|| The Managed Funds Association's D. Brooke Harlow|
Even though the Securities and Exchange Commission recently lifted the 80-year-old ban on general solicitation for hedge funds, don't expect to see late-night infomercials or billboards at sporting events advertising the industry's latest investment opportunity anytime soon.
The impact of the new rules is likely to manifest itself in a less sensational, yet more meaningful way for investors. By lifting the ban on general solicitation, Congress and the SEC have opened the door to greater transparency and information sharing between funds and those qualified to invest with them.
This welcome, overdue change will usher in a new communications landscape where managers may need to rethink their approach to marketing and building a brand. Some, for sure, will continue to do business as they always have. Other managers are likely to embrace the change and engage appropriately in the ongoing public conversation about investing.
Many believe that the first to embrace the new rules will be large, diversified financial services firms like Blackstone Group or BlackRock and smaller start-ups trying to raise capital. One thing is certain: A very competitive industry is about to get even more competitive, with more funds using a broader range of tactics to attract investors from a limited qualified investor pool.
Within the context of this new post-JOBS Act landscape, hedge fund managers may want to explore four key issues: brand, media relations, events and speaking engagements, and digital and social media.
Brand: To a numbers-driven hedge fund manager, the idea of building a brand can seem irrelevant. But a strong brand is the foundation of a business with staying power. Building a strong brand requires a company to know and consistently communicate what it stands for, what differentiates it from competitors and what unique value it provides its investors.
Media relations: For decades fund managers avoided the press to ensure they wouldn't run afoul of the general solicitation ban. Now managers and funds need to rethink their posture toward the media. With the ban lifted, funds can engage in a more proactive media strategy. Equally important, funds can now push back against inaccurate reporting and aggressively correct the public record. This new landscape will make it more important than ever to build meaningful relationships with those who cover the industry.
Events and speaking engagements: Industry conferences and events have always provided an important platform for fund managers to communicate important ideas about their investment strategies. Now they can think more expansively about a public speaking strategy --including venues outside the industry cocoon -- to demonstrate leadership on a broader stage.
Digital and social media: Once upon a time, paid media was the only way a brand could exert total control over its messaging. A brand's "owned media" properties -- its website, Twitter handle, YouTube channel -- now provide new platforms for communicating a brand's value proposition and engaging target audiences. Fund managers need to think carefully and strategically about how access to these new platforms can benefit their businesses and provide information to investors and potential investors. Effective management of digital and social media will also allow funds to manage their online reputations. After all, the most basic step in the due diligence process is a Google search.
While some pundits and consumer advocates have positioned the lifting of the general solicitation ban as an opening for potential fraudsters, responsible hedge fund managers will see the move for what it truly is: an opportunity for greater transparency and providing more accurate and timely information to investors.
We are entering a new era where funds of all sizes will compete for investors on a level communications playing field. Managers must now invest the same quality of planning and analysis in their marketing and communication strategies as in their investment strategies.
The ability to generate stronger performance on a risk-adjusted basis will always trump a slick marketing brochure. But a strong brand and a smart communications strategy are important cornerstones for an investment company or fund with staying power.
D. Brooke Harlow is executive vice president and managing director, development and communications, of the Managed Funds Association, the trade association representing the global alternative investment community.