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AlphaWeek Q&A: Tom Walek, Founder & Managing Partner, Peaks Strategies

AlphaWeek's Greg Winterton spoke to Tom Walek, Founder of Peaks Strategies, about how hedge fund PR has evolved in the past 10 years.

GW: Tom, thanks for taking the time today. Let’s begin with the current lay of the land with regards to PR and communications for hedge funds. What’s news?

TW: Two important trends are re-shaping hedge fund PR, communications; one, the rise of data in hedge fund communications, and two, the rise of professional marketing.

First, the use of data is expanding from the investment side of the house to the client service/business development/distribution side. When managers send out an investor letter, post a video, publish a piece of content, or develop a media hit they can now track who’s reading it, watching it, forwarding it, etc. Just as portfolio managers conduct attribution analysis behind sources of hedge fund returns, client service and business development executives at hedge funds now have the ability to perform similar analysis for all aspects of PR. They can use this data to learn what content has been the most engaging and how they can do better next time. One of our clients, Harvest Exchange, helps managers do exactly this, employing AI and machine learning techniques that consumer-facing businesses have used for some time.

Second, the hedge fund “Marketing” title and function is becoming real, distinct from sales, client development and client service. This is a big change. I have argued for years that hedge funds have under-invested in and underappreciated the importance of marketing. But given how competitive the investing and fundraising markets are, managers are paying attention to this vital role more and more.

GW: Hedge funds are asking their PR representatives to be more of a strategic partner these days. Tell us more about how what you’re doing at Peak Strategies is different than when you were running Walek & Associates.

TW: When I started working in the hedge fund sector in the 1990s, our mandates were driven by clients who wanted us to “get me some PR” – primarily press coverage, either more or, in some cases, less. Also, there was a good deal of effort needed to educate the media about the industry and less client-focus on marketing and branding strategy.

Everything today is built on a brand/positioning strategy, and execution calls on much more than traditional PR/media. Today, we are just as likely to get a mandate just focused on content development.

On the educational front, we have succeeded. Reporters and investors generally know what it is that managers do.  Now the trick is defining and differentiating managers’ value proposition in a much bigger and more crowded marketplace.  Again, brand and positioning.

GW: As you mentioned, hedge funds seem to be more proactive with regards to their marketing efforts these days. What changes are you seeing in this area?

TW: If managers are to outperform their peers, they have to do something different. You can’t just be another long/short equity fund or private credit fund.

Similarly, you’ve got to do something different in terms of marketing in order to succeed.  Managers need to clearly define, differentiate and promote. I don’t think you can rely on performance or mystique. Managers need a story and narrative that works both when times are good and when times are challenging.

Also, content development is mandatory.  Another of our clients, The Alternative Investment Management Association (AIMA), recently published a survey that revealed that knowledge sharing is allocators’ #1 priority when considering a partnership with and allocation to a manager. Performance is #2.

With that in mind, there is no more controlled, manageable and impactful way to share knowledge than through direct communication with clients. It doesn’t have to be in a public forum. It can be through a private digital platform or an email campaign.  Managers are starting to view every correspondence with investors or the media as content marketing.

GW: In terms of asset raising, the industry seems to be growing, but most of the new money is going to the larger, more established managers. What advice do you have for a smaller or new/young manager with regards to their communication strategy?

TW: Working with both large and small managers, the 80/20 rule seems to apply: 80% of the capital goes to 20% of the managers. Sometimes it’s even more skewed than that.

In order to stand out, smaller/new/emerging managers need to doing something interesting from an investing standpoint and carry that over to marketing.  “Me, too” funds won’t survive.   With a smart strategy you then have to consider all the tools at your disposal -- video, written content, website, advisory board, events, media – and use the right channels to tell your story to a receptive audience.

GW: The mass media have jumped on the recent ‘Paradise Papers’ leaks, bringing offshore finance jurisdictions back into the spotlight, but hedge funds seem to have avoided any real scrutiny, whereas perhaps, 5 or 10 years ago, the media would have figured a way to tar hedge funds with the same brush. Exactly how is the traditional media treating hedge funds in 2017 and have you observed any trends in the past 5 years or so?

TW: Good or bad perception based on media scrutiny goes in cycles; I’ve been doing this long enough to see a few of them. At the end of 2017, the tone seems, overall, positive: record assets, strong launches, good performance, active institutional participation.

In the years following the financial crisis, the media paid more attention to public revelations like the Paradise Papers, in large part because they were being reported for the first time. As the number of media covering hedge funds has increased, managers are much more transparent with the public at large than when I started.

Regarding the Paradise Papers and offshore finance, I don’t think it really had much of an impact as it might have had five years ago. Hedge funds have used legal, offshore structures for decades. There might have been some click bait value to the news that certain celebrities used offshore vehicles to invest some of their wealth, but the industry doesn’t seem in the cross hairs this time.

GW: Some managers have done so well personally that they now rank among the world’s wealthiest individuals. They have begun to use their financial influence beyond markets in areas such as art, philanthropy and politics. Do the actions of these celebrity managers diminish the reputation of the thousands of their peers who remain squarely focused on building their fund businesses? Does the media focus on them too much?

TW: According to the Forbes Billionaire List, there are more than 40 people whose listed source of wealth derives from hedge funds. Naturally, the media is drawn to these individuals because of their success, charitable donations, political contributions, personal real estate transactions, and thought leadership activities.

But this also creates a perception – wrongly – that all hedge fund managers are fantastically wealthy. The vast majority are small business owners that employ a dozen people or less. Some prefer to stay small because they prefer to avoid the headaches of managing a large organization. Others are working to replicate the success of the billionaire class and build a self-sustaining business with multiple product lines.

That said, given this context, it can be difficult to do a media relations campaign for a smaller manager. It is more important than ever to have a differentiated story and a smart marketing strategy in order to stand out.

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