Tag Archives: hedge fund marketing

April 8, 2016 · 1:08 pm

Survival Skills for the Hedge Fund Apocalypse

GrimReaperThere’s an increasing volume of negative news regarding the “exodus from hedge funds,” in favor of less expensive alternatives such as liquid alts and “engineered equity” products. Although many large investors still maintain significant assets in hedge funds, the industry’s ratio of contributions to withdrawals has turned south, and the near-term outlook for hedge fund growth is not encouraging. Small and medium sized funds are likely to be hardest hit as the asset class falls out of favor.

There’s no short-term marketing panacea to offset what may be a rough road ahead for hedge funds, which is a storm that hedge funds have helped to create. More specifically, the industry’s collective lack of basic communication skills is a major contributing factor to the increased levels of investor dissatisfaction. Contrary to what’s reported in the Wall Street Journal, hedge funds are not helpless victims of volatile markets, poor performance or high fees. Instead,hedge funds are now paying the price for their own inability or unwillingness, over at least the past three decades, to explain themselves properly.

Although there are exceptions (which include those funds most likely to fare well over the long term), hedge funds are notoriously inept at expressing to prospective and current investors the “what, why and how” of their value proposition. Collectively, fund managers may be geniuses at left-brain, quantitative skills; but often fail miserably at managing right-brain storytelling skills, or at hiring right-brain people to manage those tasks properly. And unfortunately for fund managers, it’s those right-brain-related communications skills that can have the most significant influence on investor interest and loyalty.

Here’s the underlying problem: most managers continue to believe – despite a growing mountain of evidence – that investor engagement and longevity is based exclusively on fund performance. So that’s the basis on which they pitch their fund, as well as the standard by which they communicate its value to investors over time. In their opinion, nothing but performance really matters.

What those managers won’t acknowledge is that investors seek fund characteristics that have little or nothing to do with performance. In fact, what investors really want is validation that their allocation decision is sound, that the fund manager is transparent and accessible, and that relevant issues are discussed immediately and honestly.

The most recent de-bunking of the performance myth was produced by Chestnut Advisory Group (Investors Want Hedge Funds to Hedge), which further validates that high returns are not the top reason why investors allocate to hedge funds. Nearly 80% of the investors they surveyed indicated that “risk management” played the most important role in manager selection.

And that’s the fundamental marketing challenge for fund managers: building investor trust through clear and consistent communication, regardless of whether their performance meets, exceeds or falls short of benchmarks.

Building trust through communication in any profession – whether you’re selling accounting services, running for public office, or managing a hedge fund – means establishing and managing customer expectations. Here are three ways your fund can accomplish that goal:

Explain what you believe in. Investors care about what you do, how you do it, and even how you are different from other funds. But explanations of features and benefits do not drive behavior. What actually incents them to allocate and remain with you is based on the power of why. Investors need to know what drives you, what inspires you, what excites you. Your fund’s goal is to do business with the people who believe the same things that you believe. So you need to explain what you believe in.

The power of “why” goes far deeper than marketing strategy; in fact, it’s a human need deeply rooted in our biology, and serves as the foundation for all of our decision-making. To gain a better understanding of the concept, watch this 18-minute TED Talks video (Start With Why) by Simon Sinek. There’s a reason why it’s been viewed more than 26 million times since 2009.

Tell them exactly what you’re thinking. Too often, investor communication consists of boiler-plate, generic language that regurgitates news media headlines on the macro-economic factors that influenced portfolio performance. It’s a rationalization of why (most often bad) things happened, and provides no real perspective on the manager’s thought process. There’s zero insight into the quality of the manager’s thinking, or whether any thinking took place at all.

The investing world is well aware of the frank, detailed explanations in the annual report shareholder letters of Warren Buffett and Jamie Dimon, but a more relatable example of effective investor communication is available from Phil Goldstein of Bulldog Investors, an activist hedge fund focused on extracting value from under-performing closed end funds. Drill down into this newsletter’s (The Brooklyn Investor) coverage to get a sense of Phil’s no-nonsense communication to investors. His communication is simple, sincere, fun to read, and most importantly…builds investor respect and trust.

“Man Up” when things go sideways. It’s difficult to believe that any fund manager would be so short-sighted as to report performance when it’s positive, and then go silent when it’s not. But this spineless communication approach happens with some frequency, and most often involves managers who peg their value to investors solely on performance. For investors, in terms of trust, this is equivalent to playing a round of golf with someone who only writes down his score for a hole when he shoots a par, birdie or eagle. “Good times only” fund managers will always have difficulty finding any investors willing to play that game.

