Regulations in the form of AIFMD are forcing fund managers to think more seriously about the impact of compliance, the markets are static, and competition from other investment vehicles has never been greater.
They have also had to contend with the blows dealt to their image over the last few years. Even sophisticated investors don’t trust them in the way they once did. In an era when transparency is king, hedge funds are still seen as secretive and opaque, perhaps even dated.
Plotting a way forward has not been easy. Hedge funds are slowly trying to build bridges with asset managers, pension consultants and other influencers in the funds arena, but it’s hard work. All these stakeholders have clients of their own to consider and need to make judgements about how they would feel about using a hedge fund. It’s a double or sometimes even triple sell.
Part of the problem is that hedge funds have never before had to consider the issues of brand and image. Marketing has always been about producing the standard promotional materials in an attempt to highlight the quality of their top people, their performance, and their strategy. But when was the last time hedge funds stopped to think about the type of information investors and advisers really want?
People and performance will always be important, of course, but hedge funds need to consider other parts of their brand such as their attitude, their standards of client service, and their ethics. Impending regulation means costs are going to rise, and more funds will be needed on the balance sheet just to maintain existing profit margins, let alone see them grow. In what is already a challenging fundraising environment, it is clear that a formulaic approach to marketing will no longer work. The question hedge funds need to be asking themselves is: How can we stand out from the crowd and appeal to new clients in the wider investment community?
Quality, targeted marketing content is absolutely crucial. But it will be the hedge funds that consider the bigger communications picture that will really build confidence in their brand and image, as well as their strategy. This extends beyond traditional marketing techniques and takes time to develop. Hedge funds need to get used to the idea of using design, PR, and online media to build and sustain an image that will give the investment community the confidence to engage with them.
It’s not just a question of transparency and openness. Hedge funds have a lot of image baggage to offload and demonstrating they are completely in tune with the new evolving culture within the investment community is critical. That’s not to say that performance and strategy are any less important than they have always been – it’s simply how these are communicated that require significant attention.
The US is different, of course. There are more wealthy individuals for a start but following the JOBS Act, it seems likely that hedge funds of all sizes will embrace PR, marketing and communications much more strategically. UK and European hedge funds cannot afford to be left behind. Those that take marketing and communications seriously can create an advantage, giving themselves the best possible chance of emerging strongly from these difficult times. However, not all of them will.