Offense is the New Defense

The changing approach hedge funds are taking to marketing, PR and communications.

At the turn of the century, Prosek Partners made a prediction – that the asset management industry would be an “emerging market of marketing.” For hedge funds, the passage of the Jobs Act in 2012 was hailed as the first step in bringing firms out of the shadows to take control of their brand and think differently about marketing. Nearly six years later and that is exactly what has happened – the emerging market has emerged.

Hedge funds around the world are increasingly taking a proactive approach in how they market themselves to investors, talent, media, government entities and other key audiences.

With increased competition for assets and for mindshare, hedge funds are realising that they can’t rely on performance and pedigree alone. Today’s hedge fund industry rewards the managers that are proactive, transparent and have a differentiated perspective that is widely understood. That’s why instead of only playing a defensive game, many hedge funds are now going on the offensive and crafting their own stories through a combination of PR, thought leadership and social and digital media.

As someone who works with many of the managers in the space, I can say with confidence that we’ve hit a critical tipping point. There are now more world-class funds playing offence and investing in their brands, than those playing defence.

The data backs this up. When the Jobs Act was still in its early days, only 36% of managers included in Absolute Return’s Billion Dollar Club ranking used external representation. In the 2017 iteration of the ranking, more than 50% did, a nearly 38% increase.

So how have hedge funds changed their approach to marketing, PR and communications? To dig deeper, I talked to leading figures in the hedge fund community and asked them to share their stories. Here’s what we heard.

A struggle for differentiation spurs a hiring spree
Hedge funds now know they must differentiate themselves to compete and they understand that it’s not just about what they do, but how they do it. The holy grail of marketing is a brand that stands for something, has meaning and purpose and is known for a unique, proven approach. But that holy grail is a struggle for most funds and it is at the heart of why many firms partner with public relations firms or even build their own in-house communications and marketing departments.

Executive recruiters are very busy with chief marketing officer and communications officer searches for hedge funds, something that was unheard of only a few years ago.

This year, Cerberus hired its first head of communications, allowing them to build out a world-class communications department, while AQR promoted its head of marketing and communications to partner.

Reporters as allies, not enemies
Although the media universe continues to shrink, influential publications and reporters – both at the top tier and trade level – are still a valuable way to reach audiences that hedge funds care about, including investors, traders and middle- and back-office professionals.

What has changed is the extent to which hedge funds are willing to work with reporters to ensure that they get the story right. On multiple occasions we have worked with clients to debrief reporters about activist campaigns or crisis situations.

This allows us to provide input to a story before it comes out, rather than after. The end result is a more accurate and balanced piece that includes our clients’ point of view.

Controlling the message with social media
Social media is probably the fastest growing platform among hedge fund managers. While social media is not right or necessary for everyone, certain platforms like LinkedIn can be a valuable tool for sharing and amplifying a hedge fund’s message.

Ray Dalio, founder of Bridgewater Associates, is a frequent contributor on LinkedIn, with more than 700,000 followers, and his articles touch on a plethora of topics. Articles such as Short-term self-interests are being pursued to a degree that is threatening to our long-term self-interests and Facebook’s move will be an important contribution to greater truthfulness in the media routinely receive thousands of views and hundreds of comments and shares, providing Dalio with a way to engage directly with his target audiences on a platform that won’t dictate what he gets to say. While every firm will take a unique approach to social media, this experience serves as a useful model for other managers looking to control their public narrative.

The modern, welcoming website
Everyone has seen the hedge fund websites that offer little more than a logo and a client log-in. Some websites try a little harder by listing bios for the executive team and maybe a brief history of the firm. While we all understand the longing for the past, this approach no longer works. Hedge funds’ websites are often the first place many investors, and journalists, go when trying to find out more about a firm. If a website doesn’t offer anything of value, it will be difficult for the visitor to assess a firm’s value and its legitimacy.

As a result, a growing number of hedge fund managers come to us for help with their websites, search engine optimisation and overall digital profiles. In many cases, we will build a microsite to highlight an executive or support a thought leadership platform, providing interested parties with an easy way to learn about a hedge fund’s position and analysis.

Some firms go a step further. For example, Man AHL, the quantitative investment management unit of Man Group, created a video series called AHL Explains to illustrate key quantitative investment concepts in an easy-to-understand format. These videos (12 in total) provide another way for investors and the media to engage with the site and learn more about the firm.

Public speaking and thought leadership
More hedge fund managers are realising (through education) the value in conference speaking and being on “the circuit.” In the past, many managers have shied away from this area of thought leadership as they typically prefer to keep a low profile and not share their latest and greatest investment ideas with competitors.

But the tides are turning, and many hedge fund managers have become regulars at conferences. The value of these speaking opportunities is two-fold. First, public speaking is an opportunity to engage directly with investors, bankers, lawyers, journalists and others in attendance in a way that allows the executive to control the message.

Second, public speaking offers a chance to elevate a firm’s brand. Conference organisers tend to pick speakers based on who can fill a room and who has something timely and interesting to say. For a hedge fund manager, getting selected as a panellist or even a keynote is confirmation that the industry values his or her opinion.

Believe me, investors take notice. We work closely with many conference organisers to secure speaking opportunities for our hedge fund clients, and I can’t count how many stories I’ve heard about how a manager is able to garner interest from investors as a result of these appearances.

Hedge funds value data and analytics
Hedge funds love data. It informs how they trade, how they evaluate risk and how they pursue investment opportunities.

It’s only natural that they would also want data about their PR or communications program and technology has provided a solution. Instead of guessing whether a profile piece or social media campaign has been effective, it can be measured. These days, a hedge fund can find out how many people visited their website after the CIO appeared on CNBC or how many people downloaded a white paper about a potential investing opportunity in a matter of clicks.

Data can also help inform a strategy. Several advertising platforms, including Google, LinkedIn and You- Tube, offer users an opportunity to target specific audiences. For example, if a hedge fund wanted to publicise its expertise in private credit, a campaign could be built that targets investors in New York and London with a specific piece of content such as a press release, news story or whitepaper.

Winning the battle for talent
With competition high for the best talent in the market, hedge funds are increasingly competing against the Googles and the Facebooks for talent, instead of just the Goldmans of the world. This raises the bar for hedge funds to market their unique story as an investor and employer.

As the best talent in newer generations seeks meaning and purpose at work, hedge funds need to portray a message that is more mission-driven, something which institutional investors want to see too. It’s not just about what you do, it’s about how you do it.

Any combination of these tactics can form the foundation of a strategic marketing and communications plan. When used together, they can transform a hedge fund’s brand and, ultimately, help a firm achieve its business goals.

Download the Article

This was originally published in the March issue of HFM InvestHedge.