If you build it, they will come

Debunking current marketing fallacies while offering a solution

That old baseball adage from Field of Dreams also seemed to work in the early and heady days of hedge fund/alternatives marketing, assuming you had the performance to back up your infrastructure.

Getting institutional investors’ attention today, let alone an allocation, requires more than just strong performance. It requires thoughtful, articulate messaging, a well-organized business plan, strong performance and marketing perseverance, all of which takes time. And let’s be realistic, it takes a lot of time. So how does one accomplish this when a fund manager’s “day job” is consumed with portfolio construction, risk management and ultimately putting up a good monthly performance number? One solution to seriously consider is Outsourcing – a cost efficient and effective tool that fund managers of all sizes should think about adding to their marketing toolbox.

Outsourcing can play a role at multiple levels in the marketing process:

  • Material creation (or renovation)
  • Presentation coaching
  • Monthly creation/distribution/tracking of materials
  • Direct investor outreach

Finding the right outsourced experts can be instrumental to a fund’s ultimate growth and success.

Getting to first base starts with a good deck and tear sheet

Fund managers tend to be a bit myopic when it comes to their marketing materials but putting oneself in the shoes of an institutional investor can be helpful to the process because, guess what, institutional investors are reading and reviewing a MULTITUDE of pitchbooks ALL day long. A tear sheet needs to really pop when it comes to describing fund strategy, edge and monthly statistics. If your one-page tear sheet doesn’t say something that grabs an investor’s attention, you’ve just diminished the likelihood an investor takes the time to open your more detailed presentation.

The more pitchbooks we see, the more they look the same. No one will argue with sleek styling, just make sure there’s substance behind the shades of blue cover page and stylized fonts and icons. A good pitch book will outline:

  • Fund strategy, including the fund’s investment universe – market capitalization, geographic focus, generalist or sector specialist (all of which hint at potential fund capacity)
  • Manager and Team pedigree – why are you qualified to be running this strategy and has this group of individuals worked together in the past
  • Organizational chart – present and future, i.e., how will the fund grow its team in conjunction with its asset growth?
  • Clear description of portfolio construction and risk management process
  • Track record, net performance and fund data & statistics to measure against most appropriate indices

Most importantly, the theme of “differentiation” needs to be woven through each page of the marketing deck because differentiation goes way beyond a fund’s track record is, it is the driving force in getting investors to take notice. Differentiation include a range of factors, including:

  • Outperformance on a relative basis is good, but it is absolute return that drives your differentiation home. It’s imperative that newer and/or smaller managers show consistent outperformance. Investors can easily rationalize why someone can outperform peers in a PA, the question is, does your strategy allow for outperformance after the arrival of larger institutional dollars?
  • Niche strategies make investors take notice, and if you’re not running a niche strategy, it’s imperative to explain why your fund is worthy of further consideration, especially if the sandbox you play/work in is big, such as long/short equity or credit
  • Degree of correlation (in up AND down markets) will make an investor sit up and take notice
  • Fund terms need to be in line with the market. Don’t dilute the message by offering a candy store of options, but investors should be fairly rewarded for making larger commitments or agreeing to longer lockups. Your liquidity terms should also properly align with your strategy and market cap focus.

So what’s the right size for a marketing deck?

Investors do not have the luxury of time, so get to the point in your marketing materials ASAP! Assuming your tear sheet has grabbed an investor’s attention, you’ve got about +/- 20 pages (think bullets, not long-winded full sentence paragraphs) to get your message across, enough that they want to follow your progress and even better that they want to talk to you.

Using a Designated Hitter to design or retrofit your marketing materials

Investors do not have the luxury of time, so get to the point in your marketing materials ASAP! Assuming your tear sheet has grabbed an investor’s attention, you’ve got about +/- 20 pages (think bullets, not long-winded full sentence paragraphs) to get your message across, enough that they want to follow your progress and even better that they want to talk to you.