Asset managers tend to be quite disparaging when it comes to marketing.
Because it is all about relationships, right?
When Baupost, the $30 billion Boston-based hedge fund now managed by Seth Klarman, was founded in 1982, it was launched with a core set of aims. Q4 2021 hedge fund letters, conferences and more Established by Harvard professor William Poorvu and a group of four other founding families, including Klarman, the group aimed to compound Read More
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It’s much the same reason that any of us favor a known entity. We extrapolate forward, believing that the next exchange will emulate the last, and this makes daily life easier.
If an allocator has been well served by a relationship in the past, there is greater likelihood that he or she will engage with that individual in the future. If the positive experiences continue the relationship will strengthen, if the reverse occurs, the relationship weakens.
Tell me how this is any different than a consumer’s relationship with a brand? Our willingness to continue to support a brand is based off of our experience with that brand and the effort the brand takes to build a relationship with us.
The individuals that have access to allocators have simply done a good marketing and building awareness across these allocators. In relying exclusively on “relationships” to access allocators, whether they know it or not, asset managers are acknowledging that there is greater value in the brand of the individual than their own.
Leveraging the relationships of another entity to access an audience is nothing new. It is cross marketing in its purest form. It just so happens that in our case the associated brand is attached to an individual not a company (although it could be a company if the entity was a placement agency).
Asset managers can make the greatest gains when they realize that access alone is not enough. So you are in the room, then what? To execute a cross marketing campaign with a credible “agent” with very little forethought as to how you are perceived if the campaign is successful is questionable at best.
That’s where concise marketing comes in to strike confidence into your audience.
Although the real quandary relates to why an asset manager would want to rely so heavily on the brand of others to begin with. As best we can determine, forgoing investing in a strong marketing platform and relying entirely on relationships to source capital is simply a hedge against failure. The problem, it is a self-fulfilling hedge. Allocators can see the lack of commitment a mile away.
It’s not a question of whether relationships supersede marketing or vice versa. The two have a symbiotic relationship with one another. To say they are opposing forces is indeed a contradiction. Marketing is required to build relationships and leveraging relationships is a form of marketing.
It is almost if there is a competition amongst asset managers to see who can spend the least on marketing and still achieve success. Our advice, don’t enter this race. If you value marketing and invest in it, the chances of winning increase dramatically.
By Kyle Dunn