The medical profession provides an interesting corollary that demonstrates the potential benefit of communicating bad news. The University of Michigan studied the impact of improved communication related to medical errors. When their doctors began to explain to patients why an error had occurred and what steps would be taken to avoid it in the future, medical malpractice lawsuits dropped 65%. Customers – whether they be patients or investors – understand that the there are no guarantees in life, and most will respond positively to honest communication.

There’s a tangible payoff for setting and managing investor expectations. According to the Chestnut Advisory Group’s research, trusted asset managers will:

  • Raise significantly more capital
  • Be engaged more quickly
  • Be retained far longer
  • More easily up-sell and cross-sell

That’s a fairly decent return for any hedge fund manager, in exchange for an investment in clear, forthright, consistent communication with current and prospective investors.

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March 7, 2016 · 3:59 pm

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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August 14, 2015 · 6:03 pm

Bare Essentials: Marketing as a Necessary Evil

Business owners across all industries and professions start companies because they have a specific expertise or interest – whether it involves trading currency futures or replacing car mufflers – and eventually discover that selling their product or service is neither in their wheelhouse, nor something they enjoy doing.

To make matters worse, business owners often engage ad agencies, PR firms and outside (and internal) marketing “experts” who are always ready to prescribe a long list of tactical solutions (white papers, blogs, newsletters, publicity, social media, direct mail, conferences, advertising, etc.)…all of which may be more likely to generate distractions and invoices than new accounts or revenue growth.

As a result, business owners are often left confused, disappointed and angry over the lack of return on their marketing investment. Or they’ve heard all the horror stories and avoid marketing altogether, hoping their “connections” will drive new business.

Because marketing is viewed by many business owners as a necessary evil, a common question they ask is, “What are the bare essentials that I absolutely need to grow my business?”

Here’s a very short list marketing essentials for B2B and professional services firms:

 1. A Website that’s Worth Reading: Your website must provide visitors with a clear understanding of who you are, what you do, how you do it, why you are doing it, and who would benefit most from what you do. Your website should also:

  • Use plainspoken, simple language
  • Not ramble on, or seek to dazzle readers with your brilliance
  • Be written by a professional copywriter; not by you or by your attorney
  • Contain graphic elements that support your firm’s brand (avoid cheesy stock photos)
  • Feature a limited number of sections / pages, and be easy to navigate
  • Take advantage of Search Engine Optimization (SEO) tactics
  • Avoid being overly self-promotional
  • Present your professionals as individuals who are real and approachable
  • Use first-class, consistent photography for people’s portraits
  • Consider using a brief video (under 2 minutes) of your key people, and / or an animated video that explains your business
  • Include contact information; not a generic response form
  • Not require a user name and password to gain access to white papers or other content that showcases your firm’s intellectual capital

Even though your website will be “brochure ware” with little or no functionality, it’s important that it be properly wired into Google Analytics or clicky.com, so that you know who is visiting your site, where that traffic is coming from, what information they are looking at, and how long they are staying. If you don’t monitor website traffic on a regular basis, then you are missing opportunities to follow-up on potential interest, and to make ongoing improvements to your website and marketing strategy.

2. A Device that Helps People Remember You:  The key marketing goal for most service-related businesses is top-of-mind awareness, which means getting people to remember you, and to reach out to you when they’re ready to buy whatever you’re selling. Because you can never know when your target audiences (current and prospective clients, intermediaries, referral sources, etc.) will be ready to make decisions, your firm must create an internal discipline and content to remind them of:

  • Your existence
  • Your intellectual capital
  • Your credibility
  • Your potential to help them

To achieve top-of-mind awareness, you’ll need to establish and maintain scheduled, direct communication with your target audiences, either by email or snail mail. The two necessary component are an up-to-date database (or CRM system), and interesting, relevant content to send to them on a quarterly basis. For many firms, the database creation is relatively easy; but content development can be extremely difficult because it takes time and planning.

Here are some ways to make this process simpler and more effective:

  • Create a repeatable format, such as an interview series, a partner letter, or hypothetical (or real) case studies.
  • Your content should not be lengthy, and should accommodate surface readers through headlines, subheads, sidebars, an intro or summary.
  • Avoid canned newsletter formats and do not promote firm-specific news. No one really cares about your firm’s recent mud run or fundraiser.
  • Address topics and issues that demonstrate the firm’s thought leadership, but don’t present it in an overly academic, ponderous style. Make it readable, and skip the complex charts.
  • Add all the content you generate to a “Thought Leadership” section of your website, so that it gains broader exposure and longer shelf-life.

