Hedge funds can do a lot of things to raise more capital, but the best strategy might have more to do with communication than anything else.

“The way they can attract more capital is by telling a good story and making sure that they’re succinct in their message about what they’re doing with the capital they’re investing,” Daniel Strachman, a financial expert who serves as the Director of Research and Strategy for the GAIM Conference Series, told StreetID. “Number two, proving that what they say they’re doing is what they actually are doing, and meeting the expectations of their investors.

“Number three, it’s a communication issue — letting your investors know when you’re doing well, letting your investors know when you’re not doing well, and then reaching out to additional investors.”

Strachman, who authored nine books (including Getting Started In Hedge Funds and The Fundamentals of Hedge Fund Management), has managed money and helped build hedge funds all over the world.

“One of the things that I think most people fail to recognize is that they have this field of dreams scenario — an ‘if we build it, they’ll come’ kind of thing,” he continued. “That’s not true. The way to be successful in the hedge fund industry is to go out, come up with your story, your marketing message, make sure it’s succinct, make sure it’s accurate, make sure it explains in detail how the money is being managed, and then communicate that to existing and potential investors on a regular basis.”

Strachman said that the number-one thing that most managers forget is that it is the client’s assets they are handling. “Clients have a right to know what’s going on with their money,” he said. “That’s what they have to remember at all times. So if a client calls and asks what’s happening, they need to be willing to talk to them and be willing to explain what’s going right, what’s going wrong, and just have open dialogue.”

While the occasional bad apple is inevitable, many within the hedge fund industry are getting it right. “A lot of the big or medium-sized funds are growing and they are adding people,” said Strachman. “I know some small groups that are adding people as well. [Hedge funds] are always looking for marketers to help raise assets and increase assets under management. I think that’s where there’s always room for good people.”

Strachman also believes that they are seeking help in compliance and operations. “I think there’s opportunity on the asset management and the portfolio management side as well,” he added.

But don’t count out the technologists, who have become an important part of the financial sector. “I think there’s always going to be room for fundamentalists and quantitative managers in the marketplace,” said Strachman. “I think a lot of times you’ll see that there are [hedge funds] out there who are looking for good people — they just want people.”

Get Hired Now

These days, job seekers have a million options, but we know where they should turn: StreetID. We built StreetID (a financial career matchmaking website) from the ground up to accommodate Wall Street’s growing community of financial professionals. In good times and in bad, current job seekers and those looking to move on in the future can turn to StreetID and sign up for a free account and make a direct connection with relevant candidates and employers.

Earlier this month, Daniel Strachman, a financial expert who serves as the Director of Research and Strategy for the GAIM Conference Series, told StreetID that if hedge funds want to attract more capital, they need to tell a good story. “[Make] sure that they’re succinct in their message about what they’re doing with the capital they’re investing,” he said.

Hedge funds that are just starting out, however, have a lot more work ahead of them. Before they get started, they need to be prepared to show their accomplishments. “Honestly, I think no amount of advertising will really work,” said Andrei Knight, hedge fund expert, founder, and Senior Currency Strategist at fxKnight.com. “People are jaded and they want proof.”

Knight told StreetID that new fund managers would have two options. “You work for a few years at an established fund and build your reputation as a trader within that fund and go solo on your own,” he suggested. “Take some of your clients with you. Or you trade your own money — your uncle’s and your dad’s money — and you build up a track record.”

Despite the excessive amount of money that financial firms, particularly hedge funds, are forced to spend on licensing and regulation, Knight said that his clients have never asked him to show his license. “What they care about is the result,” he explained. “Show me your past six months’ trading history. Now, since the financial crisis, people are asking for two or three years’ worth. But that’s what they want — they want to see a consistent track record more than anything. So either you build that track record trading your friends’ and relatives’ money, or you build that track record working at a fund.”

With regard to the potential pitfalls and challenges, Knight acknowledges that some companies make their employees sign an agreement stating that they are not allowed to poach clients when they leave. “Obviously you have to be in legal compliance,” he said. “You have to know what agreement you signed. Some companies might actually encourage it, by the way, [because] they’re overloaded.”

Knight benefited from a similar situation when he was starting out. “The company that I was involved with didn’t want to be in currencies anymore,” said Knight. “It was perceived by their clients to be a risky asset class. They didn’t want to lose those clients — there were still clients that wanted to invest in currencies. But they didn’t want to actively manage those clients themselves.”

Thus, the company encouraged Knight to start his own firm and “manage those particular clients’ money.”

“We worked out an agreement where I pay them a commission of the profits I make from those clients,” said Knight. “So if you work it right, there are actually some benefits for the company, too. For them, it’s free money.”

It really depends on how you structure the deal, Knight added. “The important thing is to be open and honest with people and find a deal that works for both parties,” he said. “The thing you never want to do in business is bite the hand that feeds you or go behind somebody’s back.”

