Supply defines demand

7 December 2021 - 9:43 am

Every fund principle or owner will tell you: start with acquisitions for the fund, as asset profiles define the collaborative appeal. If a fund and its assets under management or asset acquisition profile is/are not attractive to current and future shareholders then the objectives of the fund will not occur at pace.  If a fund operates and there are no assets generating a strong return, a prospective shareholder is less likely to add that fund to his or her portfolio in the present day, or moving forwards.

However, when a fund is trading and share values are increasing in value, a prospective shareholder is vastly more likely to assess suitability for portfolio inclusion. Founders and operators of funds should focus on developing their AUM (assets under management) or acquisition pipeline, and growing that fund portfolio strength ahead of the demand for shareholder positions. Those who take a different path do so at their own peril from the appraisal of the competitive landscape that our research team undertook for nearly 6 months. If your fund can then meet the needs of appeal, de-risking and offering sustainable value that can meet vigorous liquidity management protocols, you’re in a great spot.

Over the last decade or so, the shared economy and collaborative environment have started to emerge and become part of our everyday world. We just need to look at the likes of Airbnb, Uber and crowdfunding p2p platforms in general to see that. In simple terms we have a multifunctional, community based alternative use for our assets and how we acquire them. If you had said to me last century that I would buy a house, or share a car, or rent a property with or from a shared community I would have thought you were not in touch with reality. How wrong I would have been!  My personal observations of the commercial world have now been shaped to view a collaborative arena as all-powerful.

The essence then of a fund, its shared wealth and intellectual capability to amass a greater level of profit creation, applies with acute relevance.

And so of course, like any business in any industry, the supply profile defines the level of demand.  Converting that demand to established relationships invites questions about the mission of the business. I recall that in our first round of shareholder generation, via a pledge focus, I was asked in multiple ways the same question. That question was ”why are you not just doing this yourself?”, which of course translates from the very polite format to a more direct ”why are you sharing the profits when you can keep them all for yourself?”.

The answers are based on scale and speed.

Would I prefer to share the profits from 100 assets or retain them exclusively from 25 assets? Having modelled various scenarios in this strategically important decision-making process, the answer was not only clear but actually wholly conclusive. Not just for scale purposes but when time is in many cases against us, our careers have an expiry date, after all, time is indeed of the essence.

Then we come to the quality and consistency of supply. A fund, be it for real estate or other asset classes, traditional acquires assets or positions of investment in 3rd party providers. I have chosen to de-risk our portfolio profile but ‘also’ have control of certain assets under management by owning them at a development level. In simple terms, I become the developer that offers to the fund debt and equity positions to maximise the funds return of investment whilst retaining supply quality control. As a relevant example, property developers in the UK will typically work to a bottom line of between 30 and 40% pre-tax profits. If part of the capital requirement, within what is called the ‘capital stack’ for a project is received by a fund, the return to the fund can be as high as 80% without risking the integrity of the development itself.

As long as the development is securitised, the de-risking buffers are applied, then a fund can negate downside and maximise returns. The conclusion, supply defines demand, demand defines scale and speed. As ecosystems go, a regulated fund with supply controls, was the only way to go. The Alliance Fund is dedicated to meeting portfolio requirements, enhancing diversification and creating profits that ensure a sticky appeal to long term collaboration.

To understand the metrics and performance indicators of our fund, my team and I stand ready to furnish the suitable prospective shareholder with the relevant information to enable educated decisions. If you hold a similar or like-minded strategy, you will find the engagement to understand our objectives, asset(s) and profit profiles to be very beneficial. The benefit? Sector leading returns on investment that induce engagement and retain valuable relationships for the long term. Whilst Rome and the Roman Empire was not built in a day, they stood as a powerhouse for over 1,000 years.

With that longevity focus, we start each day seeking to forge alliances and we look forward to assisting you to assess the value of an alliance forged with our fund.

At your service.


Iain Crawford.