By Henrietta Hirst, Director of CitySavvy
About the author:
Henrietta Hirst is a seasoned PR practitioner with close to 30 years’ experience of advising companies on their international media relations activities, corporate profile raising, and reputation and issues management. Henrietta has specialised in working with hedge funds sector firms for the past 13 years. Prior to that, she has represented companies operating across a wide variety of industries from global quoted industrials to professional service firms and has long campaign experience gained working in the US and Australia as well as throughout Europe. Before joining CitySavvy in May 2014, Henrietta ran her own PR company, Parex PR, for 10 years which specialised in working with alternative assets sector clients. She was previously Managing Director of Group Corporate Communications for United Pan-Europe Communications, Europe’s largest cable company (now part of Liberty International), and before that, a Divisional Board Director at specialist financial PR consultancy Ludgate Communications. Henrietta is a MBA graduate from Cranfield School of Management, where she has had a number of academic papers published and was subsequently invited as a guest lecturer to teach a number of communications modules on the university’s MBA programme. She continues to contribute occasionally to hedge fund industry publications and educational platforms.
S2. What a PR Company Does For a Hedge Fund Management Company
S3. Selecting a Provider, including suggested key questions
S.4 About City Savvy
Establishing a hedge fund in today’s market and raising capital from institutional investors is no easy venture and only the best survive the benchmark three- year threshold. Whilst the flow of new managers launching has remained fairly consistent for the past five years, at roughly 1,000 new managers every year, investors – of all types – are becoming increasingly discerning about and demanding of the managers to which they allocate.
The well recorded skew in capital flows towards the largest hedge funds is a challenge for new managers. According to leading hedge fund industry data provider, HFR, 69% of global hedge fund industry assets is invested in just 6% of managers – those individually managing $5bn or more – and as the total industry continues to grow, these Billion Dollar firms keep on taking the lion’s share of net new capital allocated to global hedge funds.
The institutionalisation of the hedge fund industry has made it more challenging for young managers to grow their businesses. The historical backers of start-up hedge funds (going back to the 1990s and earlier) were Family Offices, private banks and rich private individuals (HNWIs). Institutional investor flows – from pension funds, endowments, foundations and SWFs – became increasingly important throughout the 2000s in the period before the financial markets collapse in 2008, and have been dominant since. Whilst private wealth has come back into hedge funds in the last few years, the total capital in the industry is now dominated by the large institutional allocators and this is unlikely to ever change.
Many of these large investors are averse to investing in start-ups, uncomfortable with the uncertainly and perceived asset insecurity of being invested with a nascent and sometimes unproven manager. Many will be contractually prohibited in their investment mandates from allocating to sub-billion dollar hedge funds or unable to invest in smaller managers because as institutional allocations tend to be larger, their individual ‘ticket’ would represent too high a percentage of the overall fund assets.
At the same time institutional investors expect institutional standard operational infrastructure and this, coupled with regulatory oversight and compliance, has created a cost burden that many smaller managers struggle to overcome. A recent study by Citi found a typical hedge fund now needs $310 million in AUM to enable its two per-cent management fee to fully pay for its regulatory and operational overheads.
Despite these challenges, capital owners are swamped by pitches from capital-hungry hedge fund managers, both new and established, eager to build their AUM. Distinguishing your firm and fund within the plethora of investment possibilities for the institutional allocator will require your full commitment and marketing savvy. Whilst a solid performance track record is, and always will remain, the single most important element for a successful hedge fund manager to be able to show, this factor is no longer sufficient alone to capture capital commitments. Being able to demonstrate institutional quality infrastructure and processes, a talented and united investment team, rigorous risk management and disciplined investor reporting have also become default requirements. And if a manager cannot successfully communicate these strengths and characteristics, then he (or indeed she) will struggle to survive let alone grow.
Many managers think of the marketing/branding and media elements of the hedge fund business as a luxury, that PR is a non-essential optional ‘extra’ that few can afford. In short, they think of it as a Cost rather than an Investment. But the commercially challenging environment articulated above shows that it is this rather old fashioned view of communications that is the luxury that the manager cannot afford!
