According to the May edition of eVestment’s Hedge Fund Asset Flows Report, investors have pulled more than $25 billion from hedge funds in 2019. Even before the outflows began, investment firms of all sizes faced an incredible amount of reputational pressure due to intense competition for investment, pressure to perform, volatile returns and fee compression.
Edelman’s Financial Communications & Capital Markets team recently hosted a meeting of the Alternative Investment Management Association (AIMA) to discuss communications strategies and reputation management for hedge funds. The discussion included representatives from Man Group, 400 Capital Management and Institutional Investor, as well as marketing and investor relations professionals from 24 of the top fund managers in the industry.
The discussion focused on how participants within this $3.2 trillion industry can navigate recent perception challenges by establishing holistic communications strategies that highlight their brands and investment strategies, differentiate them from their peers, help protect their assets and attract the next generation of investment talent.
Here are the top four takeaways from the discussion:
- Lead with your own story when the tide is high
Panelists and guests agreed that employing a proactive communications strategy during times of solid performance can mitigate the risk of reputational damage should the spotlight suddenly shine on your firm in tough times. Embracing a proactive communications strategy early on will serve your brand in the long run by building credibility with investors, peers, media and external influencers.
There are several ways hedge funds can do this. Establish a narrative that tells a story around a unique culture, business differentiators and investment expertise. Cascade the narrative through website content and thought leadership such as op-eds. The most recent Edelman Trust Barometer report on institutional investors found that technical experts and academics are considered some of the most credible and trusted voices on a company’s industry or issue. That means hedge funds can leverage their own market insights to drive positive brand perception with external audiences.
- Media relations is a two-way street
Panelists explored the unique relationship between the financial media and hedge funds. Journalists seek newsworthy stories and managers seek positive coverage of their firms. The key to a successful media strategy is to identify opportunities that are beneficial for both parties. A proven method for engaging the media is to offer a unique story idea that highlights your firm in a positive way and is also “newsworthy.” These stories can range from your firm’s innovative use of data and machine learning to simply offering a fresh perspective on the markets. Participating in these types of articles can serve as alternative narratives to the media’s more performance-focused coverage.
Other ways to engage the media include educating reporters on a complex topic or providing a differentiated view on a trend that will help them refine and elevate their stories. These interactions position hedge funds as experts, lend credibility and may provide some leverage should you find yourself on the wrong side of a negative news item.
- Address tough topics with your own voice
Throughout the discussion, one thing became clear: The days of “no comment” are over. Increased scrutiny by regulators and investors has brought increased media coverage. Choosing not to comment on a story or refusing to speak with a reporter may put your firm at unnecessary risk. As the panelists explained, the media will write the story with or without your input. If you don’t engage with the reporter, you permit other people to speak on your behalf. An inaccurate story can be misleading to your employees, investors, industry contacts, peers and potential recruits.
The recommended approach? Address potentially negative stories immediately, correct inaccuracies and provide as much context as you can divulge. Negative press will have less of an impact on your brand if you have established a proactive communications strategy, earned positive coverage, promoted your own narrative and maintained strong media relationships.
- Leverage social media to attract talent and assets
Many of the industry’s largest funds use social media to reach a broader audience, raise their firm’s profile, and attract talent and assets. According to the Edelman Trust Barometer report on institutional investors, 86 percent of respondents said they consult the social media channels of the company and its executives when evaluating a current or prospective investment. Panelists discussed using LinkedIn, Twitter and Instagram as platforms to attract new talent by distributing content that highlights positive press coverage, thought leadership, firm culture and philanthropic efforts. In their view, a robust digital presence provides audiences with additional viewpoints that can balance out negative perceptions and create a more complete picture of your firm.
Katrina Allen is executive vice president, Financial Communications & Capital Markets.
Nick Burns is vice president, Financial Communications & Capital Markets.