Moving beyond the golf course: A resource guide to hedge fund LP marketing
- Thanks to the 2012 JOBS Act, hedge funds can now use an array of digital marketing.
- Even though public solicitation is now permitted, few are actually doing it.
Traditionally, the process of marketing a hedge fund to potential LPs was a slow process of relationship building, epitomized by the golf course cliche. Hedge fund managers would mostly raise capital through third party marketers, who acted as middlemen connecting prospect LPs, institutional investors, financial advisors or high net worth individuals, to hedge fund managers. After 2012’s JOBS Act was passed, hedge fund managers can utilize the same digital marketing strategies other industries use to increase brand awareness and customer loyalty. Marketers like to talk about convergence of earned, owned, and paid media as the most holistic marketing strategy and hedge funds are now permitted to publicly solicit.
The 3 types of mediaEarned media is the exposure and awareness a brand receives from the media or the public. This includes speaking engagements, mentions in the press, and social amplification. Owned media is exposure and awareness generated by the firm itself. This includes blog posts, white papers, research, and newsletter campaigns. Paid media is exposure that was paid for, such as newspaper ads, sponsored content in trade magazines or paid search and social campaigns. The three types of media are considered convergent as activity can flow from one type to another. A white paper can be picked up by reporters, turning it from owned media to earned. Seeing the effectiveness of that piece of content, a firm can decide to pay to promote it in search or social channels to its target audience.
Hedge funds slow to moveBut even though public solicitation is now permitted, few are actually doing it. Hedge funds are missing a big marketing opportunity, claims April Rudin, Founder of the Rudin Group a marketing strategy firm servicing financial services and wealth management. Thinking of high net worth individuals as less digitally savvy is a misconception. "Investors are very receptive to digital," Rudin said. "High net worth individuals are receiving more and more information, and want to receive more information, on digital channels. What they are no longer receptive to is getting the 50-page PDF, or 25-page pitch book from a hedge fund and trying to figure out what it means. There is huge appetite for easy, digestible information that is more authentic and genuine than what has been put out in the past." Best practice marketing approaches do not change the basic nature of LP marketing, relationship building and management -- they just inject them with steroids. It is important to remember, however, that a marketing strategy is a marathon, not a sprint. It requires an organization to be regular and persistent in its thought leadership activities, as well as knowing how to personalize a message to various target audiences. Advanced tools for prospecting, relationship management and communication automation help hedge fund managers scale their efforts to reach new potential investors, stay top-of-mind with their current investors and strengthen their brand awareness. Here is a list of tools that can assist hedge fund managers in their marketing efforts.
Identifying the right audience
- Pitchbook: Pitchbook is a robust database of investor and deal activity. The database’s advanced custom search allows one to pinpoint potential LPs for prospecting, or keep up to date with current prospects in the pipeline. For an additional cost, the company also offers an API, which can sync a firm’s internal databases with the latest updates on a particular contact or company.
- Relationship Science: RelSci Is a targeted networking tool for investors, philanthropists, and high net worth individuals. The platform has an impressive amount of data on each profile in its database and allows users to search for the shortest path to get introduced to a target. This feature is extremely useful when researching decision makers in a given organization. The company boasts approximately four million business leaders and a million organizations in its database. Each profile includes work history, board connections, deal history, education, non-profit affiliations, investment holdings, personal interests, business relationships and personal connections.
- Trusted Insight: Trusted Insight is an alternative asset syndication platform. Though the platform’s main objective is to vet and discover new investment opportunities, the platform also enables its members to connect, network and even get hired. The company claims that among its most reputable family offices, financial institutions, and 140,000 members are some of the world's largest pension funds and endowments.
- Wealth-X: Wealth-X is a database of ultra high net worth individuals. Each dossier includes an individual's financial profile, interests, known associates, affiliations, family members, biographies and news. Like LinkedIn, if a user identifies his own contacts, he can easily see their contacts and ask for warm intros.
- Hedge Connection: Hedge Connection’s Capital Club, an online investor introductory service for fund managers, allows hedge fund managers to search for investors, and also to schedule calls directly from the platform. All investors have opted in to the service, so there is no concern of spamming.
- Harvest Exchange: Harvest Exchange is a content platform for hedge fund managers and other institutional investors to post thought-leadership content and share ideas and perspectives. This, in turn, can foster new business relationships and exposure to prospective investors on Harvest. The company claims 10,000 financial firms and 300,000 individual investors are on the platform.
Maintaining the relationshipConnecting with a prospect is the easy part. The grunt work of sales and marketing is the art of the follow up. A good CRM — an oxymoron if ever there was one — is essential for this. Some of the must haves for a good CRM are reminders to follow up and good email integration, so a prospect can easily be moved down the funnel, making sure no details are lost along the way. Some popular CRM choices for hedge fund marketers include:
- The grandaddy of CRMs in the cloud, Salesforce and its data tool, SalesforceIQ, which automatically enriches a contact’s record with information gathered from public social profiles.
- Base CRM, and Hubspot CRM, the latter has the ability to send emails automatically based on predefined rules. For example, a hedge fund marketer could send a follow up email with a pitch deck if a prospect did not reply to a previous email after 3 days.
- Some CRMs like Backstop’s and Ledgex’s were designed specifically for hedge funds