Within this context, appointing a specialist advisor to help market and promote the launch and growth of a new or early stage fund seems not only logical but eminently sensible. Adopting a well-planned marketing strategy which targets the correct investors in an intelligent manner, can give an emerging or smaller manager the ‘edge’ that they need to stand out from the crowd, articulate with impact, and gain the attention of capital owners.
So how should the marketing of a new fund be approached and what are the tactics used? Well, working with a sector specialist PR firm is a good place to start.
S2. What a PR Company Does For a Hedge fund Management Company
Roles of the Communications Adviser
Manager and Fund ‘identity’: determine core messaging and articulation of Fund and manager; visual identity and brand; regulatory compliant marketing, online presence, etc.
Investor marketing: assist with Investment Book and core presentation materials, Fund Fact Sheet, roadshow preparation, presentation training, Q&As
Media relations: identify journalist universe; press outreach; Fund launch release draft and distribution (and follow up activity, as appropriate); ongoing journalist engagement and introductions; forward features and contributed editorial opportunities; media ‘point person’
Other activities: conference and event participation by manager; award submissions; issues management and damage limitation (if required); intelligence gathering; sounding board for management team on external perceptions and response;
Looking In and Know-Your-Client
There is so much more that your PR provider, if you’ve chosen the right one, can do for you than just media relations. It is a misconception by managers in many industries, not just hedge funds, that PR as a practice is concerned simply with journalist engagement ,but PR – Public Relations – as the words suggest, encompasses outreach to and interaction with all external audiences. Your PR and communications partner should be regarded as a trusted, and often early stage, adviser in much of the same way as a Fund’s prime broker, distribution agent or legal counsel will be appointed.
At CitySavvy, the first thing we do if appointed by a new manager is to make sure we fully know and understand our client, their investment proposition and target investors, and help them define their ‘edge’ within their strategy. Hedge fund managers are by definition traders and investors, and few have a marketing background or instinct. The chances are they will never previously have needed to articulate their investment approach to the extent they will have to in their new context.
Marketing a new manager or fund should be approached with the same quality of strategic planning and thought as the manager undoubtedly will have applied already to the launch of his or her own business. A formal communications plan with clear objectives, actions and deliverables should be determined and written down, not least to ensure that proposals can be checked for compliance with relevant regulatory jurisdictions. This may be particularly vital, for example, for a US manager seeking to launch its first European UCITS fund.
Ensuring the core messaging and pitch points are appropriate – for manager/fund accuracy as well as investor sensitivity – is important. The investment characteristics and appetite of public pension funds and other large institutional investors varies considerably from those of Family Offices or private portfolio wealth managers. By understanding whom you are selling to, you can write your marketing materials to most effectively resonate with those investors who are the most likely to allocate to your Fund. Use your messaging as a means to differentiate your Fund within an invariably crowded market for competitive products. Be clear, be concise and focus on addressing those areas of primary concern to your target investors. It is surprising how many manager waste this opportunity by concentrating on their personal histories, effectively singing their own praises, rather than clearly articulating the investment rationale for their particular fund. Ensure your marketing pitch stands out from the crowd.
The next thing we work on is fund documentation. Core required marketing materials, as a minimum, will be the Investor Presentation and Fund Fact Sheet but can extend to the manager’s website and wider online presence (directory listings, LinkedIn page, etc). Presentation of the Fund, whether in written form, visual or verbal pitching, needs to be consistent as well as compliant for regulations across all distribution channels. Working with the right communications partners will allow you to delegate responsibility for developing all of these marketing aspects of your business whilst you focus on fund formation, operational issues, counterparty arrangements and, ultimately, managing the Fund.
At CitySavvy helping new managers with investor pitch materials and non-legal documentation is very much part of our ‘day job’ and if there is a single most important marketing activity for the nascent manager to get right it is this – fund launch investor communications.
Looking Out – Engaging the Media
Proactive media relations is a valuable tool available to fund managers hungry to build market profile, brand awareness and assets under management. It is only the most established of managers with closed funds or those running esoteric strategies who perhaps can afford to ignore the media. If you are a smaller or nascent manager – and more than 50% of the global hedge fund industry is populated by firms with less than $100m AUM – investing in media-savvy PR support will help get your name out there and get your Fund written about.
