The Securities and Exchange Commission’s decision to lift the ban on general solicitation by hedge funds and other private placements to sophisticated investors, part of the Jumpstart Our Business Startups (JOBS Act) law signed more than a year ago, marks both the end of the hedge fund industry as we know it today and the beginning of a new era in asset management, according to the asset management PR firm Walek & Associates.
In a letter today to the firm’s clients, Walek & Associates said:
The era of regulated secrecy for hedge funds is over. The veil has been officially lifted on hedge fund managers, who can now begin to more openly communicate with sophisticated investors and the marketplace, without fear of regulators shutting them down.
Hedge fund executives will now be able – within reasonable limits – to tell their story, open their web sites, talk to the media, run advertisements, showcase their expertise, and generally run their businesses as businesses, without the government-imposed cone of silence that has constrained the industry for decades.
At the same time, hedge funds will face an even more competitive marketplace as peers engage the tools of marketing and branding, and as traditional asset management firms bring their marketing and sales expertise into the hedge fund space.
Even before today's SEC action on the JOBS Act, we have seen significant changes begin to reshape the alternatives asset management industry as alternatives-based 40 Act products are launched, as traditional long-only managers buy and merge with alternatives management firms, and as investors – and their advisers – of all shapes and sizes demand access to more sophisticated investment tools.
In response to today's SEC actions, we expect to see a flurry of me-first paid advertising– some of it likely ill-conceived, some strategic. Beyond that, we see the hedge fund industry trending toward two approaches with, of course, many firms landing somewhere in the middle.
On one end of the spectrum, some hedge fund management firms will seek to grow to their full potential by developing the brand, visibility, product structures, infrastructure, distribution channels, and sales & marketing necessary to take advantage of their core areas of expertise in order to build assets under management. This will happen organically and through M&A.
On the other end of the new industry spectrum, some firms will be perfectly happy to remain below the radar, build on existing investor relationships and remain truly private funds.
In the middle ground – and we are seeing a lot of inquiries here – hedge fund management executives will choose to develop their brands, open their web sites a bit more, engage with the media selectively, run carefully targeted advertising, think about social media and speaking platforms, and overall selectively and smartly use the proven tools of marketing and communications to support and grow their businesses – all within the bounds of today's SEC decisions.
For managers, any of these responses to the new JOBS Act environment is reasonable. All of these approaches require a marketing and communications program to make them work.
In the end, investors – from retail to institutional – will benefit in this new JOBS Act world as investment managers become more transparent, sophisticated investment strategies more accessible, and investors able to make better decisions.