Marketing and Branding Can Help Hedge Funds Fight Back
Anyone following the recent news covering hedge funds has likely seen a barrage of doom and gloom showering the industry. Hedge fund marketing has turned defensive for many firms, as reports of below-market returns over the past few years are haunting even some of the once vaunted firms. Many investors are now considering moving assets elsewhere in search of higher returns or lower risk. In fact, between 2014 and 2016, large pensions including NYCERS and CALPERS both announced that they had dropped their allocations to hedge funds. As many as 59% of hedge fund managers reported a decline in assets as of last year[1], and in Credit Suisse’s 2017 Hedge Fund Investor Survey, less than one-third of institutional investors reported their managers meeting or exceeding hedge fund return expectations[2].
However, a silver lining does exist. That same Credit Suisse report found that 87% of institutional investors said they either intended to maintain or increase their allocation to hedge funds over 2017.2 And while much of the historical asset growth has been concentrated at the largest firms in the industry, our recent research into the Brandability of Trust explains how smaller investment managers can leverage their alternative investment brand strategy for asset growth.
A Barclay’s survey buttresses Credit Suisse’s findings and confirms that much of the hedge fund underperformance in 2016 was due to individual hedge fund size—not the size of the industry.[3] While the macroeconomic backdrop and lack of volatility in the markets do not help hedge fund returns, 74% of hedge funds found that as funds grew in size, their asset deployment became more challenging given position sizing. Larger hedge funds were unable to take the nimble gambles that had become hallmarks of the industry.
Smaller fund managers and their hedge fund marketing teams can and should use this to their advantage – it is a true opportunity to shine. While there is a general consensus that lower fees and relatively poor performance are factors hurting the hedge fund industry, we believe that many of these small managers are actually underachieving their potential because they, while they might have a solid investment strategy, don’t have a strong brand and marketing strategy to present to potential investors. Smaller hedge funds should highlight their unique strengths and potential over the industry giants, especially when marketing and pitching their alternative asset management strategy to institutional investors.
A strong, authentic brand is not only a tool for growing your asset base but one that helps in weathering market and industry headwinds. Some of the best financial brands inspire investors to look past performance and instead consider the asset manager’s total value proposition. For investors, investment consultants, and institutions, while fund performance is obviously important, so are elements such as transparency, thought leadership, team stability and investment process—if packaged and marketed in an interesting way.
Our most recent whitepaper dives deeper into how industry giants are consolidating assets and what smaller asset managers can do to remain competitive.
Of course, hedge fund managers can’t simply say, “We have a stable team, a thoughtful investment process and strive to be transparent with our investors.” Brand strategy and messaging need to be differentiated, authentic, and resonant. Telling the same story in the same way as everyone else, even if seemingly impactful, loses its authority very quickly. A strong brand message, tailored toward what makes your investment strategy unique and targeted at your investors, can have a much more significant impact. Even in the world of institutional alternative investment management, a thoughtfully crafted messaging strategy not only addresses the needs and decision-making drivers of your target audiences, but also clearly articulates your unique value proposition, delivering a distinct advantage.
Achieving a thoughtful message is a balancing act, and is certainly easier said than done. A financial brand and alternative investment messaging strategy must address the needs of current investors, prospective investors, intermediaries, potential partners, current employees and even new hires. It must speak truthfully about who you are, and why you do what you do. Given this, working with an experienced financial branding and marketing agency can make quite a difference. With the financial acumen to understand and articulate your strategy, and the strategic skills to position your message, we can create stronger connections with your audiences by conveying your true value and story. Finding the common thread in a messaging strategy that resonates with all your target audiences is a craft that we at MBC Strategic have been refining for nearly two decades.
See our thoughts and reach out to us to learn how we can help you create a clear and effective branding strategy.
- Pensions & Investments, More Hedge Fund Firms Seeing Decline in Assets, September 2016
- Chartered Alternative Investment Analyst (CAIA) Association, Credit Suisse Finds That Institutions Remain Committed To Hedge Funds, April 2017
- Bloomberg, Barclays Debunks the Prevailing Wisdom on Hedge Fund Returns, September 2016. Year ending at June 30th 2016