Many managers – but by no means all – will want to do some degree of media activity to announce the launch of their new fund. The press release needs to be written with the same clarity and purpose as the investor materials. New fund launches – unless very large in initial capital or with a ‘star’ name behind them – do not generally excite journalist interest and many will start life without fanfare, failing to get reported even by the trade media. To counter this it is best to work with a sector experienced PR partner that has a track record of crafting launch announcements that get noticed and create coverage.
Your PR advisor should show that they have a solid knowledge and understanding of the relevant media universe for your story. The financial and investment press is a diverse universe – from dedicated financial media such as the Financial Times and Financial News to the pension fund titles and institutional investor press, to IFA periodicals and those for retail investors, the hedge fund specialist publications, and many others: Do not make the mistake of thinking that blanket distribution is the route to successful coverage but rather segmentation and focus on those titles that will best influence and reach your precise target investors.
Of course, media relations works best if there is a continuum rather than this being thought about as a one-off activity. Post initial launch announcement, try to build a relationship with the journalists who write for and influence the type of investors you are seeking to attract by becoming a helpful source of information and insight for them. Be prepared to speak not just about your individual Fund but about investment trends, investor concerns, industry dynamics and other topics that will help make you an interesting and useful contact. Have an opinion and be prepared to express it. But make sure you consider the audience (readers) for which the journalist is writing and editorial stance of the media outlet concerned as well as the journalist’s timeline for filing copy if post interview follow-up is required.
The aspect of a comprehensive media relations programme that most hedge fund managers find the hardest is providing active news flow that sufficiently warrants journalists’ attention and to be fair, there is little to say of note about most funds most of the time. If you are to maintain a dynamic dialogue with journalists, your PR adviser will need to be creative about finding and creating valid and valuable opportunities for ongoing media engagement without wasting time, effort or, worst still, dissipating goodwill with idle and ill-thought out approaches. In this respect at CitySavvy, we adopt an assiduous discipline. We consider it fundamental that we know our target journalists and media outlets as well as we know each one of our individual clients and we work hard to ensure there is a beneficial and logical ‘fit’ between client, media outlet and individual initiative, every time we engage.
The editorial calendars published by the financial, investor and hedge fund media can be very helpful in suggesting key points of journalist outreach during the year and making a note of relevant forward features listed on these is certainly recommended for outreach at the appropriate time. But as a specialist PR consultancy known for our support of asset managers and financial institutions, we are in regular and frequent contact with all the publications of primary importance for our clients and find that most opportunities arise from this direct and individual dialogue.
We also like to suggest that our clients contribute guest editorial and commentary. This is a great way for managers to build recognition of their industry credentials and authority. News media these days are content hungry, especially online, and editors welcome well-written thoughtful editorial from authoritative industry sources.
Getting involved and actively participating in influential networking groups, especially if targeting HNW capital, is another beneficial communications activity. The closely guarded world of Family Office capital can be particularly hard to access. In both the US and Europe, there are a small number of strictly private networks through which Family Office executives (and family members) can come together to exchange views and discuss issues of mutual concern and interest. And on occasion, highly carefully selected asset managers are invited to present at these.
If targeting institutional and pension fund investors there are, of course, much larger, well established and open forums, industry conferences and events to which you can contribute as either a delegate or sponsor or, if you are lucky (and have the right PR partner negotiating for you) be invited to speak as a non-fee paying presenter on the podium or panellist. The right PR partner will be able to help you filter from the wealth of events that are available in order to select the most influential platforms and then work to ensure you ‘get a seat at the table’.
Submitting for industry awards can be another useful mechanism to build brand awareness recognising, of course, that winning the award, rather than being shortlisted, will in most instances depend on fund performance and that category success therefore will depend on the skill of your CIO rather than PRO – and so it should!
