do you do now?

“After the crisis, I thought I want to go out and do what I had done for TCI but with the people I want to work with. Parvus, the first and only remaining manager on the TCI platform, said they wanted to continue to work with me. And so, I had my first manager. I then also added another manager in the same building whom I had unofficially assised for years. And then, a year later, The Hewlett Foundation, an investor I’ve worked with for 20 years, approached me with a portfolio manager who was starting on her own, and said we want you to build the firm and we will be the anchor investor. Overtime those managers have evolved. I still work with Parvus and I am now in discussions with other managers with whom I want to work with for the next twenty years!”

2. What do you consider to be the necessary traits to be a successful marketer?

“Patience. Ability to take rejection. Being grounded. Having self-awareness about you, your peers, and your competition - who they are, what do they do, and how you are positioned against them. Humbleness. Being transpar- ent in what you are doing and why are you doing it. If you are, then people will be more transparent with you. There are three key things: Talk about mistakes you’ve made and lessons you’ve learned, demonstrate how you are different and unique, have a business plan in your head - how you think about people, assets, infrastructure and where you want to be vs where you are now. People don’t just want to invest in a fund, they want to invest in a person, a team, a business, a vision, a strategy!

I can call almost any endowment and give them an idea. I’m just honest - I’ve told investors to redeem from funds. People would never do that. If you are paid on assets raised, you would be giving away your compensation. That is why don’t believe in that formula. It is not alignment. It is focus on speed not quality. I actually care about investors. There have been situations where I don’t know what the manager is doing, I feel they have lost focus and tell an investor they should redeem now. There are times when people have said they don’t believe me but then they come back saying wishing they had listened.”

3. What are the key mistakes you see marketers make and what has led to your success?

“When marketers don’t listen to the investors or keep annoying and harassing them. Aggressiveness. People who really don’t understand how they are positioned and what market standards are for terms, fees, liquidity, performance. In many instances, marketers/funds thought they were amazing and unique and had a great philosophy, but the reality is that what they have delivered is bad. It is not unique!”

I have focused on relationships instead of assets and have taken a long-term view. I spend time understanding what investors want. I want to be able to say that I can call on those people in 20 years’ time. Really knowing who people are, how they are connected, who is on their boards, how they think, what has worked for them and what has not.

People spend so much time focusing on raising assets as quickly as they can from investors and spend little time on relationships and organisations.”

4. What do your clients respond to?

“Honesty, good analysis, unique information - controversial and thought provoking, personalised communication. Make a personal connection with someone. Find out what someone likes and invite them, for example to a wine tasting

– when people share common value then there is a point where people can interact. In some cases, I have known an investor for many years before an investment happens. One investor I’ve known for 20 years, took 15 years to invest with me and when they did they put $300m to work with two ideas I gave to them.”

5. What are the key lessons you learned as a marketer

“To focus on the quality of the assets; you need to focus on making sure investors are aligned with you. To tell investors never to give you all their allocation in one go but instead to spread it over time. This allows investors to take bites and taste and therefore understand an investment and like it before committing more to it. Also, when you first invest in a fund you’ll never know how it will perform in contrast to other funds in your portfolio. This allows investors time to understand that.”

6. Can you tell me about the most challenging situation you have had to deal with in your role?

“The hardest thing is working with a portfolio manager who does not listen. Also, I’ve had a situation where an investor threatened me because I couldn’t give them capacity in a fund I was working with. A more common situation is where an investor has done all the work, said they’re giving you the money and then change their mind on the day they are meant to be wiring you the monies. Either they have not been transparent in the process or they’ve had a blow up with another hedge fund in their portfolio or something else has changed. But you have to be long-term and think about a relationship with the investor.”

7. What, if anything would you do differently?

“I’ve helped some people along the way that I probably shouldn’t have helped and that just manifests itself in the way that they are not appreciative, don’t listen, or don’t respect the process of fundraising. But at the time they seemed like good people. It’s not that I didn’t believe in them, but I look back now and they were not appreciative. I question their integrity, mission, focus, their egos, and this is such a relationship driven business. It’s crucial to attach yourself to the right people. You are effectively an ambassador for a person, a product, a strategy, a fund, a brand. I’m much more careful and thoughtful about it now. You learn over time who you want to work with and why you want to work with them.”

