Tag Archives: financial services marketing

Why Social Media is WRONG for Asset Managers

acc009-reluctant-bride-cake-topper-mainThe latest round of blather regarding why and how asset managers (in this case, hedge funds) should use social media can be found in this month’s publication of a research study conducted by the respected marketing firm, Peppercomm.

Entitled “Everyone’s Tweeting About Hedge Funds, Except for Hedge Funds,” here are some of that study’s “key findings” and recommendations (…complete with my sidebar commentary):

  • Mentions of hedge funds on social media in 2015 were up 46% over the prior year (… and I’m at a loss to understand why this information has any value.)
  • “Despite this uptick…” (the study noted), only 11% of the 314 largest hedge funds had a social media presence in 2015, representing less than a 10% annual increase (…and I’m at a loss to understand why there should be any correlation between mentions of hedge funds in social media, and hedge fund use of social media.)
  • The study’s social media usage growth figure excluded hedge fund participation (at 73%) in LinkedIn (…and I do understand why: because this would have changed the study’s conclusion.)
  • Hedge funds need to get with the program and start using social media because, according to Peppercomm (…and I quote them here, verbatim) :

“Every time hedge funds shy away from the social media conversation, they throw away important thought leadership and content opportunities for themselves and for the industry.”

Apparently, there is now a “butterfly effect” in marketing, where an individual hedge fund’s failure to use social media can handicap the entire asset class. On behalf of semi-rational marketing professionals everywhere, I apologize to the global hedge fund community for unhelpful “market research” like this.

Other than sketchy research, there are at least three additional reasons why hedge funds, as well as a boat-load of other asset classes, should NOT be using social media:

Reason #1: There are marketing essentials, far more important than social media, that you are failing to do well.

Here’s a quick diagnostic of your fund’s marketing sophistication, based on a very short    list of marketing essentials that are far more critical to asset growth than social media, and that MENSA-level hedge fund quants, who can speak in equations, often have difficulty understanding:

  • Brand and Marketing Strategy: If you don’t have a written Marketing Plan, you’ve already flunked this part of the quiz.
  • Website: This is the mother ship of your brand. Lots of funds have websites, but very few of those sites provide meaningful insights into the firm, or deliver compelling reasons for investors to learn more about them.
  • Sales Collateral: Investors and allocators wince in pain when they hear the word “pitch deck.” Most pitch decks are incomprehensible.
  • Sales Process: If you think this means endlessly sending out emails and making phone calls, you’ve flunked this part of the quiz as well.

Reason #2: Your compliance guy is correct. The risks of social media really do outweigh their benefits.

Given the regulatory environment, compete with its fuzzy marketing rules and government agencies looking for any reason to put “Wall Street types” behind bars,  social media represents an accident waiting to happen.

For disaster to strike, all it takes is a summer college intern, who wants to be helpful by posting or tweeting an item or comment that hasn’t been cleared, or that gets garbled while he’s also texting a friend to meet him for lunch. And the intern (or full-time marketing associate) will not be entirely to blame, because most funds that attempt social media won’t have formal content standards, a tight approval process, or monitored implementation. It’s a lot of work, and few funds have the experience or the resources  to managing social media properly.

Reason #3: You should never drag a reluctant bride to the altar. It doesn’t end well.

Hedge funds avoid social media for a variety of stated and unspoken reasons. For example: They don’t understand how it can drive asset growth. Or they don’t want to be bothered by the operational disruption it might cause. They think it might diminish the opaque communication on which the cachet of hedge funds is founded. Or they think the sales and marketing function is beneath their station.

All of the combined reasons, rational or dumb, for why hedge funds don’t use social media may best be summarized in this way: as an “industry,” alternatives are simply not ready to use the tactic. Most hedge funds know their limitations, and are correct to resist something they don’t understand or  believe in.

The validation for this theory is found in the large scale hedge fund adoption (73%) of  LinkedIn. Funds may currently be passive LinkedIn users – supplying only their profile information, and avoiding   any posting of content or user groups comments – but their very presence demonstrates that they are willing to use social media platforms when it makes sense to them, and when they think the risks are manageable.