Online and social media
The relentless migration of communications to online platforms, news sites and social media creates a challenge for alternative asset managers. For hedge fund managers and others restricted to investment by only qualified and sophisticated investors, we advocate a cautious but well informed stance is adopted, especially with regards to social media platforms – essentially one of ‘watch don’t play’. This is not the same as suggesting that a manager’s own online presence should be ignored. Whatever alternative sources of information may be available to investors, regulators, business counterparties and others, they will always look online. Make sure your website is of the same high quality as your other marketing materials, consistent with the visual look and messaging of these, compliant with all necessary regulatory requirements and restrictions, and kept up to date.
There may be a limit as to how much you wish to put online for either compliance or commercial reasons but the days of the hedge fund manager sheltering behind a single firewall page carrying minimal information – sometimes not even contact details – and purposely promoting a sense of mystique are consigned to the past. The 2012 JOBS Act in the US may not have facilitated a huge uptake in managers marketing and publicly advertising their businesses, but it has led to some making marked improvements to their websites.
Illustration 2: Fund Launch Communications
Phase 1: Planning & Preparation
Communications plan and budget. Determine target audiences. Core description and messaging. Develop investor marketing materials.
Consider and confirm media strategy (exclusive or blanket distribution); write background briefing materials; press release draft, editing and sign-off; compile media targets database; review relevant editorial calendars for post launch media opportunities and set out on PR calendar; decide on media spokespeople and train if necessary; ensure all logos, photos, biogs and/or other helpful materials gathered and accessible; confirm all materials and media plan compliant for regulations
Phase 2: Day of fund launch
Press release distribution
Phase 3: post launch
Post launch interviews and press engagement, follow-on activities; forward feature lists and editorial calendars; create written editorial opportunities for client; event speaking platforms; media monitoring
S3. How to choose the right PR
A growing number of hedge funds are appointing external PRs. Rankings compiled by Absolute Return show that 45 percent of the largest North American hedge funds employ a public relations agency, up from 36 percent in 2012. For firms managing in excess of $5 billion, that number leaps to 75 percent.
In appointing PR and communications support – whether an internal hire or outsourced resource – it clearly makes sense to look for a demonstrable track record and knowledge of the hedge fund industry. If appointing externally, working with a smaller consultancy with specific sector expertise and a tighter account team generally provides for a better client experience than choosing a larger agency. Why not speak with your industry contacts about their experiences with different PRs and their knowledge of different agencies, or other fund managers about whether they feel they have obtained value for money through the appointment of a particular PR consultant or consultancy. Seeking the opinion of journalists is another solid approach. Ask them whom they like dealing with and whom they respect on the other side of the fence! Appoint an advisor that you can trust, feel instinctive about and, not least, one that you think you will enjoy working with.
Illustration 3: Good questions to ask shortlisted candidate PR firms
• Which other asset management firms/hedge funds do you work for and do you have any client conflicts?
• What was the best advice you have given a manager?
• How have you helped build a brand name?
• What is your fee structure and how much will this cost me?
• What success measures do you recommend for our campaign?
• What has been your greatest success for a client? What achievement are you most proud of?
• Have you ever had any negative client experience and if so, how did this come about and how was the situation resolved?
• Is personal fit important to you – have you ever dropped a client?
• Who will be directing my account on a day-to-day basis and how senior/experienced are they?
S.4 About CitySavvy
CitySavvy is an award winning financial PR firm that specialises in providing strategic communications counsel, international media engagement and brand reputation management for asset management sector firms, financial institutions and publicly quoted companies. We have offices in the Netherlands, UK and the US, and the multi-lingual capabilities and campaign experience to help our clients engage with their stakeholders irrespective of time zone, geography or market cycle.
At CitySavvy we design and execute high-impact, strategic and well-crafted PR and media relations campaigns with an emphasis on accountability and the out-performance of client expectations. In addition to traditional media engagement, we offer specialist expertise in the integration of social and new media platforms, content creation, issues management, and broader multi-disciplinary marketing programmes. Whilst most of our clients retain us on an on-going long term basis, we are also experienced in supporting corporate transactions and fund launches as defined projects.
Primary Contact: Henrietta Hirst Managing Director +44 20 3691 7563 email@example.com
Alternative Contact: Julian Rea Managing Director, UK +44 20 3691 7561 firstname.lastname@example.org