While the US Securities and Exchange Commission has said it will not provide guidance on its mandate to relax ”Regulation D” rules until later this year, private funds will almost certainly have a wider range of tactics at their disposal.
The lifting of the “advertising ban” actually includes most forms of marketing communications, including: media relations; web strategy; marketing collateral; advertising; event marketing and event speaking. This dramatically opens the playbook and will potentially allow GPs to take much greater control of their messaging and branding with all of their audiences.
Some examples of this broader playbook include:
· Branding: A strong brand increases market awareness, placing firms in more searches. A well-managed brand enables firms to more effectively communicate their value proposition, eliminates common objections and enhances client loyalty and retention.
· Websites: Almost certainly, GPs can now move beyond the industry standard “client log in” page to provide some basic information on a firm’s pedigree and general area of investment focus and begin to communicate points of differentiation. This is critical today when many investors do their initial research via computer or mobile devices.
· Public Relations: It is doubtful the SEC will offer GPs carte blanche to discuss performance, but it is very likely that GPs will be freer to discuss their investment philosophies in general and create visibility through media relation staples, such as thought leadership and investment commentary. This freedom offers private funds a greater ability to form relationships and educate the media. This is particularly important for a long term crisis/reputation management strategy.
· Advertising: Flip through the major institutional trade magazines, and you will see traditional managers promoting their brands and their range of investment strategies. Few rarely tout performance or reveal trading secrets, but the advertising is effective at establishing awareness, credibility and relevance. Private funds will now likely employ similar strategies.
· Direct Communications: Similar to the advertising approach of traditional managers, hedge funds can be more aggressive while communicating with target audiences. It is difficult to predict what will be permitted, since the scope of direct communications is almost certainly an area the SEC will address with granularity due to the range of suitability issues.
· Events: GPs can likely move beyond the narrow range of private equity or hedge fund-specific events to participate in broader institutional events in a more meaningful way.
In conclusions, as firms continue to adapt to a newly competitive investment, technology and regulatory landscape, they must recognise their communications strategy as an equally critical component for success. Effective communication of a firm’s value will become almost as critical to the investor’s decision-making process as a firm’s investment, operational and risk management.
There are certainly some unknowns as we await the SEC’s response. But make no mistake, change is coming to the private fund community. Winning firms will embrace this change, not resist it. Firms that take a strategic and proactive approach to managing their marketing communications will be better positioned to compete against their peers and traditional managers.
Justin Meise is a partner at public relations firm River Communications and Jeffery Margolis is president of consultancy group Margolis Advisory.