Wednesday, 31 August 2016
Last updated 12 hours ago
Jul 2 2014 | 6:56am ET
By Chris Sullivan
Managing Director, MacMillan Communications
The past two years have seen an explosion in the number of hedge fund managers rolling out long-only vehicles, all looking to participate in the rapidly-growing demand for “liquid alternatives” products.
But launching a 40 Act fund is not a simple process. The list of concerns includes a demanding compliance regime, including tackling regulatory issues, back office set-up, and shareholder reporting requirements, in addition to putting in the technology needed to support it all. What’s often left on the backburner, if it’s included at all, is the communications strategy – the messaging around the fund and the firm.
Should your firm be considering a move into the retail world, there are a few steps that can help ensure a smooth launch through consistent messaging, including:
1) Talk internally, early and often – Bring all key stakeholders inside the organization to the table to talk through how a move into the retail channel will affect everything from a firm’s operational expenses to its headcount to its culture. Getting buy-in up and down the hierarchy is key in providing consistent messaging to all of the firm’s existing constituencies (i.e. institutions, consultants, and the HNW marketplace, for example) as well as the new channels (i.e. wirehouses, RIAs, mass affluent investors, and the broader retail market).
2) Get your messaging down cold – Why are you launching this fund or funds? What makes them unique? What challenges do they solve? Why should investors care? What is the value proposition? What do your people and/or strategy bring to the market that no one else can offer? What parts of your strategy will not port over from the hedge fund world? What are the key risks for investors? What are your fees? Who will be running the funds? Agree upon your story and how you’ll answer questions like these, and make sure anyone in a client- or media-facing role understands what needs to be communicated.
3) Have your delivery down cold – Identify spokespeople and make sure they’re media trained. The first few months around a 40 Act fund’s launch can be crucial to reaching reporters and potential end users, and competent spokespeople can often be the difference between making a strong impression right out the gate and fading into the background.
4) Don’t assume your reputation precedes you – Beyond a handful of brand name hedge fund managers, it is unlikely the retail and advisor marketplace will greet you with a resounding “thank you!” when you launch your 40 Act vehicle. Whatever your track record, whatever your reputation in the institutional and HNW worlds, you’re likely to face a deafening silence from the mass market. Gather talking points, data, and any other evidence that helps make the case for your utility and uniqueness, and be prepared to feel like you’re introducing yourself to the world all over again.
5) Know your audience – Established hedge funds tend to have very regimented and repeatable communications protocols, largely driven by the regulatory environment in which they operate. Investors in hedge funds also tend to have specific expectations around what sort of communications they will receive from managers and their IR teams, as well as with regards to how often they might see these managers “pop up” in the news (hint: beyond a few bold-faced names, the usual answer is generally “never”). This changes once a firm makes a move into the 40 Act world. Reaching the retail and advisor channels is often a high-touch affair, requiring significant communications planning in order to identify the most effective media channels and messaging. Education is key. All of this must also be done with an eye toward not alienating those investors in a firm’s hedge fund vehicles. Dilution of manager attention is often the most significant concern from this group, as large investors sometimes see a move to the retail space as a potential distraction. They will need reassurance that their needs will continue to be met in the manner to which they are accustomed, and your firm will need a plan well in advance of embarking on any such conversations.
The liquid alts category is an exciting one, and it’s only going to get more crowded over the next several years. While it’s impossible to guarantee the successful launch of any 40 Act vehicle, having an effective communications plan in place at the start of such efforts can help a firm from having to play catch-up.