Hedge Fund Investors Asking for More Meaningful Communication

Clients are demanding that investment managers communicate more than just data

The following white paper was released by BK Communications Group, a company which provides outsourced marketing and client communications solutions for the asset management industry.  According to a recent survey of institutional hedge fund investors, clients largely prefer that managers take the call for transparency one level further and communicate to them in a meaningful way that explains what they’re doing with the funds.  Popular forms of communication adopted by investment firms include pitch-books, websites, and personal contact.  According to a report by McKinsey & Co., providing full transparency and enhancing communication efforts can be useful in client retention and future asset gathering.

The executive summary and highlights of the paper is re-printed in full below as well as a link to the paper.

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BKCG White Paper
June 2009
The New Transparency: Words

Clients are demanding that investment managers communicate more than just data

Executive Summary

Transparency has typically been equated with access to data (trade, exposure, valuation, etc.), but the financial crisis and fund scandals have led clients, investors, as well as regulators to demand more. Major surveys and anecdotal evidence indicate communication is now in demand. Clients want managers to put the numbers in context, to explain what they’re doing, to communicate on a clear and meaningful basis. This expanded transparency can help retain clients and strategically position a firm for future asset gathering, both by building a brand associated with full transparency and by ensuring that all touchpoints – from pitchbooks to websites to personal contact – are fully in place and high quality. Investment firms must carefully examine how they currently communicate, decide on any adjustments that must be made, and determine whether they have the internal capabilities and resources to execute on those adjustments.

Highlights

  • Communication is the new transparency. Data alone is no longer sufficient. Clients want managers to put the numbers in context, to explain what they’re doing, to communicate on a clear and meaningful basis
  • SEI/Greenwich Associates’ global survey of institutional investors finds investors will “intensify their scrutiny of investment processes” and increasingly emphasize client reporting and communications.
  • Preqin’s survey of 50 institutional hedge fund investors finds that events of the past 12 months have led 43% of respondents to expect “increased transparency and understandable strategy.”
  • Providing full transparency can be a way of helping to retain clients and strategically position a firm for future asset gathering. McKinsey & Co’s major report (“The Asset Management Industry in 2010”) concludes that “winning asset managers will be those who forge a superior reputation and capabilities for service and sophisticated advice.”
  • Communications transparency can be approached strategically, to ensure an investment firm’s brand is associated with openness and clarity, and to establish a reputation for thought leadership, as this is associated with mastery of core competence.
  • Communications transparency can also be approached tactically by making sure that all touchpoints – from pitchbooks to websites to personal contacts – are fully in place and high quality.
  • Many investment firms are shedding internal resources that are not profit centers, including communications personnel, or are hesitant to bring on those resources – leaving them without the necessary skills, or bandwidth, for an appropriate level of communications.

For the full report, please see BKCG Transparency White Paper

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Bart Mallon, Esq. runs hedge fund law blog and has written most all of the articles which appear on this website.  Mr. Mallon’s legal practice is devoted to helping emerging and start up hedge fund managers successfully launch a hedge fund.  If you are a hedge fund manager who is looking to start a hedge fund, please call Mr. Mallon directly at 415-296-8510.