Remember that your marketing strategy here is consistent contact with decision-makers. So unless you commit to communicate on a regular basis, don’t start a market outreach program. If quarterly is too onerous, then semi-annually is better than nothing. Just keep in mind that there is usually an opportunity loss associated with infrequent contact. And if all this sounds like too much work, then skip to Item #3 below.

3. A LinkedIn Profile that Mirrors Your Website: LinkedIn has become an important market research and due diligence tool for all industries. To leverage this online exposure, and because LinkedIn can drive traffic to your website, your company’s LinkedIn profile should have the same look and feel as your website. This graphic and content consistency suggests to outside audiences that your firm has its act together, strategically and operationally. Here are some other ways to benefit from LinkedIn:

  • Make sure that the individual profiles of all your staff members are a reflection of your firm’s professionalism. Although this effort can be like herding cats, at the very least ensure that your firm is described accurately and consistently in all their LinkedIn profiles.
  • Ensure that all of your staff profiles include photographs. Better yet, bring in a professional photographer and provide all staff members with high quality photos for their LinkedIn profiles.
  • Post all of the Thought Leadership content (described in Step 2) onto your firm’s LinkedIn profile as it’s published, to gain additional exposure.
  • Work at building your LinkedIn connections, which should also be added to your database of target audiences that you reach out to on a regular basis.

If you’re looking to do only ONE “bare marketing essential” from this short list, focus on building a world- class website. Your website still serves as the mother ship of your brand, it’s the one place that all prospective clients will visit, and it can kill interest quickly if it’s not professional-looking and distinctive. And if that’s too much of a marketing burden, then you might consider another profession…perhaps as an astronaut or a rodeo clown.

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August 14, 2015 · 5:32 pm

Marketing Your Fund to Zombie Investors

Gaining the attention and interest of investors and their advisors has always been a challenge. In our online world, it’s become even more difficult to cut through the constant volume of noise. Our growing reliance on electronics has also made it less likely for people to remember anything, because their devices do it for them. This has put new demands on fund marketers, who must re-think how they communicate with target audiences, if they intend to overcome short attention spans and digital amnesia.

Short of having the SEC announce that your fund is under investigation, there’s no quick or easy way to gain the attention of investors. The bad news is that it’s getting even more difficult for funds to establish and sustain investor awareness. Here are two reasons why:

  • The volume of information available is staggering: we now create as much information every two days as we did from the dawn of man through 2003. The impact of information overload on modern man is that we now have a significantly shorter attention span. Studies have shown that our digital lifestyle has reduced the average attention span from 12 seconds in 2000, to 8 seconds on 2015, which is one second less than that of a goldfish.
  • As reliance on digital devices has grown, our ability to remember information has been greatly reduced. A recent survey highlighting this “digital amnesia” showed that most adults could not remember current phone numbers – such as their workplace or children’s phones – but could recall their own home phone number from when they were a child. People don’t remember information because their devices now can remember for them.

If the bad news for fund marketers is that it’s more difficult than ever to gain and maintain the attention of investors, then here’s the good news: most of your competitors are doing of lousy job addressing those tasks.

So, within an existing competitive landscape of funds that are absolutely clueless when it comes to marketing, your fund can be exceptional. Here are three simple ways to help you achieve that distinction:

1. Give them something worthwhile: For starters, explain what you stand for, how you are different, how you make decisions, and why you are worthy of their consideration.  You’ll need to validate those claims, not only through your own words and deeds, but also through 3rd party endorsements from sources they know and trust. Effective 3rd party endorsements – embodied within media coverage of your firm, a video featuring an investor, or highlights of your presentation at an industry seminar – provide your target audiences with information that appears objective and believable. To hold their attention, your information must also address issues, challenges and opportunities that are important to them…which is unlikely to include your firm’s AUM growth.

2. Make it easy for them to understand you:   All of the tools your firm uses to communicate – website, pitch deck, brochures, etc. – should be consistent in what you say, how you say it, and what the materials look like. Most importantly, your communication should be easy for them to understand, regardless of the complexity of the content. Attempting to impress investors with technical jargon and lengthy explanations only serves to shift their attention and interest somewhere else. To measure the readability in your written communication, try the online BlaBlaMeter diagnostic  (blablameter.com),  which is an admittedly unscientific, but somewhat objective barometer of your fund’s “BS” factor.