Knight also had some tips for established hedge funds that are looking to raise capital. “I would say, first and foremost, being good,” he said. “Simply being good. Knowing that the customer comes first, that keeping their money comes first, as opposed to gambling and taking outrageous risks.

“Right now there is so much money looking for good management out there. We have not had to do any advertising. It’s all word of mouth. We treat people right, we make steady profits for them, and they come to us, and they send their friends to us. It’s business number-one — treat your client well.”

Get Hired Now

These days, job seekers have a million options, but we know where they should turn: StreetID. We built StreetID (a financial career matchmaking website) from the ground up to accommodate Wall Street’s growing community of financial professionals. In good times and in bad, current job seekers and those looking to move on in the future can turn to StreetID and sign up for a free account and make a direct connection with relevant candidates and employers.

If managers are so bent on being perceived as “contrarian,”

why do they insist on communicating their message in such conformist ways?

How do you think Apple would look like today if Steve Wozniak ran oversaw marketing instead of Steve Jobs? What do you think would happen to Crest toothpaste sales if Procter & Gamble decided to turn product branding over to the head of HR?

Silly, I know. I mean, what company in its right mind would ever let an engineer or an administrator handle its marketing?

In the alternative investments space the answer is easy…practically all of them.

What is particularly odd is that no one would ever consider putting a marketer in the PM seat, but they don’t seem to think twice about putting the PM in the marketer’s seat.

I’m not suggesting to fire all of your analysts and replace them all with marketers, but I am suggesting that it’s time to examine the disproportionately high attention and resources allotted to strategy and product development compared to strategy and product marketing.

Comparing fund management to consumer brands may be an oversimplification. After all, P&G “makes the same products as everyone else.” But like it or not…so do investment managers.

Despite this, while managers are content to rely on decades old “technology” (a pitch book developed in PowerPoint) expecting multi-million dollar investments, Procter & Gamble is out there tracking eyeballs movements as consumers walk down the grocery aisle just to figure out how to better package their $4 tubes of toothpaste.

I accept that many managers will disagree with me. So, in the spirit of “show don’t tell,” here are 10 common mistakes from fund managers in their “DIY” marketing that you will want to avoid:

1. USING THE WORD “UNIQUE”’ TO DESCRIBE STRATEGY

It would be great if every manager’s strategy really were “unique”….but mathematically speaking, it’s unlikely.

Your strategy might be “different” or even “exceedingly interesting.” But with 25,000+ active funds globally, it’s hard to imagine that an allocator hasn’t seen it all before.

No need to fret, though. Your strategy doesn’t actually need to be “unique. Your Value Proposition, though, does. Chances are that some aspect or combination of aspects of your business around process, philosophy, trade execution, risk management, structure, culture or team really are unique.

2. NOT TAKING THE TIME TO UNDERSTAND PEERS

Nothing hurts a manager’s credibility more than claiming that “no one else does this” when lots of others do. This goes much deeper than just headline strategy.

Shocking how often we hear grandiose statements about a relatively pedestrian process or approach to risk management. It may be easy to look past that – but not the statements about comparative strategy correlation or performance. Stuff that a manager can quickly research with an eVestment subscription.

3. THEY LET THE “ME, TOO” STUFF GET IN THE WAY

Allocators being human, they only can process so much information at one time. If you want your message to be heard, focus on the big points upfront – the two or three messages that you really need them to walk away with. Then push everything else to the back.

It’s not productive to try and check every box in a first impression. So better to stop trying.

Bottom line: say less, not more.

4. CONFUSING “MARKETING” AND “SALES”

Two distinct activities which are so intertwined that it is easy to misunderstand the difference. But doing so in a business with a long sell-cycle like ours is not a mistake you can afford to make. Simply understanding the difference will make you more effective in your process.

“Marketing” is your message, positioning your brand and aligning with your target audience. It encompasses the tools you use and the collateral you develop to communicate that message.

“Sales” is the relationship development and personal interactions you have with prospective investors. Sales is about taking your carefully crafted message and putting a voice and personality to it, one-on-one with clients and prospects.

5. NOT RESEARCHING THE PROSPECTIVE INVESTOR BEFORE THE MEETING

Just as you are unique, so is your prospect. Do some homework on the investor before you walk into the room…

You wouldn’t buy a stock without understanding the opportunity. Same holds true for your approach to preparing to meet a new investor.

By JD David

(Click HERE  For Part I)

6. Employing a “sophisticated, systematic and repeatable” investment strategy but an undisciplined and discretionary marketing strategy

 “I did PR once. It didn’t work.”

• One client’s comment during a brand development discussion

Imagine scrapping your entire investment strategy every time a trade doesn’t immediately go your way? Just like investing, marketing requires a strategy, consistent execution and commitment.

