We’re in the middle of our Discovery phase for a hedge fund-of-funds manager: gathering perceptions from their clients, prospects and intermediaries. When the topic of competition comes up, we keep hearing phrases such as “field” and “arena” – evoking images of sports teams on playing fields or boxers in a ring. This metaphor is fine as far as it goes, but it stops short of making the essential point. The fight for competitive dominance happens in space all right, not physical space, but rather cerebral space–your prospect’s mind.

We’ve just completed interviewing the management team, external clients, prospects and intermediaries for a private equity firm in Rhode Island. This process – we call it Discovery – is the first step in competitively positioning your firm and developing clear messages for an invigorated brand. This is one secret you want told. Why? Strong brands lead to a more cohesive team, higher prospect conversion ratios, more successful recruiting efforts and better growth.

The use of video has transformed the way we view content. Marketing statistics published by DigitalSherpa indicate that videos not only increase an individual’s understanding of a company by 74 percent, but also 80 percent of viewers can remember a video on a website they have seen within the past 30 days.

According to the business press and bloggers, Topturn Capital became the first hedge fund manager to publish an advertisement to the general public (a video on its own website).
The firm said it was “tapping into the energy of the recent ratification of the JOBS Act” and wanted to be “at the front of the momentum and stand out.” Using a surfing metaphor, the spot is light on information but has certainly caught the attention of the hedge fund world. As some firms wait to see what happens; others are already making inroads – or catching the wave. Topturn Capital is delivering on its marketing strategy is to be bold, innovative, forward-thinking. Check it out…

as published in HedgeFund Intelligence and Absolute Return 7/26/2013

The marketing arms race is about to come to hedge funds. And, with the Securities and Exchange Commission’s landmark decision to lift the 80-year-old ban on publicizing hedge funds, and how they raise money, it may never be the same again. As Yogi Berra might say, “It’s déjà vu all over again.”

Once mutual funds hardly advertised, and even those that did spent a pittance by today’s standards. Now of course established brands like Fidelity and T. Rowe Price advertise significantly to grow and protect their businesses, and newer entrants like Wisdom Tree and iShares use marketing to grab market share and help achieve business success. Institutional money managers, like JP Morgan, Pimco and State Street, who once considered marketing and brand management as beneath them, now invest significantly in marketing to support their institutional business as well as newer ventures like mutual funds and financial advisory channels.

It’s not just advertising and sponsoring golf tournaments, of course. Social media and other internet activities play a huge role.

Marketing, by the way, is not sales, although in our business salespeople frequently like to call themselves marketers. Marketing is about brand, competitive positioning, the ongoing stream of communications that can help create awareness, trust, and confidence in you and your firm. It makes sales more effective. Marketing provides leverage to everything you have created and enhances and protects your business.

Is marketing the most important thing? Of course not. Performance is primary, and client service and sales are right up there. Marketing accrues value to your business over time, which makes marketing an ideal investment for an annuity-type business like a hedge fund.

The established fund

Do you have to join the marketing arms race? Eventually, yes. Do you want to join early or later?

Marketing can protect your position against new entrants and fuel more growth. Given your margins, the cost becomes negligible. Marketing distinguishes your brand. Enhances it. Protects it from competition.

But we’re institutional! Does marketing matter? Well, yes. Brand might matter more in institutional than in retail. You already know this. You use brand name audit firms. You use brand name law firms. To do otherwise would raise questions.

The phenomenon of concentration of assets is about performance, size and brand, because the biggest do not always have the best performance, whether absolute or risk-adjusted. Marketing can make that phenomenon work for you.

Stakes are high. What will your clients think? Clients want to see that you are managing your business well, which includes managing your brand. But how you do it is critical. You want your marketing first and foremost to enhance your clients’ relationships with you. Clients also know you are in a people business and to retain and attract talent you need to pay them appropriately and provide opportunities for growth. Which means you need business success.

BlackRock’s business success has many elements, and marketing has certainly been one. They are investing heavily in positioning themselves as a thought-leader. In a relatively short time (by institutional standards) they went from a start-up to one of the largest. Marketing has been completely consistent with sophisticated investment strategies. And BlackRock’s older competitors may now find themselves somewhat displaced in their once highly secure client relations.

The new fund

If you are new, either a startup or a fund that has been around for a year or two establishing a track record and now wanting to grow, marketing will be one more cost of doing business.

You need awareness. You need to be able to cut through the noise at an investor conference. You need your prime broker’s capital intro people to find success when they bring up your fund to their contacts. You need analysts at potential clients and consultants to want to meet with you. When you get that precious meeting, you need to know that your presentation positions you effectively. And you need the stream of communications, from the RFP to the follow-up letters to the website to the performance reports, to get noticed, get read, and communicate what you need.

You get one shot to introduce yourself to the marketplace. At a certain point in time, if you are not successful in raising significant capital, that becomes your reality—you become the house on the street that is difficult to sell. Don’t let yourself get in that position.

When does the race begin?