3. Speak to them directly and regularly: The explosion of information online has made direct communication even more important. You’ll need to create an internal discipline that ensures meaningful and consistent contact (ideally on a quarterly basis) with existing and prospective investors, as well as those who influence them. The content you send to those audiences – by email or direct mail – should display your fund’s intellectual capital and institutional values without being self-promotional or self-serving. Consider, for example, sending out market commentaries written by respected individuals outside of your firm, or Q&A interviews that you conduct with opinion leaders whose values are aligned with yours.  The goal is to make your firm memorable, in a world where remembering is no longer a necessity.

If all of this sounds like too much work, you will likely find greater comfort and continued anonymity simply by hoping that investors take interest in your fund the old-fashioned way…solely through its track record and word-of-mouth recommendations. And if you’re lucky enough to get noticed and remembered by investors in that manner, you are truly exceptional.

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May 7, 2015 · 12:36 pm

Investment-Related Publicity: How Clueless is Your Fund?

According to BNY Mellon’s most recent survey of Investor Relations (IR) practices worldwide, fewer than half of the nearly 700 respondents are using media relations to support their IR goals. More significantly, only 6% of that group included media exposure as a top IR goal.

Whether its reluctance to proactively pursue publicity (also called “earned media”) is based on cost, control, or misunderstanding of the function, the investment industry is failing to take advantage of one of the most powerful means to build investor awareness, third-party endorsement, and assets under management.

Here are some thoughts on how your fund can effectively leverage publicity:

More Publicity is Not Better: The term “media mentions” is broadly used by the investment industry to describe publicity, which implies that the sheer volume of exposure is beneficial. Even if your fund generates piles of press clippings, however, there are too many distractions within print, broadcast, and digital media channels to ensure that target audiences will ever notice, or be influenced by, any of those mentions. A media relations strategy driven by volume rather than substance is an expensive, zero-sum game.

Not All Publicity is Created Equal:  High-value media exposure puts an exclusive spotlight on your fund’s intellectual capital, underlying values or narrative, and typically allows you to control all or most of the content. On that basis, specific types of publicity — such as a firm profile written by a “friendly” journalist, or a one-on-one interview on relevant topics — are far more valuable than simply being mentioned or quoted (often with a competitor or two) in a news story, or providing a sound bite for CNBC.

Create Credibility Tools: The underlying value of media exposure lies in the inherent third-party endorsement that’s provided by a respected, objective media source. (This is why a Wall Street Journal article is more valuable than paid Wall Street Transcript coverage.)  Your goal is to generate media exposure that serves as ad hoc “credibility tools” for your firm, which can be used in your IR program to assure current investors, prospects and referral sources that you are a safe choice. If your publicity doesn’t make your fund’s marketing materials more believable, then the tactic will never have a connection to asset growth.

Plan Media Solicitations Last: Most media exposure is pursued in a haphazard, opportunistic manner. But to generate publicity that has inherent business value, you need to work backwards: first define what specific behavior or opinion you’re attempting to influence, and then determine what type(s) of media exposure will accomplish your goal. Only at that point are you prepared to solicit specific media opportunities that have the potential to drive measurable business outcomes.

Put Your Media Exposure to Work: Too often, media placements are passively hung on a website or a LinkedIn profile like a hunting trophy. But media exposure itself is never the goal; it’s only a means to an end, and must be put to work. Current and prospective investors, referral sources and other key audiences should be consistently reminded – through your positive media exposure – of who you are, what makes you different, and why they should invest with you. This is the tedious but critical step that most firms skip: maintaining a database of important contacts, and nurturing those relationships with those individuals by leveraging their media exposure to drive awareness and engagement.

Slice & Dice for Incremental ROI: In our digital age, there are online opportunities to gain additional mileage from the publicity you generate. For example, if you’ve scored a bylined article in a respected publication, initiate a discussion on the article’s topic within appropriate LinkedIn user groups, and attach a link to the published piece. Or use Twitter to promote your article’s link, by Tweeting (more than once) a provocative observation or quote from the piece to generate interest.

Funds that use media exposure effectively also understand the greatest limitation of the tactic: that no amount of publicity can compensate for an enterprise that lacks a strong value proposition, a clear sense of purpose, and underlying integrity. Without those cornerstones of brand reputation, publicity’s potential to expose a fund’s shortcomings will always represent a liability.

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March 11, 2015 · 12:30 pm

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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February 13, 2015 · 10:15 am

The Road to Hedge Fund Transparency: Marketing Essentials and Potential Pitfalls

To survive and prosper in a marketplace where transparency and trust are now valued by investors and promoted by regulators, hedge funds will be increasingly required to build a rational and risk-averse approach to external communication. Ideally, those plans will also avoid many of the non-productive tactics that marketers are known to promote.

