Are You Taking These Five Factors Into Consideration When Marketing Your Fund?
With rising interest rates, persistent inflation and market volatility keeping investors awake at night, investment fund managers are finding it harder to secure fresh capital from an anxious investor base. Indexed funds and passive investment vehicles have a particularly problematic road ahead of them, but long/short and other active funds are also finding the present economic backdrop to be full of challenges when their strategies may be outperforming.
Fund managers, especially emerging managers, understand that attracting assets in the face of these challenges is immensely difficult, so they’re taking a long-term approach and leaning into marketing like never before. While strategic promotion can prove immensely helpful in today’s environment, it’s important to consider these five factors to ensure marketing is done in a compliant manner.
History Is Your Friend
When the market is rising and the economic landscape looks trouble free, it’s easy to raise new capital. But a troubled financial outlook makes time more important.
That’s why savvy managers draw attention to the long-term outlook of their fund. During periods of volatility, building empathy with investors by keeping the fund’s narrative focused on the big picture is more important than ever. Managers today are looking down the road, as far as 6 to 9 months away and using current performance as a barometer on how their strategy holds up to market stress.
Put Out The Welcome Mat
Although it may seem counterintuitive, today’s economic turmoil is tomorrow’s paydirt. Now is a great time for emerging fund managers to hit the market. Smart investors know that there’s risk around every corner these days, but new strategies can attract capital as investors seek to stand out from the crowd.
Intense headwinds are also learning opportunities. Effective managers emphasize their insights and stick with the fundamentals during difficult times. A no-nonsense approach is attractive as investors are resetting their allocations. Well-timed and carefully vetted information, shared during a downturn, can be a useful method for managers to attract new assets.
Don’t Be a Hero
Overpromising and underdelivering isn’t just a recipe for an unhappy investor; it also might land a fund manager in hot water with regulators, too. Don’t try to be a fund managing hero. Funds, particularly active ones, tend to attract extra scrutiny during a down market. Clear and accurate communication is paramount, as is a documented review of fact sheets.
Consider using a vendor like STP, with in-house compliance solutions, when launching or updating fund information. For emerging managers, an outsourced compliance review keeps promotional materials and fact sheets aligned and consistent. We help managers and their funds catch changing market circumstances and keep fund materials consistent with new regulations during their annual compliance review.
Keep fund descriptions precise and concise. Don’t bury fund objectives under complicated terminology or fancy wordplay. Clients want to know what the fund is and how it works, whether the economic backdrop is positive or negative. Avoid selection bias when marketing a fund. Be broad and consistent with the performance of the fund, neither highlighting or minimizing the fund’s underlying winners and losers.
If a fund is being compared to an index, ensure that the index is clearly described and clients are informed as to how the index works. Assume a client is starting without any knowledge of the fund when designing marketing materials and fund descriptions. Keep fonts consistent and review all materials with a compliance manager and the fund’s risk committee. The stakes are too high for surprises.
The Gray World of Social Media
While regulators are still sorting out what is explicitly allowable or not on social media, adhering to conservative guardrails is a prudent decision for fund managers.
For fund materials designed for distribution among more than 25 people–which is the threshold considered advertising–managers should undertake the necessary advertising checks and include those reviews in their audit trail.
Steer clear of testimonials and promotions on popular social media platforms, like LinkedIn or Twitter. Even “liking” a post might suggest an indication of approval. Comments and social media posts could be considered examples of persuasion, which should be appropriately weighed and reviewed by compliance specialists.
Compliance teams need the right technology for reviewing and archiving social media profiles and any messages sent within platforms. Sales pitches need to be reviewed for accuracy and to ensure that there’s alignment across all material describing or promoting a fund.
Fair and Just
The best funds speak for themselves and the right marketing can extend the reach of that messaging. When promoting a fund, focus on clear communication. If a fund is promoting downside protection, for example, make sure the fund delivers on those promises. If a fund, such as a hedge, private equity or venture capital fund, utilizes illiquid strategies that create delays in transparency, make sure clients are aware of how often information will be shared.
STP’s software and expertise gives fund managers a comprehensive suite of fund administration, accounting and investor reporting services, so managers can focus on raising and managing assets. Emerging managers can leverage STP’s proven leadership, accelerating the growth of their startup and stature. For a comprehensive review of the services available at STP, from compliance and oversight to insights that will help you build the right investment to attract new assets, connect with us today.