7. Not having a content marketing strategy

You know the joke…”How do you know if someone went to Harvard?…They tell you.”

We all want to be viewed as “smart.” But it’s not something you can just say.

The better approach is to show me how smart you are instead of tell me. Demonstrate your brilliance by becoming a thought leader. One great way to do this is via a content marketing strategy.

It entails an occasional thought piece, blog post, white paper or even just curating other people’s content and then publishing it. Not just on your website, but also on external content platforms like Harvest Exchange or LinkedIn. Sites like these exist as destinations for sharing knowledge and provide access to potential new audiences.

8. Playing “hard to get”

Even managers that want to be perceived as ‘hidden gems’ are beginning to realize that being found is a LOT harder than it sounds. There are way too many competitors.

Being the secretive alchemists hidden in a dark corner is not what it used to be. But…unless you are willing to go “all in” on making your presence known, don’t expect a big ROI on a half pregnant marketing strategy.

9. Insisting that a web presence is unnecessary (or that an unprofessional looking website is okay)

Now you are just being stubborn. The world has changed – accept it.  Digital tools really do provide the biggest bang for the buck in shaping perception and disseminating information.

Few institutional investors will give you money without ever visiting your office. But…which office will they visit first – your virtual one (your website) or your real one?

Too often managers are so caught up in appearance around passing operational due diligence that they fail to realize how hard it is to ever get an investor to come to their office in the first place. Considering the steps an investor is going to take in the overall diligence process, having a weak website or no web presence at all in 2017 is just nuts.

10. Blaming compliance for using 20 year old marketing strategies

We are in a highly regulated industry. Restrictions exist on what you communicate, how you communicate, to whom you communicate and when you communicate. No doubt, there is a lot that you are not allowed to do. We get it.

But there is also a lot that you can. Many of the biggest managers that target the same institutional investors that you do and have to manage under the same private placement rules that you do seem to understand that.

If your GC or CCO is telling you that you cannot use modern, digital tools to communicate, then get a second opinion. Better yet, get a new GC.

BONUS: Selectively quantifying ROI on non-investment activities

We are often asked to provide an expected ROI in terms of AUM growth on a video or marketing campaign. Always a good question to ask – albeit poorly phrased.

Implicit in the question is the recognition that marketing is an investment. Marketing in a long sell-cycle business is always an investment. Also implicit in the question is that there is perfect correlation between marketing and AUM growth. That is a bold assumption. It is a bold to assume that perfect correlation exists between performance and AUM growth (otherwise, why would any manager below the top decile ever have money?). Both are essential contributing factors, but neither on their own, is sufficient.

To put it into context, ask yourself, what is the ROI on office space at 57^th and Madison in Manhattan? No arguing that location is important – but go ahead and try to quantify it. Now try to quantify the opportunity cost when comparing office space at 17^th and Madison. How about 17^th and Madison in Milwaukee for that matter? All things being equal, we know which space the market considers most valuable (the price tells you that), but it’s impossible to say how much more AUM you will raise by choosing one location over another.

The right metrics to measure ROI are those that can be directly influenced. For marketing in the alternatives space, that comes down to audience growth, engagement and retention. All very measurable outcomes.

Bottom-line… getting your message to stand out is hard.  Avoiding the common pitfalls that others make in their marketing and messaging is a good start. The biggest pitfall is simply thinking that the way it is done by everyone else is the way that it should be done.

If there is ever a place to be contrarian in your business, it is in your approach to marketing.

Click HERE for Part I.

By JD David

Asset managers tend to be quite disparaging when it comes to marketing.

Because it is all about relationships, right?

Not exactly…

WHY DOES AN ALLOCATOR FAVOR CONNECTING WITH THOSE HE OR SHE KNOWS AND TRUSTS?

It’s much the same reason that any of us favor a known entity. We extrapolate forward, believing that the next exchange will emulate the last, and this makes daily life easier.

If an allocator has been well served by a relationship in the past, there is greater likelihood that he or she will engage with that individual in the future.  If the positive experiences continue the relationship will strengthen, if the reverse occurs, the relationship weakens.

Tell me how this is any different than a consumer’s relationship with a brand? Our willingness to continue to support a brand is based off of our experience with that brand and the effort the brand takes to build a relationship with us.

The individuals that have access to allocators have simply done a good marketing and building awareness across these allocators. In relying exclusively on “relationships” to access allocators, whether they know it or not, asset managers are acknowledging that there is greater value in the brand of the individual than their own.

Leveraging the relationships of another entity to access an audience is nothing new. It is cross marketing in its purest form. It just so happens that in our case the associated brand is attached to an individual not a company (although it could be a company if the entity was a placement agency).

Asset managers can make the greatest gains when they realize that access alone is not enough.  So you are in the room, then what? To execute a cross marketing campaign with a credible “agent” with very little forethought as to how you are perceived if the campaign is successful is questionable at best.