Here’s a marketing roadmap designed to achieve that objective:

Build your brand strategy first. This internal discipline yields a unified view and clear expression of what your firm seeks to achieve for investors, how it addresses that goal, what makes it uniquely qualified for consideration, and why investors should select and trust your firm. An upfront articulation of the firm’s value proposition serves as the cornerstone of a written marketing plan that should include: tangible business goals, appropriate marketing strategies and tactics, calendarized activity, budgets and accountabilities. Any firm that operates without a formal plan (which should be simple, and not take months to create), eventually becomes a victim of “trust me it’s working” marketing. No plan = lots of wheel-spinning + no tangible business outcomes.

Create a bona fide website, not a proxy. In an online world, websites are the mother ship of market transparency. If a hedge fund is unwilling to provide on its website essential information related to its capabilities and credibility, then the firm is not really serious about market communication. Ideally, your website should express institutional values, explain investment processes, showcase human capital, provide examples of thought leadership and include inherent 3rd party endorsements. It’s not a sales pitch or report card. Your website will generate investor interest by allowing visitors to draw their own conclusions about the firm and its potential to help them achieve their goals.

Leverage your firm’s intellectual capital. Thought leadership – which is overused marketing jargon – is a strategy that leverages knowledge and ideas to engage target audiences. Effective thought leadership can involve a broad range of marketing tactics, but should always be designed to achieve measurable goals; not to simply have people think you’re smart. A hedge fund’s intellectual capital represents its most powerful market differentiator, and can be showcased without giving away any proprietary information or methodologies.

Harness the market reach of LinkedIn. LinkedIn has become an important due diligence tool for investors, intermediaries and the financial press. Most hedge funds understand this, and either provide a very basic firm profile, and / or allow its employees to post their personal profiles on LinkedIn. But to harness LinkedIn’s enormous market reach and professional clientele, hedge funds must establish a buttoned-up institutional persona that’s consistent with the firm’s (bona fide) website; ensure that its employees’ profiles enhance the firm’s brand positioning; and take full advantage of appropriate user groups on LinkedIn to raise brand visibility and display its thought leadership. 

Hold off on Twitter and other social media sites. Twitter can be a great information source, and most hedge funds should use it exclusively for that purpose: to listen rather than to speak. Few hedge funds have the time or social media sophistication to engage safely and consistently on Twitter, and the compliance risks are significant. Facebook is simply not an appropriate channel for hedge funds, and posting comments on independent blogs or online publications will not yield meaningful results.

Manage press exposure selectively. Beneficial media exposure can provide valuable brand credibility. But this is a high-risk tactic because reporters have agendas, can make mistakes, and are not in business to make your firm look good. However, hedge funds should proactively seek media exposure through participation in targeted editorial opportunities – such as bylined articles, OpEd pieces and certain types of feature articles – if they provide total or nearly complete control over what’s published. Although guest spots on financial news channels such as CNBC can fuel the ego, these are high-risk opportunities that most hedge funds should avoid.

Unfortunately, most media coverage yields no marketing value, because it’s simply hung like a hunting trophy on a firm’s website. To benefit from the implied 3rd party endorsement, beneficial coverage must be properly integrated into the firm’s direct communication strategy with clients, prospects and referral sources.

Merchandise conference participation. Investor conferences are high-cost tactics that can be effective for hedge funds. But these events also yield low results because firms fail to properly re-purpose the related thought leadership they’ve produced; which can serve as raw material to influence target audiences that are much larger, and sometimes of higher value, than those in attendance at the conference. Doing all the heavy lifting (in terms of content preparation, travel, time away from office and home), but failing to benefit from that investment – both before or after the event itself – represents a tangible opportunity loss.

Forget advertising for now, and perhaps forever. Regulators have not made it easy for hedge funds to understand the rules of the new advertising game, so the industry is better off encouraging the very large players – with deep compliance muscle – to be the first ones on the field. But there are more significant reasons why most hedge funds should never include advertising in their marketing plans. Notably, institutional advertising is expensive, requires a long-term commitment to be effective, and is very difficult to measure or generate a market response. More importantly, at most hedge funds there is an extensive list of marketing strategies and tactics (for example, building an effective website) that should be addressed first, and that will provide a more meaningful return than advertising.

As market dynamics of the investment world drag hedge funds, however reluctantly, into the new era of transparency, there is some good news for those firms. Hedge funds have long demonstrated their ability to sustain a successful business enterprise without traditional marketing tactics. So any benefits that effective market communication might provide for them are very likely to result in incremental asset growth.

