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Posted by on Sep 5, 2012 in E-Letters |

Tips, Traps and Trends

e-letter from HS Marketing

Preparing for a Marketing Sea Change . . . Post-JOBS Act

September 2012


Dear Clients and Friends,

The marketing of private placements is expected to undergo a sea change in communication opportunities and some challenges resulting from the SEC vote as of August 29, 2012 to eliminate the ban on general solicitation and advertising, as required by the JOBS Act. Once this proposed rule is finalized, hedge funds will face a wide range of external communication options that were previously unavailable for this space. What are some of the marketing challenges and potential risks? How can fund managers prepare?

Trends

The regulatory shift toward less restricted marketing of private placements coincides with an investor-driven trend toward raising the bar on the expected quality of hedge fund managers’ outbound communications. This combination could be a double-edged sword: the open floodgates resulting from a less restricted marketing environment are likely to increase the challenge of getting heard above the noise! “Communication alpha” as noted in our recent e-letter, may be considered an increasing source of value in supporting asset raising and retention objectives.

The Managed Funds Assocation (MFA) has continued to engage with the SEC and has commented to the CFTC in support of eliminating the ban on advertising and general solicitation of private offerings.

What are Some Marketing Best Practices?

Tip #1: Don’t neglect a broader marketing tool kit and opportunity set.

In preparation for the JOBS Act implementation, think in terms of broader dissemination of information. Thus far, in order to avoid jeopardizing Regulation D provisions (pre-JOBS Act), most fund managers have functioned with a core marketing tool kit:

  • Pitch book, 1-2 page summary, DDQ;
  • Performance report, investor commentary;
  • Website: publicly accessible sections generally minimized to avoid posting fund-specific information and related performance details without password protection.

Outbound communication has been narrowly constrained.

Going forward, managers should consider casting a wider net to reach their target audience and brand the firm effectively. Without the long-standing Reg. D shackles, the private placement marketing tool kit and tactics may also include additional visibility opportunities:

  • Website expansion and/or restructuring: consider building out the public message areas to provide further transparency regarding the firm, people, process and products/services offered;
  • Press releases and media interviews: explore coverage beyond Pre-JOBS Act restrictions;
  • Targeted advertisements, video/multi-media collateral and direct mail/e-communication and social media tools.

How will your target audience find you? Of course, you need to seek visibility where you can be seen and heard in person. The marketing budget should be weighted toward potential ROI. For example, if investors/asset allocators or other targeted audience generally attend specific industry conferences, be sure to participate in the right places with as visible a role as you can obtain and afford.

Tip #2: Focus on message differentiators

As the floodgates open from a less restrictive marketing environment, investors will be inundated with pitches. However, many fund managers may unwittingly undersell or undermine their capabilities by overselling performance. A longer lasting brand-building approach focuses on qualitative message differentiators such as the people/pedigree and process. In addition, the message should identify problem-solving benefits (using examples where possible) to the investor/clients.

Tip #3: Share your views with a wider audience

Investors, intermediaries and the media want to hear from industry experts. You can build brand identity and elevate your visibility by articulating your views on market developments, trends in your niche and how your firm is positioned while becoming recognized as a “go-to” source of credible information.

Traps to Avoid

It’s easy for managers to get side-tracked with the new-found wealth of marketing opportunities as they explore a wider mix of tools and tactics. For example, unless the planned advertising campaign reflects a well-articulated message that will resonate well with the target audience, the brand-building and business development objectives may not materialize.Fund managers should consult their legal counsel or compliance advisor before implementing new communications initiatives.

You only have one chance to make a first impression. Contact us for a complimentary evaluation or inquiry. We’ve been in the marketing communications business, serving the alternative investment community, for almost two decades.

Sincerely,

Holly Singer, President, HS Marketing, LLC www.hsmarketing.com

Princeton Junction, NJ 08550 | tel. 609.275.1303