That’s where concise marketing comes in to strike confidence into your audience.

Although the real quandary relates to why an asset manager would want to rely so heavily on the brand of others to begin with. As best we can determine, forgoing investing in a strong marketing platform and relying entirely on relationships to source capital is simply a hedge against failure. The problem, it is a self-fulfilling hedge. Allocators can see the lack of commitment a mile away.

It’s not a question of whether relationships supersede marketing or vice versa. The two have a symbiotic relationship with one another. To say they are opposing forces is indeed a contradiction.  Marketing is required to build relationships and leveraging relationships is a form of marketing.

It is almost if there is a competition amongst asset managers to see who can spend the least on marketing and still achieve success. Our advice, don’t enter this race. If you value marketing and invest in it, the chances of winning increase dramatically.

By Kyle Dunn

Everyone has their own style of engaging prospective investors and moving them through their pipeline. Having your own sales strategy mapped out helps you close deals more efficiently. In our conversations with managers, we’ve found 4 sales personas that seem to be very common across  many strategies.

THE FILM DIRECTOR – AUTHORITARIAN

The Film Director believes that he/she knows exactly what the prospect needs to achieve the best results for their investments. Film Directors express their opinions freely and are direct to ensure that the sale goes the way they believe is best. Some prospects do need that push.

THE MAYOR – DEMOCRATIC

The Mayor seeks the opinions of the prospective investor. From there, he/she advises them on the best plan of action henceforth. This gives prospects the sense of security and the feeling that they are part of the decision-making process, even if the mayor takes the sale in the direction he/she had planned for from beginning.

THE COACH – ADAPTIVE

The Coach has the game plan set out, doesn’t stick to just the one play. The Coach’s style evolves as his/her counterpart reacts; the wheels in the ‘game’ are always in motion. This involves micro-management or multiple touch points, but investors are more receptive to such an approach.

THE CONSULTANT – LAISSEZ-FAIRE

The Consultant believes that the most important attribute of any sale is educating a prospect. He/she educates prospects on the benefits of being invested into a certain fund, dangles some carrots, and then leaves it there. Waiting for the prospect to bite. The Consultant is willing to come back with advice, but is less aggressive with sales, believing that the hottest prospects present themselves.

Again, these are 4 sales personas that are common across managers and strategies, but certainly aren’t the only ones out there. Each persona brings its own strength, but there are advantages to being able to analyze and adapt.

There is however, one common trait that each persona has; the human element.

THE HUMAN ELEMENT

Prospective investors are people too! The irony is that many forget that while many represent an institution, family office, or are even just the face of a HNW family, they possess the same malleability as you and I do. Every prospective investor reacts differently to varying emotional cues (i.e. sales approaches).

The cookie-cutter approach of making sales doesn’t work. In any big transaction, there’s comfort and reassurance when the right human interaction is provided. Think real estate: what benefit is your realtor truly bringing you? Expertise? There are plenty of real estate salespeople with the same level of experience, but some who you relate with, better than others.

It’s “that gut feeling”, not “that circuitry feeling”.

By Darragh Hill

Asset managers overestimate the time and attention people invest in their marketing decks.

Case in point, upon initial review, will anyone recall the stages of your investment process or intricacies of your investment strategy… doubtful. But that’s not the objective is it? The goal, after a quick thumb through, is for someone to walk away with a mental imprint or impression such as, “these guys have an in-depth process,” or “their strategy accounts to this.” It’s a binary situation. There is too much going on in the world to ask anyone to walk away with a complex, multi-dimensional impression of your investment thesis.

Here is the interesting part. The binary, mental impressions you shape are more influenced by the design of your marketing deck than the language you use.

The image below is intended to represent a series of 3 slides within a larger deck of similar slides.  In reviewing the slides below, what will someone walk away remembering, my position, not much?

Alternatively…

What do you think the person reviewing your deck will walk away remembering?

A few key points:

1. In building a deck, the mental impressions you leave (if any) is entirely shaped by design and not language. (Now if the isolated point is uninteresting, we can’t help you with that.)

2. You only have two or three moments in a deck to create a mental impression. If all the slides looked like the middle slide, would it work, nope?

3. The reverse is also true. You can create a mental impression of complexity, by inserting a very heavy slide in the midst of a deck where the majority of slides have less information. (This relates back to my first example. People aren’t going to recollect the stages of your investment process. You simply want them to walk away thinking, “they have a very involved process.”)

My advice, the next time you build a marketing deck, strategize around the three mental impressions you want to generate and design the deck accordingly. Either isolate language, or build a graphic or information heavy page amidst lighter pages with the understanding that no one will remember what is written, but simply the fact that the attribute that you are describing is complex.

Make sense?

By Kyle Dunn