Hedge Fund Marketing: 10 Steps to Gain More Clients |
Date: Thursday, May 20, 2010
Author: Hedgetracker.com
Raising money for hedge funds has never been tougher and it seems like
it will remain tough for quite some time, maybe forever. It is what
most hedge fund managers are talking about and trying to figure out. It
was not that long ago that money was pouring into anyone who
established a hedge fund. With all the frauds and the market meltdown
of 2008, those days are gone. The hedge fund business has slowly
become institutionalized; investors not only have large sums of money on
the line, but also their careers.
People buy people not track records. Today’s hedge fund manager
should realize that obtaining clients and keeping them satisfied is
just as important as the funds’ performance. Experience, performance,
infrastructure, and risk management are a ticket to the dance, but you
won’t be dancing without a proper marketing and client-servicing effort.
It is critical that managers treat the potential clients and clients as
if they actually matter – because they do! Successful firms view
clients as real partners and in most cases these clients will stay with
them through tough times.
Unfortunately, there is no Silver Bullet to guarantee a hedge fund
manager more assets, but the following 10 Steps will increase your
chances of raising capital.
10 Steps for Hedge Funds To Gain More Clients:
1. COMPANY MESSAGE: Formulate a Company Message that is clear,
concise and memorable. The goal of your Company Message is to clearly
inform the investment community who you are and what you do. Your
message should come from top management and be well known by all
employees. All marketers should be able to articulate your Company
Message and be able to have a fairly detailed discussion about your firm
and the portfolios. Your Company Message may change as you grow your
business.
2. PITCH BOOK: Take a close look at your pitch book. This is
your image piece, it is a necessary evil, you must have one. The
ultimate goal of the pitch book is to get a face to face meeting with a
potential investor. Does your pitch book clearly explain, Who you
are (your firm history and pedigree), What you are doing (your
strategy and the market opportunity) and How you are doing it
(your investment process and management of risk). Each page in your
pitch book should be there for a reason. If you cannot articulate why a
particular page is in the book, take it out. In most cases, you don’t
need a 40-page pitch book with 10 trade examples, since there are only a
handful of investors that I can think of that actually enjoy reading
pitch books. Crazy graphs, charts and diagrams, often referred to as
“chart junk,” may make you feel good (for whatever reason), but if the
reader has to struggle to understand what you are trying to say, then
you lose. Make sure your graphics reveal rather than confuse. Don’t
exaggerate your bio, being responsible for making sure your boss has hot
coffee, should not translate in to you ran a trading desk. Keep your
pitch book simple, accurate and to the point.
3. THE MEETING: Having a face to face meeting with an
investor is a BIG DEAL. Treat it as such and be Prepared. It is the
Main Event, Opening Night on Broadway. Are you Ready? What do you want
the investor to think and feel as he/she hits the elevator button to
leave your office just after meeting with you? Do words like
Trustworthy, Honest, Experienced, Smart, Confident, etc. come to mind?
Most investors when asked why they invested with a particular manager
will say something to the effect of, the manager has a good track
record, good infrastructure, manages risk well, etc. All of that is
true, but there are others who may have a better track record, have more
people, and manage risk better, yet the investor did not invest with
them. So what is it? In the end, not to get too deep, it is the
experience that the investor had in dealing with the manager during
his/her due diligence process. It comes down to a gut feel that the
investor has based on these experiences that drives him/her to invest.
The manager has a lot of control over what the potential investor will
experience during his/her due diligence process. Make your pitch a
conversation rather than a presentation. Make sure you answer questions
accurately and clearly. In most cases the investor does not have the
same experience as the manager, so use terminology the investor
understands. Using terms such as conditional asset swaps, rolling spread
locks, condor trades, etc., without clearly explaining what they mean,
may impress the investor, but will also confuse him/her. An impressed
confused investor will not become a client. Obviously, if the investor
understands all the applicable terminology, then have at it. The goal of
a meeting is to get to the next meeting and ultimately call the
investor one of your clients. If the investor is confused or not clear
about how you make money, then you will hear – “we will put you on our
radar” or “let us track you for a while,” which really means – thanks,
but no thanks.
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