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Fund Investor Relations


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Next-Generation Client Management:
Leading the Pack with Investor Relations

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Fund Investor Relations

  1. 1. INVESTORRELATIONSFebruary 2011 Next-Generation Client Management: Leading the Pack with Investor Relations By Rich Cockrell, President of The Cockrell Group This paper is the first in a series examining best practices in investor relations in the context of helping fund executives gain an advantage in the current market. There was a time, not so long ago, that fund managers enjoyed Create and maintain a conversation that with clients that an effortless in-flow of investor capital. They were able to instills confidence and motivates the current investor to concentrate on achieving the right mix of investments to introduce prospective investors. deliver the best performance with little need to communicate to investors beyond the standard periodic statement. Ensure that clients understand the fund investment strategy and are able to relay the strategy to their constituents and to Then came the breakdown of the global economy. Weakness prospective investors. in industrialized countries, a continuing increase in the number of funds available to investors, and recent investment scandals In order to thrive in the current environment, fund managers have altered the fund management landscape. With the ability must work with people as well as numbers. They must change to transfer funds becoming easier and easier, in this brave new the value they place on the “soft” side of the business in order (post-Madoff) world, institutional investors have added trust to retain clients while focusing on future growth. Specifically, and credibility to the benchmarks by which they assess funds. they must: Today they are more likely to work with fund managers who • Incorporate proven practices in investor relations (IR) into connect with them rather than simply going with those who their operations. show good performance in their funds. • Make the investor relationship a top priority • Leverage the right strategies to efficiently and effectively These changes present a new set of challenges to fund communicate to their investors. managers. In addition to managing fund performance in an increasingly competitive market, they must: These requirements merit examination in more detail. This white paper begins that examination; subsequent papers in this Retain current investors despite overall market conditions or series will delve even further into approaches, practices, and periods with less than satisfactory manager performance. strategies that will help fund managers implement pack-leading IR initiatives. 1
  2. 2. INVESTORRELATIONS November 13, 2010 Relationships are formed in the presence of credibility and trust... When the investor trusts that the fund manager is managing well... When the investor feels a high degree of partnership... Making the client relationship a priority “Markets are conversations” The Cluetrain Manifesto It’s a buyer’s market. With intense competition for their dollars, the need to be proactive, to reach out, to investors rather than institutional investors are able to call the shots, and they are sit back and maintain a reactive stance. Examples of tactics cited doing so by demanding more visibility into a fund’s investment by corporate IR executives (and that are adaptable to the fund strategy, risk, and performance, as well more liquidity than was IR space) include: previously available. Investor education initiatives that share strategic information And fund managers are complying. To successfully compete in about the investment process and about industry trends. the market, they are looking for “investor stickiness;” that is, they Surveys conducted by a third party that “take the pulse” of are looking for approaches and strategies that will motivate current and prospective investors and allow them to provide investors to stay with them through good and bad times. Smart input focused on operational improvements. fund managers recognize that stickiness comes with relationship. Incorporating results from these sur veys into investor communications and fund positioning. Relationship is formed in the presence of credibility and trust. When the investor believes the information the fund manager is Regularly scheduled one-on-one meetings with institutional providing them, stickiness goes up. When the investor trusts that investors (in lieu of contact limited to financial conferences). the fund manager is managing well, stickiness goes up. When the Non-sales “road shows” that include analysts and media investor feels a high degree of partnership, stickiness goes up. representatives as well as investors. Best practices for establishing and enhancing investor relationships are being employed by fund executives. Initially • Christopher Locke, Doc Searls, David Weinberger, The Cluetrain Manifesto, 2000/2009 acquired from corporate IR programs, these practices emphasize • Investor Relations – Best Practices: Interviews With Executives™, Special Report #6, Capital Markets Board 2
  3. 3. INVESTORRELATIONS November 13, 2010 “For many Managers, investor letters (or other similar communications) provide the opportunity to communicate in their own voice. Accordingly, it may be written in any form or style that the Manager desires (preferably at least on a quarterly basis) and would generally be expected to include updated information on developments relating to the fund…” Best Practices for the Hedge Fund Industry Leveraging the right communication strategies Investor relationship is rooted in high quality communication. technologies for connection will create a rich, well-executed Establishing a cycle of engaging, informative, “plain English” cycle of messages that serve to cement relationship and attract communications is part of an effective communication strategy. new investment. Further, providing information in multiple formats through multiple channels enhances the investor experience, which Examples of technologies that fund managers can increases that all-important stickiness. Communication channels leverage for results include: include: • Social media forums that allow two-way dialog. • Videos made available to investors and stakeholders online. • Written, both electronic (email, website) and printed (letters, • Secure web portals that combine communication with online reports) transaction capability and document repositories. • Social media (secure client-only forums, blog) • Live events (one-on-one meetings, road shows, webinars) • Webinars that combine real time audio and video for a virtual workshop or meeting. Frequency and type of communication depends on various • Email list services that allow large (non-spam) broadcast of factors. Communicating “just to communicate” will not build the messages, which can be queued up to go out over a period of needed trust, credibility, and relationship. Messages need to be of time. value to prospects and clients, and need to be at a frequency that will not feel “spammy” to them. Monthly or bi-monthly As with any other business expense, return on investment must insights into the state of the market and the hedge fund be considered. Technology-enabled communication strategy industry, information about the investor base, and details about needs to include metrics to gauge effectiveness. the fund’s performance and investment strategy are likely to be welcome messages in whatever format they are delivered. Technology-enabled communication tools and resources offer fund managers innovative options to reach existing and • Mark Report Of The Asset Managers’ Committee to The President’s Working Group on Financial Markets, January 15, 2009 prospective investors. Leveraging the wide range of available 3
  4. 4. INVESTORRELATIONS November 13, 2010 About The Cockrell Group Your management team has a business to run. Most of our clients do not have the time and resources to handle the critical, day-to-day interactions that most investors often demand. The Cockrell Group is a proactive investor relations firm that can serve as a buffer between fund managers and their sometimes frequent, or infrequent interactions with the client community. Cockrell Group 1230 Peachtree Street 18th Floor Atlanta, GA 30309 T 404.942.3369 W