Hedge Funds–Muddling Through Their Marketing
While a number of large established hedge funds have recovered quite well from the financial crisis, many small funds have continued to struggle. We anticipated this development in the new normal environment where competition is greater and margins are tighter. In such an environment, there is greater differentiation between the strong firms and weak ones; weak firms will have trouble surviving.
As we speak to small hedge funds, we notice a common theme; many are having a hard time understanding why their marketing has been unsuccessful lately since it was so successful when they started a few years ago. Many of these firms are very sophisticated investors, but are quite naive when it comes to marketing. Just a few years ago, they were able to attract clients fairly easily, often without a marketing function at all. If they had marketing resources, they were usually limited to an unsophisticated sales person who simply called potential investors, or they relied on prime brokers for introductions.
In the current environment, hedge funds are being forced to run as businesses, with proper infrastructure and strategic marketing in order to remain competitive. Many hedge fund managers have never had to understand strategic marketing as the business was easy in the past. Now, not only is the business more competitive, but the entire investment industry is converging such that hedge funds and traditional managers look more and more alike. Their products and business structures are converging. In a few years, there is likely to be little distinction between “alternative” firms and “traditional” firms. The sooner the hedge funds understand this, the sooner they will get their businesses on track for the future.
2 comments July 21st, 2010
RSS Feed