Infovest21Special Research Report: The growing importance of branding in hedge fund manager growth

In general, hedge fund managers have not yet made conscious branding decisions. In fact, most firms in the hedge fund space have ignored branding.

When it does occur, branding in the industry is often driven by the personality of the manager. Therefore, the product, i.e. the investment management service, is inextricably tied to that personality by default rather than a conscious strategic effort to create a brand.

But as institutions continue to be the driving force in the hedge fund industry and the main provider of assets, more managers strive to be of “institutional quality.”

Brand is very important in the institutional market place. Most of the institutional money has flowed to the largest hedge fund managers over last two years as they are seen as the managers with the strongest brand.

Institutions view these managers as a safe place to put their money. They are seen as asset managers, not just hedge fund managers.

Many institutional investors are more attracted to a firm’s sustainable infrastructure rather than a high rate of return.

Branding is relevant to any size manager. Smaller managers have a greater need for branding than larger managers. Part of branding will be achieved by educating investors about a strategy or sector. The manager can become a go-to resource for that specific niche.

As hedge fund managers attempt to build their stature as institutional asset managers, they often focus upon their perceived branding in the marketplace and how it enhances their overall acceptance to larger investors. Analyzing their branding forces hedge fund managers to review a wide range of issues: from their company name to their mission statement to their investment objectives to the associations they have built in their service providers.

Marketing and public relations experts say a number of activities should be taken. Branding includes everything from how they answer the phone to marketing materials to the website to corporate personality. Branding is making the name of your company stand for something that is positive in the client’s mind. It includes the name, logo, tagline, website, core message, road show, and what people write about the company. It is not just the products and deliverables.

That message needs to be linear and concise and clearly articulate the differential advantages of the hedge fund across the various factors used to analyze hedge funds.

Some point to the mutual fund industry as a model as it has a longer history. “It used to sell performance. Then in the late 1990s, everyone wanted to know what Peter Lynch of Fidelity thought. Now, they no longer sell individuals and sell performance less. They sell an institutional name. Who knows who manages the individual mutual funds? It is the brand, more than the individual manager. People want the brand of trust.”

Other thoughts on branding

Brand is different than the actual quality. Hopefully, they are the same but there are a lot of good firms that don’t do a good job of articulating what they do and their brand in the market place is below the quality of the fund they offer. Other firms have a very good brand but the underlying product isn’t at the same level as people’s perception of that firm. This may be true for many of the largest managers.

A brand can also be negative. For example, accusations of insider trading or other negative press reduces high quality perception that a firm wants to have.

Some marketers take a contrarian view and say there are no hedge fund brands. They say hedge funds grow because they are institutional and generate superior performance. They argue that a hedge fund can try to brand, but without performance it will eventually lose assets regardless of the customer’s identification with the fund. Rather than branding, they focus on differentiation.

Building a brand is a slow process. A consistent high quality message needs to be heard over time. If the manager delivers what he says, over time, the brand will develop.

In its special report, Infovest21 provides a number of case studies that illustrate how managers, in different circumstances, achieved their specific branding goals. While the report focuses primarily on hedge fund managers, a section is provided on branding as it relates to service providers.