A handful of the top alternative investment firms on both sides of the Atlantic have realised the importance of brand communications. Unsurprisingly, they are among the industry’s most successful firms. What do they know that others are missing? For a start, they have acted to manage and build their brand communications. For the lucky few that have gotten this process right, the rewards have been immediate and tangible as asset allocators have increasingly invested in alternatives in order to meet their long-term investment objectives.
Many alternative asset managers know they need to communicate more effectively. Clearly, allocators need to be able to identify the investment benefits of what an alternatives manager is offering. Yet they also want to know more about the intricate workings of the alternative investment firm, particularly on compliance and risk.
Communicating is vital
In such areas the ability to communicate efficiently, clearly and regularly is becoming ever more vital. This is particularly true for US-based alternative fund managers. Under the Alternative Investment Fund Managers Directive, US managers are now under severe communications restrictions which limit them to receiving “reverse inquiries”. In effect, managers who are not registered with the AIFMD are prohibited from direct outreach to both private and institutional investors in the European Union.
Under the AIFMD regime, investors must uncover and approach a US-based manager. The bottom line is that investor interest from Europe is directly related to how a fund is known, understood and accepted. In other words, the ability of a US alternative fund to raise assets in Europe is now intimately linked to brand awareness, effective communication and the ability to educate investors.
Becoming better at communications isn’t just an imperative for alternative investment managers aiming to succeed in Europe. Indeed, major developments in the US mutual fund space, notably the proliferation of ’40 Act alternatives, are making managers realise the imperative of structuring communications in the ways that help to meet the unique demands of different types of investors.
Brand building facilitates communication
What needs to go hand-in-hand with structuring communications is an effective brand building strategy. In this respect, a number of successful alternatives managers have embraced investor education as a way to attract attention and get recognition in an increasingly crowded fund landscape. The growth in demand for liquid alternatives products (total assets under management in alternative mutual funds, including non-traditional bond funds, surged to $255 billion in 2013, more than double the amount for 2010, according to Morningstar) is rewarding those managers who have managed to differentiate themselves by successfully building a brand. Indeed, in a report into launching a ’40 Act fund, SEI Investments observed: “No manager hoping to break into the market will succeed without a strong brand strategy.”
An integral part of such a strategy is controlling risk. Since alternative fund investment strategies are generally less well understood, managers are more prone to media criticism. Being more prone to negative headlines increases the stakes and underscores the need to manage communications and build a reputable brand. Put simply, uncontrolled communications are unacceptably high-risk. Therefore, a systematic and controlled content strategy is critical.
Becoming a communicator
The first step for an alternative fund manager is to formulate its key performance, compliance and communicative differentiators. The medium for this is on-message placed content, which bypasses the traditional media process and allows for tighter control of the outcome. As we have seen, the availability of digital channels to deliver this content to the marketplace has grown exponentially in recent years.
A single piece of expertly defined educational content is amplified across all key communication channels: from the fund manager’s website to being disseminated through graphically sophisticated email marketing software. Further distribution can go through key online channels (LinkedIn, Google+ and Twitter, for example) with the potential to be supported by a related event, manager video, and a highly targeted digital advertising campaign.
The amplification through this ‘waterfall’ effect engages and calls to action far more target investors than one sole communications channel. Crucially, this placed content should not be based on performance which, as we know, is variable, but rather on the firm’s best original thinking that demonstrates its thought leadership. The aim is to position an alternative investment manager as a “solutions provider” rather than a “product pusher”. Building a relationship with investors in this way will help to turn a first meeting into a second meeting.
Getting the right communications partner
The importance of an effective marketing communications partner in delivering a content strategy is critical. A skilled agency is capable of creating highly messaged, high-impact and relevant content that engages a manager’s target audience. The ideal partner will also have the in-house technical knowledge to create powerful educational content with minimal input from the manager. Equally crucial is the communication partner’s ability to push this content across every available channel, dominating the all-important Google profile (now the greatest newspaper in the world) which is an investor’s first port of call in doing manager research.
To be among the elite group of alternative investment managers leading fundamental change in the industry, it is now vital for managers to have an effective integrated marketing communications strategy. A key component of this is rigorously planned and effectively executed thought leadership. Proactive managers have the opportunity to increase (and retain) both the quality and quantity of their assets under management. Communicating really is no longer an option.
Max Hilton is a director of Peregrine USA. His clients include some of Europe’s largest hedge funds and funds of hedge funds, an alternatives seeding platform, half a dozen listed alternative investment companies and a leading fixed income-focused institutional asset manager. He has been a client account manager since 2009, and a senior consultant since 2010. He was made a director of Peregrine USA in June 2014. Prior to joining Peregrine, Hilton worked for Porterfield, a real estate marketing specialist. He has obtained an advanced certificate from the CIPR, is currently studying for his Investment Management Certificate, as well as being a founding ambassador of HedgeBrunch.