All of the research studies, and hair-on-fire forecasts of missed “thought leadership” opportunities, will never change the collective mindset or marketing velocity of asset managers who are hard-wired to be methodical and slow-moving. In fact, like supporters of Donald Trump, marketers’ excoriations and rational evidence in support of social media may even drive left-brain financial managers to a more well-entrenched position, ensuring that they will never dip their toes into the pool.

Conversely, by teaching fund managers to walk before encouraging them to run – in terms of marketing tactics – and by helping to deliver tangible business outcomes (not social media “likes” and “shares”), marketers will earn their trust and respect. At that point, fund managers rather than marketers will drive the interest and discussion regarding ways that social media can help them.

Until then, marketers need to back off hedge funds with respect to social media.

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Why Your Fund Marketing Strategy Isn’t Working

helpIn manager selection, most investors will look beyond your fund’s track record and give weight to organizational factors that provide them with confidence that the business is well-managed and likely to succeed long-term.

If your strategy and marketing efforts have qualified your fund for an investor’s short list of candidates, then business management factors can either close the deal or disqualify you from further consideration. And with so many funds competing for attention, investors are always looking for any reason to bump funds off their “watch” list.

Like all types of business, your fund’s organizational strength is based on tangible and intangible factors related to the quality of its leadership, the consistency of its operational disciplines and the depth of its customer focus.  On a more granular basis, here’s what those 3 factors entail:

Quality of Leadership: Investors Bet on the Jockey

  • Articulating the Vision…This task is far more complex than sticking a mission statement in a pitch deck or website; it’s a belief system that drives the business. According to Fast Company magazine co-founder, William C. Taylor, leaders at high performing companies are “able to explain, in language that is unique to their field, and compelling to their colleagues and customers, why what they do matters and how they expect to win.” Taylor claims leaders who think differently about their business invariably talkabout it differently as well. Your fund must “talk the walk” to inspire and convince internal and external audiences.
  • Building the Culture…A company’s culture is shaped by how its leadership “walks the talk,” and has a great impact on organizational health and longevity. Some businesses succeed financially in spite of a poisonous or opaque internal culture, but never reach their full potential because the people who work there are not truly engaged. Beyond depicting the traditional org chart, your fund needs to explain to investors how it manages human capital, and must demonstrate how it fosters transparency, communication and teamwork.
  • Thought Leadership…This overused marketing term is typically associated with blog posts and publicity. But bona fide thought leadership is less about self-promotion, and more about acting as a serious student of one’s own professional discipline; whether that be asset management or auto mechanics. Your fund must demonstrate that it’s much more than a one-trick pony with a smart investment formula. Investors want to engage with people who are constantly exploring new ideas and better approaches in their pursuit of excellence.

Operational Discipline: Investors are Business Detail Junkies

  • Working ON the Business…Most business owners are so focused on working AT the businesses (i.e., managing the fund), that they fail to create or properly manage all the internal disciplines necessary for the enterprise to succeed. More importantly, according to Michael Gerber – author of “The E-Myth: Why Small Businesses Don’t Work and What To Do About It” – your fund’s intrinsic value and ability to survive is based on how well it has defined, documented and perfected all of its internal systems and methods. There’s a reason why McDonald’s french fries taste the same in all of its worldwide locations: they constantly work ON the business of sourcing, preparing, cooking and serving french fries.
  • The Outsourcing Challenge…For many businesses, the outsourcing of middle and back office operational functions can make great economic sense. But investors need to know that your fund isn’t simply a “virtual” business composed of a contractual network of various 3rd party providers. If your fund outsources any critical business functions, it needs to assure investors that you (not the outside providers) are 100% accountable for those functions. More importantly, your fund must demonstrate rigorous internal disciplines for oversight that ensure the accuracy, timeliness and quality of all outsourced functions.

