5 Unique Hedge Fund Marketing Tactics (3 of 5)
This is part 3 of 5 within a series on unique hedge fund marketing tactics that managers should investigate further while working to raise capital for their funds. Before taking any of these actions please consult with your compliance and legal counsel for confirmation that you are able to use these methods to market your specific fund.
Forget about contacting more investors. Yes, it may seem illogical to forget about contacting new investors while attempting to raise capital, but this may be what you need to do to meet your business goals. Many of the hedge funds I speak to want to be connected with investors, they want
lists of family offices, seed capital providers or HNW wealth management firms. While accessing more investor contact details may be a useful resource and improve your marketing efforts it is often not the real constraint which is holding your business back.
No business is perfect, every business has some constraint which if removed would help the business more than anything else. Sometimes this constraint is portfolio management expertise, sometimes it is marketing materials, and many times it is lack of institutionalized processes and tools. Very seldom do I meet with hedge funds which if provided with a long list of 1,000 investors would explode in assets under management.
Most hedge funds do not take the time to right down all of their current business problems or symptoms and ask the why questions needed to identify the root constraint within their business model. A good tool that I have seen used by half a dozen management consulting gurus is the "4 Why Process." If you ask why something is happening 4 times you will get to the root cause of the problem.
- Initial Problem/Symptom: Why don't we manage $100M in assets yet? Why?
- Potential Answer: We are not raising capital from wealth management firms as you had hoped. Why?
- Potential Answer: Our marketing materials have not been brought up to part with the competitions, they are light and our investment process is poorly described. Why?
- Potential Answer: We now that you should be paying a consultant or in-house marketer to help with both marketing materials and generating relationships but you have not hired one. Why?
- Potential Answer: We do not have the profits available to hire a full time marketer but we get around to creating a system to share equity, grow relationships with third party marketers or build a marketing related advisory board.
The point of this exercise is to identify what the bottleneck is that is slowing down your growth. A hedge fund can be seen a 20 link chain, you must have all 20 strong links in place to keep the business growing long-term. If 19 links can carry the weight of a $300M fund but one link is only up to par for a $10M fund than you will limit your growth and you may never or only very slowly grow into a $300M fund. The biggest return for your investment of time and money will be to focus on that one broken or sub-par link within your operations, marketing, trading or internal business processes, anything else would be a relative waste of money or energy.
This is a unique marketing technique because it is a reminder that the smartest thing you could do for your marketing and sales campaign may have nothing to do with picking up a phone or buying a database of investors. Before spending more money or valuable time try to consider the following 2 tips for improving your ability to attract investors:
Use the "4 Why Tool" to drill down deeper into the top 5 problems that you see your fund facing right now. Often times 3-5 problems will often be symptoms of a single root cause which can be directly addressed.
Ask others including your advisory board, current investors, potential investors and co-workers what is holding your fund back. Do not settle with two word surface answers and try to identify what 3-5 action steps your fund could take this quarter to improve how you are positioned and address the #1 limiting factor in your business.
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Tags: Hedge fund marketing, capital raising, fund marketing, third party marketing, hedge fund, hedge funds, private equity, alternative investments, marketing, sales, fundraising
Last week I gave a speech entitled, "Top 5 Investment Fund Marketing & Sales Best Practices" in Boca Raton at a conference put on by Marcus Evans.
