Posts tagged '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.
July 21st, 2010
As 2010 gets underway, broad trends toward outsourcing of a variety of services and functions continue. For the foreseeable future, we will be in an era where efficiency and tight execution predominates. Those firms that constantly examine their cost structure and optimize value per dollar spent have the best chance of being winners.
We have written before about the opportunity to outsource various marketing support functions to gain efficiency. There are variable cost solutions in the marketplace for marketing communications, RFP production, and data base management that offer low cost high quality services.
Another example of this trend applied more broadly is exhibited in the insurance asset management marketplace. Insurers are outsourcing asset management in ever greater numbers. It seems they have concluded that their core competency is in insuring risk rather than manages investments. A number of asset managers have noticed this trend, and alertly have started to explore their opportunities in this space. Of course, managing assets for insurers requires specialized capabilities so it behooves them to carefully analyze their potential positioning in the insurance segment before jumping in with both feet.
Overall, firms should continue to look for ways to streamline their operations and narrow their focus. Outsourced resources provide interesting solutions to certain functional areas. Look for this trend to gather momentum in the months to come.
January 18th, 2010
As investment firms react to the new post-crisis environment, one of the issues they will need to address is what they should outsource. I have no doubt that outsourcing will continue to increase in the industry as firms will be reluctant to staff up with full time help to the degree they have in the past, as managers will be cautious to increase their fixed costs.
In the sales area, the outsourced solution is third party marketing. These businesses should continue to serve small managers and alternatives firms, but whether their use with larger traditional firms becomes more popular is unclear.
I see the largest potential increase in outsourcing in the marketing area. There are now quality resources available on an outsourced basis in RFP production, data base population, all forms of writing and communications, presentation design, website design, and various other elements of the marketing process. Managers should consider these variable cost solutions to their marketing needs carefully before restaffing with full time employees.
September 7th, 2009
Why can’t I sell more? When I talk to managers, I get this question all the time. To some, it seems that it should be simple. Develop a good investment product, hire some talented sales resources with contacts, and off you go. The truth, of course, is that there is much more to it than that. Most managers don’t realize how competitive the business is. For the majority of asset classes, there are many strong managers. In order to compete effectively, a manager must clearly differentiate its products and capabilities, and promote them through a well crafted marketing plan. Over time, this will generate “demand pull.” Then, talented sales resources can be more successful. Otherwise, they can spin their wheels and management can waste a lot of time and money. In the best of cases, patience is required as it takes time to build a client base. Look for my next white paper coming out this summer which touches on much of this.
July 7th, 2009
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