Depth of Customer Focus: Investors Need to Like You

  • Accessibility/Affability/Ability…These “Three As” of consultation, taught for decades in medical schools, have application across all service businesses, including fund management. Every type of customer – whether they’re shopping for legal representation, tax advice or portfolio alpha – is influenced as much by your likeability as they are by your college degree, your fancy office or your IQ. Irrespective of its track record, if your fund (as individuals and as an organization) doesn’t come across as friendly, easy to work with and professional, investors are unlikely to explore a relationship. Ego and attitude can be brand liabilities for any business, and fund managers who display those personality traits risk losing out to competitors who may be less talented, but far more likeable and marketable in the eyes of investors.
  • Managing Customer Experience…Many funds don’t even think of investors as customers, but rather as potential beneficiaries of their market insight, trading genius or financial returns. This stilted point of view is often reflected in how those funds communicate and behave, both with prospective and current investors. But the most successful funds understand that investors are people, regardless of the size of the institutions they represent, and that nurturing personal relationships matters. Your fund would be well-served by following the advice of Bruce Temkin, founder of The Temkin Group, and a recognized authority in customer experience, who suggests that all companies:
  • Focus on your customers’ needs, even when internal priorities push them to be ignored.
  • Orient your thinking on customers’ journeys, even when the organization cares about individual interactions.
  • Design for customers’ emotions, even when success and effort are often the better understood parts of an experience.
  • Develop innovative ways to treat customers, even when the status quo seems to be good enough.

Selling performance alone is a dead end for funds, and is the #1 reason why fund marketing strategies fail.

Increasingly, investors are more interested in how funds create and sustain a successful business enterprise. To build a company that provides investors with the confidence to put capital at risk, fund managers must be held to the same high standards of leadership, operational discipline and customer focus that private and public companies face in seeking to attract equity investors.

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A Few Marketing Best Practices for Alternative Investments

Although the lion’s share of alternative funds have yet to dip their toes into Lake Transparency, some small funds are cutting a path for the rest of the industry, in terms of smart marketing…if that’s defined by how clearly they explain their value proposition, and by how well they create investor interest.

Although it doesn’t provide a complete picture, very often you can gauge a fund’s marketing savvy by its website, which in our online world serves as the mother ship for a company’s brand.

So based solely on their websites, here are two small funds that can serve as examples of marketing best practices:

  • Monterey, California-based Topturn Capital – a single, low volatility hedge fund, and
  • Lake Forest, Illinois-based SilverPepper – a liquid alt firm offering two sub-advised funds

And here’s why these two firms are exceptional:

  • Both funds demonstrate that small firms can market themselves very effectively. In fact, smaller funds have a marketing advantage over larger competitors. Fewer people often can mean less politics, a more flexible compliance viewpoint and fewer opinions from the peanut gallery, which serve to dilute core messaging and can kill great ideas.
  • Both funds tell engaging, believable stories about themselves. Their stories explain their investment philosophy and commitment to their business in very human terms, directly related to their own life experiences. They don’t pontificate; they connect with people.
  • Both funds use video to tell their stories. Seeing and hearing fund principals makes those individuals and their firms credible and likeable. This visceral connection is critical in a business where “management” is consistently cited as a leading factor in fund selection.
  • Both funds display thought leadership. Their intellectual capital is showcased, but not in a self-serving manner. Topturn Capital, in particular, succeeds in maintaining market interest and increasing its credibility through well-written blog posts on topics ranging from Ebola to the market impact of presidential cycles.
  • Both funds understand the importance of brand strategy. All of the website elements – content, messaging, design, navigation – support a well thought-out effort to differentiate their firm’s value proposition, and to make it memorable. These are not cookie-cutter marketing solutions; and they reflects pride, creativity and skin in the game.

Admittedly, the SilverPepper website pushes the marketing envelope, in terms of what’s acceptable to most hedge fund compliance officers. But here’s what’s significant about the emergence of liquid alt firms like SilverPepper: because of their retail orientation and facility with sophisticated marketing tactics, that emerging asset class will indirectly drive hedge funds to show greater courage and creativity in marketing in the years ahead.

For most hedge funds, whether they emulate Topturn Capital or SilverPepper, the adoption of marketing best practices – or any marketing practices at all – is long overdue.

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This article appears as the March edition of “Marketing Alternatives,” a monthly column published in the Barclay Insider Report, a newsletter produced byBarclayHedge, a leading provider of alternative fund data.

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