Controlling the Message

Hedge fund marketing in a digital age

IN CONVERSATION WITH ANTHONY PAYNE, FOUNDER AND CEO, PEREGRINE

Anthony Payne is a corporate and financial communications consultant with more than 25 years’ experience. Prior to founding Peregrine in 2003, Payne was managing director of WPP-owned Hill & Knowlton Financial, a global financial communications firm. Since founding Peregrine his work has been entirely focused on asset management. He spoke to The Hedge Fund Journal about the environment for marketing hedge funds in a digital age.

Rod Sparks: You refer to yourself as a marketing communications agency focused on brand building, brand protection and lead generation. Taking each of those elements, what can you do to help asset managers?

Anthony Payne: We want to be the outsourced marketing solution, and what has that meant for the development of our business? When I think what a marketing team does, I think they look at the newsletter, what you send to clients. They look at the content, they look at the design, the look and feel of that. They look after the website, looking after content on the website. They look after events, they look after advertising (if there is any). There are also pitch books, marketing materials and, of course, press office, media relations. So that to me is all the different activities that you need to be quite good at.

In order to be an outsourced marketing solution you have got to be really good at the subject. The actual bit you cannot fake in any way, shape or form is your understanding of the story. You have got to be specialist. That is why we focused very much on asset management. You have got to have people who can write, to be able to produce content internally. You have got to have a design team because you have to be able to get not only the voice, it is also the look. You have got to have a design team to help with that.

The final piece of the picture is that you have to measure the effectiveness of all of this activity. So you have got to be really good at the analytics, because you have to know who is reading the content, who is engaging, who has actually read your newsletter – both from a compliance perspective and from a nurturing relationship perspective.

RS: Can you give me an example or some examples of the sorts of things that you are able to and are doing in respect of proactively building a hedge fund brand?

AP: The first thing I would say is asset management is probably the best area you could possibly be in the financial services sector. There is going to be a huge growth in the sector, because governments are encouraging people to save money and incentivising that or regulating it. It is a very exciting space to be in, and often the smartest managers within the space are hedge fund managers or have got that sort of background.

Within that, what does it mean to build a brand? It is extremely obvious really: you have to build that brand based on education, investor education, and explaining what you do and being a thought leader as opposed to a product pusher. If you want to be a thought leader it means you need to have some thought. Building a brand the way we think about it is based on thought leadership, based on education and based on technical content, because we are not selling Levis. If you think of a spectrum on the one end you have Levi jeans – an irrational sell, very emotional, picture of sexy people in jeans. On the other end you have a weapons system: completely rational, totally technical, no branding. It has a technical buyer buying a technical product based around the technical specs of that weapon system (leaving aside for a moment the bribes that have been paid and the other things!) and then nearly at that end of the spectrum you have asset management. Yes, there is an element of emotion in there. You need that visceral connection, that emotional connection with the brand so it stands for something, but it is still very much about content – the rational end of branding.

Building a brand through thought leadership, how do you do it? You need to go back to thinking about what your edge is. What is your DNA as a manager? What makes you different? Why should investors give money to you? We go through a process of interviewing managers to extract what their DNA and edge is. There is a lot of push-back when people say generic things. We will come up with the visual representation of the brand, so you then have the face and the voice. We combine that with all the content that is within the organisation already. Research, white papers, the monthly newsletters, marketing pitch books, etc., and that then turns into thought leadership content.

We deliver that through multiple channels – say four pieces of content a year. There might be more than that because if you counted your newsletters, and you deliver that through email, through PR. You might place a piece as a contributed article in The Hedge Fund Journal for example, put it on your website, your LinkedIn platform as a piece of content. Construct an event around it. That is how you deliver your content on a continuing basis, and then you measure the reaction to that and continue to build the relationship, refining and tuning how people are responding to your interaction with them.

RS: Do you think hedge fund managers are now more willing to engage with the press than they might have been in the past?

AP: I think there has been a seismic shift in pre-crash, post-crash. Pre-crash the idea was that the most exciting brands were all secretive and opaque and it was like finding hidden nuggets. Post-crash, everything has changed in that returns have been harder, regulation has been more oppressive, and competition is greater. So the commitment to education and being perceived to educate has increased. So I think certainly the more sophisticated hedge funds want to be seen to be transparent and educating. It is inaccurate to say that hedge funds haven’t been educating, because they have all spent huge amounts of time educating their own investors and explaining things to their own investors, but that is the perception. Without question there is a more sophisticated approach to branding and external communication within the hedge fund community, and the ideas of being a thought leader and using content to help attract investors as to their thinking.

Quite apart from that, it has become much harder to actually even talk to investors. Reverse enquiry has meant that traditional forms of marketing and sales are not so relevant. You have to actually build a brand, so you attract investors to your thought and your thinking and your smart people. You don’t want to communicate performance and you can’t in many circumstances. The best proxy for performance is smart people organised in a smart way around smart ideas.