Additionally, because hedge funds do not currently depend on marketing for survival, they can act in a deliberate, strategic manner. Hedge funds have the luxury of being able to design and implement their marketing programs incrementally, and to focus on doing a limited number of things very well.

In that regard, other vertical industries may eventually point to hedge funds as examples of best practices in branding and marketing. But at the current rate of change, that’s unlikely to occur in our lifetimes.

 

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January 10, 2015 · 5:44 pm

Hedge Fund Marketing: From Oxymoron to Best Practices

HFJ_logo

Published in January 2015 Edition

This past September, the well-respected marketing firm, Peppercom, conducted in-depth research involving nearly 300 of the hedge fund industry’s largest firms, to measure how those funds are currently applying standard marketing tools & tactics including websites, social media, the financial press and advertising, one year after the JOBS Act.

Peppercom’s research paper begins with the statement that, “The private world of hedge funds is looking more like Madison Avenue.” But a close examination of the study’s findings suggests that this observation may be wishful thinking.

In terms of marketing sophistication, the hedge fund industry lags far behind all other financial and professional services, across every sub-category. Peppercom’s research shows that:

  • Nearly all of the largest funds have a website, but most of those websites have no marketing value, and consist of little more than a logo and contact information.
  • Two-thirds of the largest hedge funds have a LinkedIn presence, but only 10 of those funds post any meaningful content on that social media site. Very few funds have Twitter accounts.
  • Hedge funds continue to be a hot topic covered by the financial media, but most funds refuse to talk to the press.
  • The anticipated JOBS Act-related groundswell of advertising by hedge funds “seems more like a trickle than a deluge.” Despite the research study’s sugar-coating (for example, “…mid-sized funds…are beginning to understand the importance of a website.”), hedge fund resistance to marketing is unlikely to abate anytime soon.

And there are both good and bad reasons why these sophisticated, deep-pocketed companies refuse to communicate externally in an effective, transparent manner:

Bad Reason: Misguided Mystique: Many hedge funds embrace the notion that an opaque brand image creates a mystique that’s appealing to sophisticated and well-heeled investors and intermediaries. They believe common marketing practices will diminish their “private club” exclusivity. An OpEd piece published recently on the Hedge Fund Marketing Alliance website sums up the prevailing attitude: “Online universities and community colleges advertise—Harvard and Yale do not.”

Good & Bad Reason: Fear of Visibility: Many funds believe marketing makes them more of a target for regulators. In a business where an S.E.C. inquiry can send investors running for the exits, “out of sight / out of mind” appears to be a prudent risk management strategy. Many funds prefer to restrict market visibility, and even sacrifice potential asset growth, rather than to put the firm’s reputation and entire business in jeopardy by raising its public profile.

Although their trepidation regarding visibility may be well-founded, funds can gain some level of comfort knowing that regulators now publicly encourage market transparency. In October 2013, S.E.C. Chairwoman Mary Jo White stated that, “…hedge fund managers feel they have a new freedom to communicate with the public, to advertise, to talk to reporters, to speak at conferences and, most importantly, communicate with investors openly and frankly. And, you can do these things without the fear of securities regulators knocking on your door, or your outside counsel screaming at you.”

My mother’s advice given decades ago to my two younger sisters regarding teen-aged boys may also apply here. She warned them, “It’s always the quiet ones that you need to keep your eye on.” Based on a similar rationale, regulators may also be more likely to focus attention on funds that have very little to say about the nature of their business.

Good Reason: Marketing Confusion: Regulators and marketers share equal responsibility for the widespread misunderstanding about what’s considered permissible and effective marketing for hedge funds. Regulators create incomprehensible rules of engagement, and marketers offer strategies and tactics that often have no connection with tangible business results, and that sometimes put funds at greater risk of violating fuzzy regulations.

Because of this confusion regarding the definition of a risk-averse and effective marketing strategy, many well-intentioned hedge funds that otherwise support the underlying notion of market transparency will pursue the path of least resistance. Most often, that means doing nothing.

Marketing Essentials and Potential Pitfalls on the Road to Transparency

Changing their existing culture, addressing regulatory concerns and deciphering marketing propaganda are not easy tasks for hedge funds of any size. But to survive and prosper in a marketplace where transparency and trust are now valued by investors and promoted by regulators, hedge funds will be increasingly required to build a rational, risk-averse approach to external communication.Here is a roadmap designed to address that marketing challenge:

Build your brand strategy first. This internal discipline yields a unified view and clear expression of what your firm seeks to achieve for investors, how it addresses that goal, what makes it uniquely qualified to achieve that goal, and why investors should select and trust your firm. This articulation of the firm’s value proposition serves as the cornerstone of a written marketing plan that should includes: tangible business goals, appropriate marketing strategies and tactics, calendarized activity, budgets and accountabilities. Any firm that operates without a formal plan (which should be simple, and not require a lengthy process to create), eventually becomes a victim of “trust me it’s working” marketing.

