The SEC ruling of 10 July 10 2013 lifting the ban on general solicitation and advertising of private placements ushered in a new era of communication opportunities and challenges for hedge fund managers.
This rule dramatically expands the marketing flexibility for managers of private funds, enabling far more opportunistic public relations initiatives and media dissemination of messages while also providing for insight on content, encompassing product, personnel, strategy, performance, fund commentary etc.
Holly Singer (pictured), President, HS Marketing LLC outlines the following guidelines for start-up, emerging and established managers seeking to benefit from this newfound free speech while competing for assets.
Develop a Communications Plan:
Although many hedge fund managers have historically ignored the advantages of branding or de-emphasized an integrated marketing approach, these firms would benefit by developing a holistic communication plan encompassing the complementary ongoing initiatives including, but not limited to, a public relations strategy, marketing tool kit, web presence integrating social media as well as multi-media tools and advertising campaigns.
Develop a PR strategy:
Initiate press releases, media interviews, topical stories and commentary to create coverage among industry press and mainstream media in order to achieve brand building value, reinforcing how the firm wants to be recognized in the marketplace.
• Disseminate widely while engaging specific industry media contacts to achieve visibility among investors particularly as a means of differentiation within your niche strategy. Become recognized as a go-to source of credible information.
• Make sure your message is timely, informational and unique. Press releases and interview topics should prove useful to your target audience or prospective clients. Select an angle or find a hook to highlight your message.
• Create press releases that open with a strong headline and first paragraph to grab the reader’s attention. Use active verbs where possible. Less is more. Multi-media features and links may add significant SEO value and enhance your message visibility.
• Leverage a mix of targeted PR initiatives while integrating interview preparation and coaching to interact effectively with the media.
Upgrade your marketing tool kit:
Your pitch book, 1-2 page tear sheet/summary document, due diligence questionnaire (DDQ), investor letters/commentary and business cards are all core components of presenting the firm.
• A compelling message is a critical communication differentiator to set you apart in a competitive environment. Content clarity is the top priority in order to be properly understood. The pitch book must be tightly structured with a highlighted opening, middle and end to the storyline. Investors expect the investment philosophy, process and risk management to be articulated in layman’s terms, yet detailed enough to reflect investment acumen and sustainability. Be sure to include an organizational chart plus biographies.
• Well placed captions and analytical sound bites, particularly accompanying performance information, will hook the audience/user more effectively than a sea of data and verbose content.
• Appearance counts. Investors expect aesthetically attractive professionally designed presentations. Use visuals, flow charts and images to support the story, integrate the verbal and visual content, particularly to reflect process and team structure. Invest in a professional logo. Apply it consistently to business cards, promotional materials, web site, press releases and all forms of outbound communication.
Consider multiple delivery channels:
The fund manager’s web site should be properly optimized for ease of being seen or found online, chock full of informative and fresh content.
• As hedge fund managers adapt to less restricted communication, websites are expected to provide an important transparency tool with more public content emphasis and far less dependence on bundles of information residing in password protected regions of the site.
• Site development built with SEO tools and links to social media platforms such as Linkedin, blogs and more engaging multi-media components such as video clips will enhance branding objectives, while enabling managers to further leverage searching and visibility opportunities.
Selectively placed ads may help boost desired visibility. However, managers should carefully consider the potential for ads to consume a tight budget vs. other PR-based budget allocations.
Traps to avoid:
The removal of the prohibition on general solicitation and advertising of private placements is accompanied by additional obligations for hedge fund managers involving verification of investor qualifications, further disclosures appearing in marketing collateral and regulatory reporting responsibilities.
• Fund managers must consult their legal counsel and/or compliance officer before undertaking new communication initiatives and seek approvals prior to disseminating marketing messages.
• Registered Commodity Pool Operators should proceed cautiously and seek counsel’s advice given the current CFTC divergence in regulatory restrictions.
Meet the Challenge:
The newly open floodgates resulting from a less restricted marketing environment are likely to increase the challenge of getting heard above the noise. "Communication alpha" may be considered an increasing source of value in supporting asset raising and retention objectives.