Two weeks ago, the Securities and Exchange Commission lifted a ban on hedge-fund advertising and promotion that had been in place since the Securities Act of 1933.
Twitter was quick to respond to the news with the hashtag #hedgefundslogans which produced some clever spoof taglines like: “Because you can only make so much money at Goldman Sachs!” And one of my favorites: “I don't always pay for underperformance, but when I do, I pay 2 and 20.”
Bloomberg Businessweek also got in on the act with a less-than-flattering portrait of the hedge-fund industry on its cover. Inside, the article chronicled the recent trials and tribulations of hedge funds such as SAC Capital Advisors, which is at the center of a government investigation into insider trading.
Is it possible that all of this negative attention could actually be a good thing for the financial communications professionals who will be tasked with burnishing the image of hedge funds? Oddly enough, it could be.
The trick is to harness the power of the media's fascination with hedge funds and use it to your advantage. For every story about an overzealous hedge-fund manager who bought a professional sports team and then crashed spectacularly, there are just as many celebrity worship-style stories that rhapsodize about the intrepid, all-knowing sages who manage these funds. Take this passage from Institutional Investor's Alpha magazine annual “Rich List”:
“As our 12th annual Rich List ranking shows, it was not a time to run scared. Indeed, several of the top 25 earners – led by David Tepper of Appaloosa Management – largely ignored such macro fears and stayed bullish. Tepper headed a handful of managers…Who were unfazed by ambient worries, elevating their firms' annual performance to the 20% to 30% level through deft moves and gutsy market calls.”
Hedge funds are a Jekyll-and-Hyde product where the media is concerned. On the one hand, you have the image of risk-taking renegades who sometimes go too far; on the other, you have the masters of the universe who have taken on a mythic status.
Working within that basic template for good and evil, the key for hedge funds looking to promote themselves is to thread the needle between the two images, borrowing a little of the intrigue from the risk-taking image and a little of the wisdom from the legendary investor image to develop a sense of intrigue about their market views.
The tools of this trade will be specialized market observations and research notes that showcase the fund managers' unique market purview or observations on structural mis-pricings in the current markets or around key economic indicators. They should not be press releases about new hires or assets under management milestones!
The goal for the smart hedge-fund communicator should be to identify intriguing market movements that help journalists identify a trend, without revealing too much about a proprietary strategy. By offering these types of insights, the proactive hedge fund becomes a resource to journalists and a trusted voice to investors, rather than a target.
Achieving this level of transparency around market insights will require a culture shift for most funds. Most will look at the hostile media environment and ask: Why risk it? The answer is simple: There's gold in them hills.
There is a huge opportunity for hedge funds right now to take a big slice of the mutual fund market that's looking for a trusted voice with a little extra edge. The funds that can walk the line between complete transparency and the status quo of silence will be those who can help redefine the alternative investments space.