RS: How do you go about controlling the engagement that managers have with the press, and why do you think that this is important?

AP: If you manage it badly it is extremely dangerous, because if the reporter is not sophisticated enough to understand your story, you then have something on Google which will be there permanently which misrepresents what you do. It can be extremely harmful. Producing your own content becomes very important, obviating reliance on the occasional intermediated piece.

So own content has become more important. The role of media is always still important, but there is an increasing trend towards sophisticated investors wanting to hear directly from the manager, reading the manager’s own content and also looking at the manager’s own video. Own content has become more important because of the increasing trend where people are trying to manage their own investments. As more investment comes into the asset management business there is an increasing level of sophistication where people want to understand what they are investing. There was a huge loss of trust, quite rightly, in the crash, where there was a very unsophisticated level of communication based around performance and labels which were not totally accurate like “absolute return”, for example, which were not helpful.

RS: You opened an office in New York last year. It is early days, but can you just tell me how things differ (if, indeed, they are different) when it comes to your offering and how it is perceived?

AP: The first general point is that the sophisticated approaches to managing money, like hedge funds, really took off in the US, so I think there is a much better tradition of investing in hedge funds in the US than there is in Europe. The level of understanding is higher at a basic level.

What happened in the UK is that there was a big trend starting in 2002/3. It was all a bit of a bubblereally, and then just before it burst, the Europeans got into it – continental Europeans, the Swiss – and the whole thing went “bang”. Funds of funds were obviously the main way in, so people didn’t take much responsibility for understanding it. They didn’t have that level of technical analysis within their firms. Then it all went wrong.

I think in the US there is a much longer time-frame and a much greater understanding going into the crash as to where hedge funds properly sit going into the portfolio, and what they should be doing for the portfolio, which didn’t necessarily exist to the same degree in UK/Europe. That means hedge funds in the US are going to be a bit further down the curve of branding and marketing and understanding what to do next. You will see a greater commitment to video thought leadership, etc., but you have had more successful, big trends like multi-asset happening, liquid alts happening in the US. UCITS as the vehicle didn’t have time to pick up as much momentum as happened in the US.

So the context for marcoms (marketing communications) is just better. It’s a more sophisticated conversation, a quicker uptake about what you are talking about. This makes for a speedier turnaround in setting up relationships and producing the results. That is the main difference I believe.

Certainly in the US there was this even worse fear inspired by lawyers. “Don’t say anything otherwise you are going to go to jail or get sued for millions of dollars”. Putting everything I have said into some context, you still have to understand that fear that hangs over everything in the US to a much greater degree than it does in Europe. The understanding that you can speak at a strategy level and educate investors is probably a little better understood with managers in Europe than it is in the US. It is not black and white. It depends on who you are talking to.

RS: How are asset managers using social media – both in the context of some of your long-only clients and also hedge?
 
AP:
On the long-only side it is definitely always part of the picture; so there is LinkedIn, Google+, Twitter – all used as a way of driving traffic towards content. It is very much part of the picture, and our clients on the traditional side all have social media in the mix because it creates a nice digital footprint for the content. A no brainer really.

As far as hedge funds are concerned, as you could probably guess, hedge funds are much slower to use social media. Obviously, on the protection side we will always advise and always monitor.

On the proactive side, until hedge funds are more proactive with content, there will be less of an inclination, but certainly, as far as the ones that are looking at content and thought leadership, it tends to start with LinkedIn, because LinkedIn is exceptionally good at pushing people onto the website and towards the content.

RS: Are you excited for what the future holds in your space?

AP: Yeah, I am. In my career I don’t think there has ever been a more exciting time. In some senses I haven’t really changed my view on what the most powerful idea is which is to be extremely specialised in one thing, but to be fully integrated in terms of the service offered. In order to be effective you need to have the full range of services and command all the channels.

The thing that has changed which makes now more exciting than any other time in my career is the analytics piece. You can measure very precisely what is working in your marketing and what is not working and you can create one-to-one relationships in a very powerful way. If you think of audiences, it has been broad audience bases, targeting broad audience bases through advertising, for example, and through campaigns. Now you can segment down to one, down to the individual. That is why I am more excited about what I am doing now than I ever have been, because the power of what I can do for my clients, I can measure the value to the nth degree which I have not been able to do.

At the same time, the barriers for entry have dramatically increased, because you do need to be specialised with very expensive, technical people. You need to have the platform, the analytics platform, which is obviously expensive, and you need to be global, which means you need an office, in my view, in London, New York and Hong Kong, which is expensive. A bit like hedge funds, the days where you could just go in to a serviced office with a computer and say you were a hedge fund and manage £5 million, are over. The same is the case for anyone that says that they are setting up as a marketing communications partner for a hedge fund today. It needs to be quite a powerful organisation with a lot of strength and depth and a full range of capability.