Hedge funds: everyone has heard of them and knows that they play a very powerful role in the global economy. But very few people know what they actually do — and opinions vary wildly.
Everyone in business and communications also knows about the JOBS or Jumpstart Our Business Startups Act, the law designed to encourage investment in new companies that also seems to have influenced today’s “IPO boom market.”
Our friends at Peppercomm recently released a study about the ways in which the comms strategies driving these funds and the firms representing them have changed since JOBS was signed into law one year ago. In short, they’re trying to be more transparent with the public via social and other types of media as interest in their industry hits new highs and related scandals make headlines around the world. (Note today’s top story about investor Carl Ichan’s “open letter” to Apple CEO Tim Cook.)
We spoke to Tom Walek, President of WalekPeppercomm and author of the study, to find out what that means for the industry. (His firm received a “Best North American PR Firm” award from Hedgeweek back in May.)
Q&A and infographic after the jump.
First, some facts:
- 66% of 2014’s largest 292 hedge funds are on LinkedIn, and 10% are on Twitter with an average of 15,000 followers
- 14% launched websites in 2014
- Monthly hedge fund mentions across all media recently reached all-time highs
- Some have even begun to tinker with paid advertising
Why did these changes come about?
The JOBS Act was implemented just over a year ago to make it easier for businesses to raise capital. One of the provisions of this regulation allowed hedge funds and other private investment vehicles to be engaged in general solicitation — i.e. advertise their products.
This represented a seismic shift for an industry used to operating behind closed doors and complying with dozens of regulatory restrictions. With the door now opened for marketing communications, hedge funds are beginning to consider new (for them) communications tools such as social media, websites, advertising, thought leadership and media relations.
How does this digital shift reflect the ways they want to communicate with the public and manage their reputations?
Everyday conversations are moving online, and increasingly this includes conversations about finance and investing. Our data shows that mentions of the term “hedge fund” appear regularly on Twitter, often topping 50,000 mentions per month, with a recent high of 80,000.
Hedge funds can be a part of this conversation. One year after the JOBS Act went into effect, hedge funds are exploring social media platforms such as Twitter and LinkedIn. Some managers are even beginning to use Twitter, highlighted by Carl Icahn’s series of Tweets about Apple, ultimately resulting in a stock buyback to the benefit of Icahn and Apple shareholders. There’s enormous potential for more of this type of social media activity.
What is the end goal?
Hedge funds have the same goal as every business—to grow and make money. Executives at these firms are beginning to understand that performance alone isn’t enough to attract and keep investors.
Given the vagaries of the market, they seek a sustainable business model and more committed clients and that means thinking about things like reputation, branding and thought leadership. Asset flows over the past few years clearly show the “brand-name” managers attracting the bulk of the assets, and we think that trend will continue.
What, if anything, does the typical hedge fund want the average American or journalist to know about what they do?
There is a disconnect between what people think hedge funds do and what they actually do. Insider trading, fund blow-ups and outsized compensation dominate hedge fund headlines, but don’t accurately characterize the industry.
One reality is that the average American, whether he or she knows it, is likely invested in hedge funds via a retirement plan or pension. It will benefit hedge funds if all stakeholders – institutional and retail investors, politicians and policy makers, regulators and the media – better understand the reach and role of this $2-trillion-plus, global hedge fund industry.
Do we have any information on how successful these new efforts have been?
Hedge funds are still in the early stages of upgrading their communications efforts. The JOBS Act was an important catalyst for that. Already we are seeing clients open up their web sites, engage in social media, talk to the press and related efforts. This is the beginning of a process with a long way to go, but one that is very much moving in the right directions.
Here’s the infographic. How strongly have PR pros representing hedge funds felt the JOBS Act’s influence?