Saturday, 13 February 2016
Last updated 1 day ago
Jan 10 2012 | 9:40am ET
In an era of non-stop news, even hedge fund managers, who once shunned reporters’ phone calls, are now being forced to interact with the media. However, confusion remains over just what a fund manager can and should reveal to a reporter. FINalternatives recently spoke with Mitch Ackles, who serves as global director and spokesman for The Hedge Fund Association, about the benefits of building a relationship with the media, and what a hedge fund manager should and should not discuss.
Today, what topics are safe for a fund manager to discuss in the press without endangering the fund’s safe harbor status? Are there any that must be unequivocally avoided?
Hedge fund managers can discuss their economic and investment outlooks in the press, but they must do so carefully. Managers can discuss biographical details and even political views, though it’s best for non-compliance reasons to avoid the latter. In a public forum, hedge fund managers cannot talk about their track record, mention specific positions within their fund, make investment recommendations, or openly solicit investments. Obviously, legal opinions about this differ and I am not a lawyer, so be sure to consult legal and compliance counsel before making any statements to the press.
Hedge fund managers are increasingly being quoted in the press. What do they have to gain by talking with the media?
The relationship between the media and hedge funds has been loosening up for the past decade. As more publications begin covering hedge funds or ramp up their existing coverage of the industry in an attempt to give the public a look into this once-shadowy corner of the financial services industry, hedge fund managers are realizing that they have to join the conversation and try to shape it, or else they will have their world shaped by it.
Moreover, the media has a better understanding of the hedge fund industry today. While hedge fund blowups will make headlines, bad news is no longer the main topic. News outlets regularly call on hedge funds managers for their take on economic and market conditions. As hedge fund managers see the tone of coverage improving, they have been more eager to participate. Also, since hedge funds can’t advertise, managers see providing expert commentary to the media as a way to get their name out there and improve their reputation among their peers.
Many managers are reluctant to talk about their track records to avoid being seen as marketing their funds. Can they safely answer questions about stock picks or other types of investment recommendations?
I am not a lawyer or a compliance expert so the best answer I can give is to always consult your counsel before making any public statements. That said, it comes down to the language a fund manager uses. If asked for a stock pick, the manager should specifically state that, for compliance reasons, they can’t make any investment recommendations. However, the fund manager can offer to discuss some of the sectors or stocks that he ‘likes’ and that he has a ‘positive outlook’ on.
If a hedge fund has a bad news event, is it smart for them to clam up and avoid the press?
Every crisis is different, so there is no formula that applies to all of them. It may sound self-serving, but my advice is to hire an experienced communications expert first. A good approach is to select a single spokesman for the company, generate a few key talking points that are approved by both legal and communications counsel, agree what information can be released to the public and what cannot, and then issue a formal statement which encompasses these points. They should also make the spokesman available for interviews. Be selective with which reporters you speak to and, when you do an interview, do not deviate from the information and the statements you have already made available.
In the past, much of the concern about hedge funds being unable to hold themselves out to the public centered their status as unregistered investment vehicles. Post Dodd-Frank, most hedge funds will be registered. Should registered hedge funds still be prohibited from speaking freely?
This is an evolving issue. Now that hedge funds over $150 million in assets under management must register with the SEC, it seems unnecessary to restrict information about them. Moreover, most existing regulations restrict who can invest in hedge funds. But for most of their existence, hedge funds have operated under the radar so it’s likely to be a while before information about them becomes more easily available.
The SEC recently issued a stance on the proper use of social media. Should hedge funds use social media? Are there any best practices they should be aware of?
Hedge funds should be using social media. This is not a fluke or a trend that will go away soon and the sooner the alternatives industry embraces it, the better. There had been some confusion from a compliance side over how to handle social media, but this has been largely spoken to by the recent SEC statement. Put simply, don’t say with social media something you wouldn’t say to a reporter or in a public forum as it will endanger your private placement status. Be sure you archive social media communications and consult with compliance specialists on the topic.