The news yesterday that Man Group’s clients pulled billions more from its funds last year and that one of its employees had been arrested for insider dealing dealt a blow not just to its share price, but yet another to the reputation of hedge funds in general.
Certainly, the introduction of the JOBS Act in the US has created ample opportunities for hedge funds to enhance their public image through better media relations and advertising.
Yet many hedge funds remain media-shy, hesitant to stray away from a reactive approach to public relations, where they engage the press only to respond to difficult incidents such as SEC allegations. As competition for investor assets heats up, small-to-mid size hedge funds have an opportunity to work with media to differentiate themselves from their peers and, more importantly, better communicate their story.
Often, small hedge funds are run by capable managers who produce consistently solid returns. However, they rarely gain as much attention from the press or investors because they’re not a big name. Indeed, by taking a more proactive approach with media, smaller hedge funds currently have a great opportunity to educate journalists, institutions, and consultants about their investment successes and value propositions.
As the hedge fund space becomes increasingly competitive, public relations can play an important role in helping smaller funds connect with potential investors and consultants. But sharing their insight with the media forms part of a much bigger agenda: transparency.
For hedge funds of any size, increasing transparency can help greatly with educating potential investors about how they deliver returns and harness the collective intelligence of their executive teams. By sharing key insights about risk management, operations, and other elements of a practice with influential media, hedge funds should be exploiting the opportunity to highlight their knowledge and expertise.
Crucially, by encouraging more open dialogue with the media, hedge funds can ensure they feature prominently in the stories that matter. As stated by hedge fund media personality Anthony Scaramucci:
“The media likes to focus on the person that made a billion, the person who lost a billion and the person who stole a billion, so what happens is the general public has an image that we are gunslingers.”
By engaging in dialogue with journalists on a regular basis, whether comment is off-the-record or not, hedge funds can gain their trust by giving them the inside track. And the more trust and knowledge there is in the relationship, the greater likelihood that a fair story will be told. This is why hedge funds must adopt a more proactive and strategic approach to communications, seize on media opportunities as they arise, and earn the trust of journalists, investors and institutions alike.