Create a bona fide website, not a proxy. In an online world, websites are the mother ship of market transparency. If a hedge fund is unwilling to provide on its website essential information related to its capabilities and credibility, then the firm is not really serious about market communication. Ideally, your website should express institutional values, explain processes, showcase human capital, provide examples of thought leadership and include inherent 3rd party endorsements. It’s not a sales pitch or report card. Your website will generate investor interest by allowing visitors to draw their own conclusions about the firm and its potential to help them achieve their goals.

But increasingly, investors are demanding transparency. An Opalesque survey showed that 98% of more than 100 institutional investors, family offices and UHNW investors had declined to put money with at least one hedge fund manager because of transparency concerns. And a growing body of market research confirms the weak correlation between fund performance and investor contributions. So understanding of a firm’s investment process, rather than brand mystique, is at least as important as its track record as a driver of asset flows.

Leverage your firm’s intellectual capital. Thought leadership – which is overused marketing jargon – is a strategy that leverages knowledge and ideas to engage target audiences. Effective thought leadership can involve a broad range of marketing tactics, but should always be designed to achieve measurable business goals; not to simply have people think you’re smart. A hedge fund’s intellectual capital represents its most powerful market differentiator, and can be showcased without giving away any proprietary information or methodologies.

Harness the market reach of LinkedIn. LinkedIn has become an important due diligence tool for investors, intermediaries and the press. Most hedge funds understand this, and either provide a very basic firm profile, and / or allow its employees to post their personal profiles on LinkedIn. But to harness LinkedIn’s enormous market reach and professional clientele, hedge funds need to establish a buttoned-up institutional LinkedIn presence that’s consistent with the firm’s (bona fide) website; ensure that its employees’ profiles enhance the firm’s brand positioning; and take full advantage of appropriate user groups on LinkedIn to raise brand visibility and display its thought leadership.

Hold off on Twitter and other social media sites. Twitter can be a great information source, and most hedge funds should use it exclusively for that purpose: to listen rather than to speak. Twitter is a content beast that demands constant feeding, but few hedge funds have the time or social media sophistication to engage safely and consistently. Facebook is not an appropriate channel for hedge funds, and posting comments on independent blogs or online publications will not yield meaningful results.

Manage press exposure selectively. Beneficial media exposure can provide valuable brand credibility. But this is a high-risk tactic because reporters have agendas, can make mistakes, and are not in business to make your firm look good. However, hedge funds should proactively seek media exposure through participation in targeted editorial opportunities – such as bylined articles, OpEd pieces and certain types of feature articles – that provide total or nearly complete control over what’s published. Although guest spots on financial news channels such as CNBC can fuel the ego, these are high-risk opportunities that most hedge funds should avoid.

Merchandise conference participation. Investor conferences are high-cost tactics that can be effective for hedge funds. But these events often yield low results because firms fail to properly re-purpose the related thought leadership they’ve produced; which can serve as raw material to influence target audiences that are much larger, and sometimes of higher value, than those in attendance at the conference. Doing all the heavy lifting (in terms of content preparation, travel, time away from office and home), but failing to benefit from that investment either before or after the event itself, represents a tangible opportunity loss.

Forget advertising for now, and perhaps forever. Regulators have not made it easy for hedge funds to understand the rules of the new advertising game, so the industry is better off encouraging the very large players – with deep compliance muscle – to be the first ones on the field. But there are more significant reasons why most hedge funds should never include advertising in their marketing plans. Notably, institutional advertising is expensive, requires a long-term commitment, and is very difficult to measure or generate a market response. More importantly, at most hedge funds there is an extensive list of marketing strategies and tactics (for example, building an effective website) that should be addressed first, and that will provide a more meaningful return than advertising.

As market dynamics of the investment world drag hedge funds, however reluctantly, into the new era of transparency, there is some good news for those firms. Hedge funds have long demonstrated their ability to sustain a successful business enterprise without traditional marketing tactics. So any benefits that effective market communication might provide for them are very likely to result in incremental asset growth.

