Are financial institutions — namely hedge funds — prepared to market themselves to investors when the JOBS Act rules are issued in the next six to 12 months?
Will Thompson, co-founder and CEO of HedgeComm (a marketing and PR agency that focuses on the alternative investment industry), has found that few hedge funds have a proper business plan — let alone a marketing plan.
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“What hedge fund managers want to do is promote their expertise and at the end of the day raise assets,” he told StreetID.
According to Thompson, one of the first things that hedge fund manager need to do is manage their expectations.
“It has gotten so difficult to raise money over the last few years,” said Thompson. “The old days aren’t coming back. All the money is going to the big guys. For a little guy to stick out and raise assets he has to be exceptional and very clearly communicate his message and, as part of that, differentiate himself. Be prepared that the process of differentiating yourself and proving your value to an investor can take a lot longer than you might have thought.”
Thompson’s Estimation For Hedge Fund To Raise Asset
Thompson estimated that it could take between two months and two years for a hedge fund to raise assets.
“That’s a long stretch of time, so if you’re not prepared, you could run out of money very quickly,” he said.
Next up, hedge funds should make sure that their message is very, very clear.
“If you’re a long/short equity guy, why the heck should I invest with you versus the five thousand other long/short equity people out there?” Thompson questioned. “What makes you better or different?”
If there isn’t anything that proves your firm is superior — or at the very least different from the rest — Thompson suggested that you should “consider doing something else.”
Additionally, Thompson advises that all hedge funds hire actual marketing professionals to handle that side of the business.
“One of the most important things that hedge funds can do when marketing themselves is have someone to market for you, whether it’s someone inside that is a dedicated marketer or a third-party marketer or someone along those lines,” he said. “One of the biggest mistakes that new firms make is to have their CEOs handle the asset raise or have the CFOs handle the asset raising. What do they know about marketing? Usually very little.
“When do they have time to actually call investors? The market closes at 4:00, the investor leaves his office at 6:00, so you’re gonna reach them between 4:00 and 6:00. Really? When they return your call the next day, you’re not gonna be able to answer because you’re trading. You need someone to actively raise assets or every lead that you get is going to be another ball dropped.”