8. Why have you not built your own 3rd party marketing business?

“It’s disingenuous to the manger and to the clients. You get paid very well but you’re just raising money then you go away. You don’t retain an interest in the business. You’re not bothered if the firm does well or not, as long as you get paid. I don’t think you can retain long-term relationships if you bring people to the table and don’t remain with them on that journey. Your focus is speed and execution, i.e. to get paid, and not duration and quality. I’ll tell managers I work with, I can bring you the best investors in the world, but you have to know that I will be with you, know what you are doing, and still be in touch with those investors. So, I have an interest in what you’re doing and making sure you’re doing it the right way. I don’t want to just introduce someone to a firm, get paid, and walk away, because then that person can go bad not listen, or do something stupid. But if I’m part of the firm at least I have a say and still have eyes on the ball.”

9. When and why did you start writing greeting cards

“I’ve always done it. I always do it after I see people. I take relationships seriously. It adds a different level. It shows people that you really care about a relationship and you’re willing to spend time to solidify it. If it’s important to you, you would take five minutes to write a card. I think it just takes relationships to a different level. If I don’t write a card after meeting someone there is a reason why!”

10. What led you to getting involved in philanthropy?

“I’ve always done charity work – from the age of eight at school. I just think we all have a moral duty to do something, especially to give back to people who are less fortunate than ourselves. The big thing that people don’t have today is empathy and the EQ to understand that the marginal five, ten pounds, whatever the number is, doesn’t make a dif- ference to your own life but can make a difference to someone else’s. It’s not just about money - it’s about time and energy. For me, with wanting to be a diplomat, studying development, when I was offered the TCI job it was a culmi- nation of my passion and my abilities at one firm – I can be working with a guy who is giving all this money to charity and I can still do my fundraising and business building. When I resigned from TCI all my immediate team, except one person, left with me and one of them went to work for Whizz Kids which is a disability charity. She reached out and asked me to help her arrange a charity event for them and upon meeting Team Whizz-Kidz I fell in love with them. That love still reigns today! The rest is history.”

11. How do you see the future of the industry

“Regulators are not necessarily focused on all the right things. Regulation isn’t 20-20, it’s looking back in the rear mir- ror. People don’t understand the asset-liability mismatch of UCITS and 40 ACT funds for example. Retail investors are in structures where there is such a mismatch. People think these funds are more liquid than they are. The use of social media and advertising to promote alternatives strategies is growing. Some managers are advertising on every social media platform. Social media is bad for the industry as it targets retail investors. If we look back at the financial crisis – why did we let the retail investors go into certain products?

Also, there is institutionalisation of the industry, which means larger pools of capital are investing and strategies are becoming overcrowded. The opportunity set is declining. Historically there were a lot less hedge funds – now there are more people playing in the same space. It’s harder to generate alpha. At the same time, pre-2008, there was this culture of ‘…..graduate Friday, start a hedge fund on Monday.’ But barriers to entry are growing. Regulators are taking this more seriously. This is a good thing.”

12. How do you think a marketer’s role will change and how do you think marketers need to adapt?

“Yes, it’s already changing - a lot of it is about education, understanding the universe and your peers and how you are different. Now the due diligence process is much more thorough and detailed. Investors hold on to cash and are cynical as too many of them have made mistakes. A lot of marketers don’t understand the industry – structure, governance, liquidity, asset-liability, duration. This is key to being able to target the right investors. For example, a manager recently gave me a list of 800 investors and I narrowed it to 40 for them to focus on. A marketer needs to understand who would really consider an investment with a manager.”

13. How should a marketer be compensated?

“We have to raise the funds and get them closed and then we have to look after those clients. If you are paid only on assets raised, you don’t have to maintain the relationships. Your compensation should be aligned with the busi-

ness. Otherwise, how are you incentivised if a manager is closed and you are building a pipeline? In an ideal world, a marketer should have a profit share of the business. It’s just a different mindset. This makes you focus on duration not execution. I don’t believe managers should give away equity stakes, it’s too complicated if things go wrong. Having a profit share or shadow equity amounts to the same thing.”

14. What would be your advice for anyone thinking of building a career in alternatives fundraising?

“Be yourself don’t be something that you’re not. Be prepared to be punched in the face a lot. Make sure you understand what you’re selling. Focus on duration not execution. Be patient. People tend to focus on a fund’s strategy but it’s not about that! It’s about structure – structure of a fund, of a business, of a team, of incentives, of fees. Etc.”

15. Do you have any future projects planned?

“I want to help a lot of new smaller guys and get in there in the beginning to have an influence on them, their funds, their firms, their visions, their strategies as I believe many people know how to manage money but have no idea how to manage businesses. Indeed, it is usually mismanagement of businesses that leads to problems for them, for investors, and for the industry.”