Raising and retaining assets: Hedge fund firms that do not understand narrative impact and do not deploy a sound communications strategy will remain at a competitive disadvantage.

Hedge fund investor relations teams must acknowledge the power of a good communications strategy. They must design crystal clear and differentiating key messages that explain why their firms’ products actually solve investors’ challenges. Moreover, they need to understand relevant narratives in the media, grasp their construction and acknowledge how they influence brand perception and business decisions. Hedge fund firms that do not understand these things will remain at a competitive disadvantage to those that do when raising and retaining assets.

With new research and reports revealing the hedge fund industry is actually experiencing net outflows at the moment, these considerations and the role of IR are more important than ever. Indeed, securing and keeping investment is one of the most significant problems managers now face.

At Sapience, our research has shown that IR teams do a fantastic job at interacting with their investors. We also know that they understand their firm’s investment philosophy and why the strategies it employs are valuable and unique. But amongst competition, for investors, grasping why a particular firm is the right solution for them might be less obvious. Our experience shows that small changes to communications processes and approach can have rapid and significant benefits.

It was interesting to hear about asset raising and retention from hedge fund managers, but also from investors, at the annual ‘Spotlight’ event in London run by The Alternative Investment Management Association (AIMA). AIMA represents over 2000 hedge funds in over 60 countries around the world.

Over two panels, speakers identified that investors now demand more transparency and more reporting from their managers. Furthermore, they said that this reporting needs to be considered and thoughtful. Whilst liquidity and fees remain a key consideration, it was clear that ESG is now a high priority for managers as they work to formulate policies in the area and address investor interest.

One panellist said that allocation should be seen as a long-term game, that ESG should not just become a box-ticking exercise and that investor relations (IR) personnel need to be patient and communicative. It’s clear that IR teams must have a detailed knowledge of their products, and its obvious that a sophisticated, institutional investor base will require new levels of expertise.

AIMA’s Spotlight on Raising Assets was insightful, interesting and informative. It provided a useful window into the rationale of investors allocating to hedge funds and what those firms need to do for them to remain invested. We look forward to next year’s meeting.

 

 

2019-11-13T11:42:34+00:00