When a large fund embarks upon a multi-million dollar advertising and marketing campaign, competitors will “market-up.” When a smaller fund devotes precious resources to marketing and gets results, others will join the battle. We live in a pretty fast moving world and in an industry filled with hyper-competitive people with resources, so it could start soon. Should you be a leader or a follower in the marketing arms race? If the ingredients are there for significant further business success—reasonable performance, a repeatable investment process, and budget—then lead. You can gain more assets and secure your competitive positioning. If you don’t have those ingredients right now, then work on them—you may still have some time. Later, you won’t have a choice—you will have to participate to have a long-term viable business.

So where do you start?

You are still in a regulated industry with technically demanding products. You need compliant-friendly effective marketing. So you need people who understand marketing, compliance, and investments.

You accept that marketing can provide leverage to your business, and you understand leverage—its costs, benefits, and risks—but unlike financial leverage, you can’t go to your friendly investment bank and negotiate a line of marketing credit. Marketing is a process; its output is a position as well as the materials (electronic and print) and activities which express that position. It requires research, often an outsider’s look at your business, enough financial market education/experience to understand your investment proposition, and the skill to get to its essence and effectively and creatively express it. Like any other desirable and valuable resource, it is scarce. Twenty years from now there will be many people with the right experience, because they will have done marketing for hedge funds. Today there are not.

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Many folks think that PowerPoint is a form of incarceration – you’re trapped in a confined space with dense writing on a dull wall. This outcome, however, is mostly self-inflicted. PowerPoint, in fact, supports a host of technologies that are liberating. These include: sound, animation, and video. ask ted . aabalone[red] presented a “get-out-of-jail-card” demonstration of PowerPoint’s liberating features – as well as some essential do’s and don’ts – at the fall PAICR conference in New York City.

Click to view the PAICR presentation which includes our scripted commentary.

As well, we introduced the audience to a powerful new presentation technology, Prezi, with native capabilities ideally suited to telling a story, completely outside the slide-formatted structure of PowerPoint. We anticipate many investment management firms, seeking a differentiation edge, will migrate over to Prezi. Check out  our Prezi presentation.

You’ve seen the numbers. Facebook has more than a billion monthly active users. LinkedIn is the world’s largest professional network. Twitter has 500 million total users. YouTube has a billion unique monthly users. And then there’s Tumblr, Instagram…

You’ve seen the people. Eyes completely glued to screens – whether it’s an iPhone, iPad or laptop. And it’s not just teenagers. The American Life Project at Pew Research conducted a study at the end of 2012 of internet users. The report revealed the age, sex, education attainment, race and urbanity of the largest social sites. Not surprising, young adults are the biggest users. But over half of those over 50 years old and a third over 65 are active in the social media world.

This is the way people communicate today. Social media networks were designed to connect people to each other and to organizations, but more than that, they have transformed the way people interact, share and make decisions. Recommendations, “Likes,” posts, and Tweets and reTweets help people form opinions. If your firm benefits by communicating with people, then social media is a concept you can’t ignore.

For many reasons investment managers have been slow to embrace social media. One is this historically closed-door, private, word-of-mouth industry seemed to work just fine without it. Then there’s a belief that the wealthy don’t use new media. Another hesitancy is a lack of understanding of what social media can do for the firm. Oh, don’t forget the fear of the Securities and Exchange Commission.

Rethink. Young adults are growing up; and even some of them already need investment management (think of 17 year old Nick D’Aloisio who reportedly sold his app to Yahoo for $30 million). Seven out of 10 wealthy investors either have changed their relationship with an investment provider or reallocated investments based on something they read on social media, according to Cogent Research. This month the SEC outlined the rules for social media disclosures and the commission appears to be relaxing its stance by recognizing social media sites as legitimate outlets for communication, much like a corporate website. The digital world evens out the playing field; large investment managers don’t look any bigger on a screen than a small boutique. There’s another reason to not wait – it takes time to build a following.

With the right strategy in place, a solid understanding of appropriate usage and someone dedicated to keeping communications up to date, investment management firms can benefit both in terms of client acquisition and retention by engaging “socially” with the online world. After all, research tells us your prospects and clients are already making decisions based on your online presence (or lack there of).

Manufactured intelligence may be a confusing issue as their information is derived from the understanding of terms and conditions unnatural and learning ability. Intellect could in fact be generally called ones capability to relate with their swift platform, are aware of the setting they wind up in and have the capacity to learn how about and from that conditions. (more…)

No one seems to be talking about the economic concept of moral hazard any more. At the time of the Lehman collapse, concerns were widespread that if the risks inherent in managing a financial firm were removed by underwriting its losses with public funds, we would be removing the economic counterweight of insolvency that serves to constrain risky behavior.  Now, with hundreds of billions of dollars flowing from the national government to shore up private enterprise companies, we are empirically testing the theory.

While economic theory and public policy are important, for stewards of wealth the real crucible of moral hazard is much closer to home. Fiduciaries know that insulating themselves from the very risks they advise their clients to bear is unconscionable — no matter how lucrative it might be in the short run. Reassuring your clients that your moral compass will not be a hazard of this financial turbulence is the most important message you can convey to your clients. And now more than ever, this message needs to be backstopped by behavior. Ethical fiber demonstrated throughout good times and bad times provides the only platform on which trust can stand.