Additionally, because hedge funds do not currently depend on marketing for survival, they can act in a deliberate, strategic manner. Hedge funds have the luxury of being able to design and implement their marketing programs incrementally, and to focus on doing a limited number of things very well. In that regard, other vertical industries may eventually point to hedge funds as examples of best practices in branding and marketing.

So perhaps hedge funds are not marketing Neanderthals. They are simply late bloomers.

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February 10, 2012 · 3:17 pm

5 Secrets to Ray Dalio’s Hedge Fund Success

Hedge Fund Craftsmanship

By most measures, Ray Dalio has achieved great success during his 65 years on earth. Unlike Donald Trump, Dalio didn’t inherit wealth. As a middle-class kid, he delivered newspapers, shoveled snow and was a caddy during the summer. The company Dalio established in his apartment in 1975, Bridgewater Associates, is currently the world’s largest and most successful hedge fund manager, with more than $87 billion in assets under management. Recently, Dalio was ranked by FORBES as the 30th wealthiest person in America, and the 69th wealthiest person on the planet, with a personal net worth of $15.2 billion.

So in a highly competitive landscape populated with nearly 10,000 hedge funds, how has Bridgewater been able to rise to the top of the investment management world and remain there? It’s unlikely that Dalio and his team know more about the markets, across every asset class, than all other hedge fund managers. It’s unlikely that Dalio simply has had a luckier hand in the bets he’s placed over the past 4 decades. And it’s also unlikely that Dalio has sold his soul to the devil.

In fact, Dalio makes no secret about Bridgewater’s success, and it’s articulated in great detail on his firm’s website. Dalio even provides a “Principles” playbook that you can download.

Briefly, here are 5 “secrets” to Dalio’s success:

He’s built a values-based organization – Dalio understands that Bridgewater’s ability to get 1,200 smart people to sing from the same songsheet requires clarity and consistency on what his company stands for, what it’s trying to achieve, and how it intends to get there. His belief system is based on the concept of “radical transparency,” which encourages employees to question everything, to think for themselves and to speak up.

He works ON his business, not AT his business – Dalio understands that intellectual capital, enterprise experience and operational systems & processes must be captured, documented and integrated into the day-to-day decision-making of a firm. Like Ray Kroc, Dalio has invested great thought and effort to create an organization with intrinsic value that does not rely on him, or on any individual, for its continued success. In Bridgewater, he has created the McDonald’s of investment management.

He has no patience for ego or emotion – Dalio understands how personal agendas and corporate politics can destroy any organization. He has been relentless in his efforts to remove ego barriers and emotional reactions in Bridgewater’s decision-making process. Institutional and personal transparency is the cornerstone of Bridgewater’s corporate culture. Some employees who’ve found it difficult to survive under such a high level of scrutiny either drop out or are invited to leave, providing the firm with a very effective natural selection process.

He’s focused on the importance of mistakes – Dalio understands that corporate arrogance is the most significant potential liability for successful companies. Because he believes anyone can be wrong, the Bridgewater culture views mistakes as opportunities to learn, rather than something to be avoided. FBI Director James Comey, who once served as Bridgewater’s general counsel, described the firm’s “obsession over doubt” as an asset that drives constant improvement and reduces the chances of bad decisions being made.

He’s not motivated by money – Dalio has been wealthy for a long time, but being wealthy was never his primary goal. In his own words, “I started Bridgewater from scratch, and now it’s a uniquely successful company and I am on the Forbes 400 list. But these results were never my goals—they were just residual outcomes—so my getting them can’t be indications of my success.  And, quite frankly, I never found them very rewarding. What I wanted was to have an interesting, diverse life filled with lots of learning—and especially meaningful work and meaningful relationships. I feel that I have gotten these in abundance and I am happy.”

The corporate tag line describing Bridgewater Associates is aptly titled “A Different Kind of Company.” And Dalio is a different kind of American businessman. Unlike Apple’s Steve Jobs, who managed by arrogance, fiat and intimidation, Dalio has created a meritocracy that’s based on honesty, clear thinking and humility.

Bridgewater doesn’t produce clever electronic gadgets or software apps designed to entertain us or make our lives easier. Dalio’s greatest achievement is unrelated to the wealth he’s created for himself or for his institutional investor clients. Dalio’s most valuable and enduring accomplishment is based on his role as the architect of an organizational management model that can radically improve the world of work, as well as the lives of people who seek personal meaning through their work.

Unfortunately, most companies – regardless of industry – don’t have the courage or the desire to adopt Dalio’s brutally honest management approach. That’s why Bridgewater is likely to be the most world’s successful hedge fund manager for a very long time.  True hedge fund craftsmanship.

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