This document discusses best practices in investor relations that fund managers can adopt to gain an advantage in the current competitive market. It recommends that fund managers prioritize client relationships by creating open communication to build confidence and motivate current investors. Managers should ensure clients understand the investment strategy and can relay it to prospective investors. Adopting proven investor relations practices includes educating investors on strategies and industry trends, conducting surveys to understand client needs, and scheduling regular one-on-one meetings with institutional investors. Developing trust and partnership with clients through transparency and responsiveness helps increase client stickiness during periods of varying performance.

1. INVESTORRELATIONS
February 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.
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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
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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
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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 cockrellgroup.com