“Growth is never by mere chance;
it is the result of forces working together.”
James Cash Penney
Launching a private fund isn’t terribly expensive. Between attorney fees, vendor deposits, regulatory and compliance costs, it will set you back about as much as a year of college tuition. Yet when I met with prospects early on, my business plan came off as audacious. ‘A hedge fund? Here? Why?’ was a common refrain.
It’s true, few private funds have launched in Nebraska, making them seem exotic or unattainable, like an invitation-only yacht club. But it never struck me as crazy, especially since Omaha birthed the world’s most successful private fund ever. It’s worth noting that most of its early backers were of relatively modest means.
Unfortunately, what I had in vision I lacked in capital. In the hedge fund world, when a talented manager leaves to start his own firm, previous employers are often eager to back him. Any hard feelings about his departure are quickly overcome by economic self-interest. Few managers hang a shingle absent a strong track record, and the world has always had more capital than investing skill. Each year, the list of new launches are littered with Citadel, Millenium or Tiger alumni, many of whom left with their employers’ blessing and frequently some of their capital.
This wasn’t on offer, so I had to start from zero, known in industry parlance as bootstrapping. Epigram Capital Partners Fund launched January 1st, 2025 with just five limited partners and $2.5 million in assets. I also happened to office beneath a bowling alley, which I’m sure added to my air of legitimacy. I told my partners that I had the wherewithal to do this for three years without a salary, and because expenses were high relative to assets, I reimbursed the fund’s early operating expenses. I was so committed to its success I actually paid my partners for the privilege of managing their capital.
This month, I’d like to share that my hard work is beginning to pay off. On October 1st, Epigram Capital welcomed two strategic investors, both of whom committed $20 million which will fund over time. Today’s assets under management are approximately $25 million, which I considered the threshold for sustainability when writing my business plan. What’s more, both parties have agreed to a five-year lock-up, providing substantial runway in which to scale. While their identity is protected by confidentiality agreements, both are pillars of our community and I couldn’t be more grateful for their backing.
Historically, I’ve disclosed the fund’s top ten holdings each quarter, one month in arrears. I’m not compelled to do so but preferred to err on the side of transparency. Given assets grew by two-thirds this month, and the prospect of an additional $30 million in the not-too-distant future, I’m pausing this disclosure. I can’t prove that it impacts prices, but I have noticed an increase in trading volume in businesses that I’ve written about. If you’re a limited partner, I will still provide them upon request and continue to report performance in my letters quarterly.
Having met with over 350 prospects during my capital raise, I know first-hand that backing an emerging manager is not the easiest sell, regardless of pedigree, track-record or charisma. My Private Placement Memorandum requires an acknowledgement that you may incur substantial or even total loss of your investment. I don’t use leverage, so I’m unsure that’s even possible but I left it in at my attorney’s assistance. In the two years I’ve been doing this, it’s been my aim to scale the fund deliberately, earn a reputation for thoughtful allocation and provide differentiated returns that don’t mimic your other holdings. I take the commitments these strategic investors as evidence that my plan is working.
While size isn’t necessarily the best moniker of success, life can be difficult without it. At $55 million in assets and commitments, the fund is still small by private fund standards, but among funds that buy public equities, I believe it’s the largest raised in Nebraska in at least a decade. Hopefully the fund’s increased size and scale will increase its marketability, allow it to accept larger commitments and increase its durability and longevity.
If you passed the first time due to any of these concerns, I’d welcome another conversation.
Sincerely,
Dan Walker