Customer Relationship Management

Hedge funds are finding it is everybody’s job

Originally published in the June 2010 issue

There’s nothing like a great recession to teach financial professionals that marketing is every employee’s responsibility. In the past year, successful hedge funds learned to embrace that tenet, making marketing and investor relationship activities higher priorities than ever before. In the changing market where competition is fierce for capital investments and client retention, every touch point with an existing or potential investor is critical to building credibility, trust and rapport. These firms have found that through increased client service and effective outreach to potential investors, they can protect their funds even during a serious economic downturn. Top fund managers now prioritise their task lists differently, putting more of a focus on marketing and investor relationships than ever before. Managers are expanding their job descriptions to include responsibilities aimed at:

• cultivating investor relationships;
• repairing investor trust through transparent business practices;
• enhancing market reputation; and
• gaining competitive edge by employing communication tools, marketing techniques and technology.

Technologically, customer relationship management (CRM) applications are enabling financial professionals to meet the new obligations of their positions. The move to CRM was certainly sparked by the downturn in the market; when investors feared losing money, they demanded more information and insight into their investments.

Rather than scrambling to address individual investor questions as they arise, forward-thinking fund managers implemented CRM applications to manage these queries more efficiently. Many firms now use CRM as the foundation for investor extranets that deliver on-demand access to transaction histories, account balance statements and other fund information. But CRMs are more than just an efficient, centralised communication tool for investors; they provide fund managers a market advantage as investors look to select funds that not only succeed monetarily, but also communicate effectively.

Up until recently, many hedge fund managers simply did not associate with the operations side of the business. That has markedly changed, but they still need to be concerned with how to make hedge fund managers more comfortable in sales and marketing roles. Providing them with the proper tools to communicate effectively with investors is a critical part of that process. In this environment, CRM might be just the thing to help managers succeed and illustrate a firm’s client service commitment to wary investors. CRM can be seen as a true asset in a firm’s business, in its appearance and professionalism. In short, operating with a hedge fund CRM and eliminating disorganised spreadsheets and Word documents could be what sets your firm apart from the rest.

So, what is a CRM?
CRMs were originally designed to enable companies in a wide range of industries to easily and efficiently track customer information. CRMs have evolved in recent years, and many vendors now offer hedge fund-specific solutions that support the unique hedge fund workflow and serve both the fund and the investor.

As a tool that supports investor relations, a hedge fund CRM application gives funds the ability to centralise all of their investor data, including contacts, documents and correspondence, while also allowing investors to access critical fund information at any time, including transaction history, account balance statements and other investment data. CRMs also assist in compliance issues as the thousands of pieces of data are well-organised, secured, indexed and reportable.

In order to become more accountable to investors and provide them with greater transparency and reporting, funds should deliver investor account management capabilities, which can be found within hedge fund CRMs. Firms can easily track investor transactions, centralise subscription documents and monitor expected inflows and outflows, all within one comprehensive application. With a CRM system in place, employees no longer have to sift through home grown spreadsheets and disperse systems to find, organise and report information to clients – all information is centralised and easily accessible.

However, many hedge funds and investment firms, particularly smaller organisations, still erroneously believe that CRM applications are only for the major players. In truth, funds of all sizes need an efficient system that can easily and completely manage investor relations. Whether a fund’s investors can be counted on one hand or number in the triple digits, CRM is a valuable and cost-effective tool.

More so than ever before, investors are interested in hedge funds’ operational infrastructure and back-office management, which includes investor relations. An investment-focused CRM might be what sets your firm apart from competing funds. Hedge fund CRMs have the unique ability to scale with a fund, can support firms with five people or 500, and can track relationships with thousands of investors. While generic CRMs are readily available to businesses of all kinds and can easily manage customer data, a hedge fund CRM provides the features and functionalities relevant to an investment firm.

Key features

Integration: Because many firms are doing more with less these days, it’s important that any technology implementation lessen the load rather than add to it. CRM applications should not require more time than employees at a busy investment firm have to devote. A quality solution will generally come fully integrated with key applications, including Microsoft Outlook, which lends itself to more flexibility and less time and money spent on coordination between multiple applications.

Mass E-mailing: Most applications come with mass e-mailing capabilities, which allow funds to quickly and easily communicate with all investors and potential investors, while also giving investors the immediate information they require.

Pipeline Management: Funds can also manage their sales pipeline and create performance estimates, among other things, all from one platform.

Investor Portal: Another increasingly popular feature within CRMs is an investor portal or Extranet – a secure site where investors can log in to download specific reports made available by the fund. By giving investors easy access to relevant documents and reports, funds can increase confidence and satisfy growing demands.

Helping investor trust
Hedge funds and investment firms of all sizes are fielding more requests for increased transparency and reporting. CRM tools are becoming increasingly popular avenues through which funds can provide their investors with accurate information in a reliable and comprehensive format that complies with financial regulations.

Beyond competitive advantage and streamlining operations, CRM enables hedge funds to begin repairing the broken trust in the market. Disgraced financiers like Bernie Madoff made investors cautious and controlled when it comes to where, and with whom, they place their investments. Today’s investors hold funds to a far higher standard and demand that they maintain efficient operations that promote greater accountability.

The current asset allocation landscape presents increased competition for assets, and investors view every fund manager as potentially guilty until proven innocent. This seems like a daunting environment for hedge fund managers.

However, those who look at current challenges as opportunities can capitalise on the shift in investor priorities. The modern hedge fund manager – the one who now sees marketing as a vital part of his or her job – realises that every touch point with a prospect or client is an opportunity to build credibility, trust and rapport. CRM supports firms in their moves to better attract, inform and retain careful investors.