Saturday, 27 August 2016
Last updated 21 hours ago
Jul 17 2012 | 1:08pm ET
By Jennifer Connelly, JCPR — The recent enactment of the JOBS Act has given hedge funds, private equity funds, venture capitalists and others that utilize private capital markets a tremendous opportunity to stock their communications tool kit. With the easing of restrictions on general advertising and solicitation, these funds must now consider how they want to build their brand and how they will protect it.
Prior to the JOBS Act, regulations governing these investments did not expressly prohibit advertising, though they did leave several gray areas that many chose to sidestep by avoiding external communications altogether. Few hedge funds or private equity funds speak to the press or even have Web sites that aren’t password protected. While the clarification provided by the JOBS Act has been heralded as a sea-change in how alternative investment funds can communicate with the general public, opening the door to everything from an uptick in direct mail to new competition for stadium naming rights, the reality is that many of these funds must start with the basics of brand building in order to take full advantage of the communications tools at their disposal.
Doing nothing is not an option. Sticking with one-on-one investor communications, as has been the practice of many funds to date, is akin to using a typewriter in the digital age. The JOBS Act has reimagined how these funds can communicate with investors. But this is not license to dive head first into any and all mass communications efforts, either.
Before deciding to advertise in target publications, make their websites available to the public, build relationships with the media or communicate directly with prospects through video or other social media channels, alternative investment funds must first determine how they want to be perceived by their target audience of accredited investors. Under the rules and bylaws of the Investment Company Act of 1940, these are defined as investors with a net worth of at least $1 million, not counting the value of their home, or an annual salary of $200,000—and this definition is not affected by the JOBS Act.
There is little that connects these high-net-worth individuals and institutional investors from a market analysis perspective other than their considerable assets and sophistication in terms of wading through commercial messages to get to the information most relevant to them. They are savvy enough not be swayed by clever slogans or thinly disguised sales pitches. They want to trust the companies they invest with, and have the power to spread a fund’s message across their own circles of influence. The challenge for alternative investment funds is to cut through the hype and rise above the noise of numerous firms unleashed simultaneously upon this narrow market segment.
These funds must also combat negative perceptions surrounding their work. Hedge funds have long been painted as unregulated, risky and opaque. Private equity firms have battled a reputation for being ruthless restructurers, or as even Newt Gingrich put it during the Republican presidential primaries, “vulture capitalists.” Even where negative perceptions aren’t prevalent, fund managers must compete against big names and big personalities in order to garner their share of assets.
This is why brand identity is so important—hedge funds, private equity firms and venture capitalists need to communicate differentiators beyond performance when targeting potential investors. They need positive attributions that don’t define them in comparison to their competition, but rather, that set them apart as the solution to a particular problem that these investors need to solve. They must also be vigilant, nimble and willing to take on the challenges of adapting to a fast-changing market.
If the JOBS Act has thrown open the gates for these funds to reach the public, brand-building will ensure that the investors they want to engage are waiting to hear what they have to say. Alternative investment funds can, for the first time, redefine their industry, bringing more transparency and visibility to their offering. To do so, they must not get sidetracked by the tools of communication, whether advertisements, press releases, media opportunities, video or marketing collateral, but instead focus on the strategy that will help them build their brand, protect their reputation, increase assets and expand their business.
Jennifer Connelly is chief executive officer of JCPR, a leading independent public relations agency developing and executing strategic, multichannel communications campaigns for businesses across a broad range of industries.