How Social Media is Changing the Hedge Fund Industry
With more 15,000 competitors, the hedge fund industry is extremely competitive. Many institutional investors are contacted by thousands of managers a year, meeting with a few hundred, have follow up meetings with fifty, and ultimately allocating to two. In this competitive environment, any edge over the competition is vital. Having a well thought out social media strategy is one way to achieve this. During the past five years, the use of social media has significantly increased within the hedge fund industry. Today, a vast majority of firms have at least some presence on social media. Far and away the most utilised social media platform in the industry is LinkedIn, which can provide benefits to multiple parts of the firm. This paper will focus on its use to enhance a hedge fund’s sales and marketing strategy.
Utilising LinkedIn to Enhance a Hedge Funds’ Sales and Marketing Strategy:
Identify, Enhance Knowledge, and Screen Investors - The hedge fund investor universe is opaque, with very little information publicly available about investors. Many hedge fund investors do not even have a website, or if they do, it is often limited or password protected. LinkedIn is a great resource to map out a firm’s organisational structure, figure out who conducts hedge fund research, and who has the authority to recommend and ultimately allocate to an external manager. Those in hedge fund research can be identified either by job description or based on a number of common connections. Basically those employees with the most common connections typically are involved with hedge funds. Once this information is obtained, a pre-existing relationship can begin to be established by having a conversation with the individual or firm about their investment needs. Once a pre-existing relationship has been established, future communication can focus on hedge fund products that fit the needs of the investor.
LinkedIn is a great resource to view many hedge fund investors’ profiles which typically includes a picture, their work history and job description, any boards on which they participate, their educational background, and a list of common connections. This is valuable information to improve a business relationship. It also can be helpful in doing research before attending an industry conference to better understand how to avoid low quality (or even fake) investors and maximise one’s time. Many hedge fund conferences allow hedge fund allocators to attend free of charge, resulting in a large number registrations from people falsely claiming their primary role is allocating to hedge funds, when in reality they are tangentially involved in the industry and selling a product, or just looking for a free meal. For example, Agecroft’s annual conference, Gaining the Edge–Hedge Fund Investor Leadership Summit https://www.apgainingtheedge.com/ utilizes LinkedIn to maximise the quality of the event. By using LinkedIn Gaining the Edge is able to screen out close to 25% of the people requesting one of the 300 complimentary tickets reserved for investors whose main role is to perform due diligence and allocate to hedge funds.
Improve probability of getting meetings with investors - The viewing of LinkedIn profiles goes both ways. While hedge funds can use LinkedIn to find and screen investors, investors are increasingly using LinkedIn to help screen people with whom they meet. The more professional someone’s LinkedIn profile looks, the higher the probability an investor will want to meet with them. A LinkedIn profile often serves as a first impression of an individual or firm, so it is important to make sure that one’s profile accurately and strongly represents their skills. People should check with their compliance department for guidance on what they can include, However, many firms are comfortable with including any information that is also on their company website. Some organisations are even comfortable including information on the firm’s ADV, which is available to the public through the SEC’s website.
Connecting with industry contacts - Connecting with industry contacts helps an individual strengthen his or her “brand” in the market place and also improves relationships with each person with whom one is connected, because each of their connections will be reminded of them every time they view their list of connections. Connections also see each other’s postings which will keep everybody involved updated on the other’s current interests. It is important to remember that the power of LinkedIn is directly proportional to the quality and quantity of your connections and is subsequently vital to build out a network to include both close contacts as well as other professionals in the industry. In addition to individually connecting, it is important to participate in LinkedIn groups.
Enhancing knowledge of the hedge fund industry by participating in LinkedIn groups - LinkedIn has hundreds of hedge fund industry groups designed to enhance knowledge of specific areas within the industry. Some of these groups focus on hedge fund administration, compliance, legal, sales and marketing, in addition to investor groups focusing on pension funds, endowments, fund of funds, family offices among many others. Each of these groups allows members to read posts from members of the group, post information they believe the group will find useful, ask questions, and post surveys. Groups allow members to connect with a large, targeted audience that may not be first connections. Members of the group also see a list of other group members which allows individuals to reach out to each other directly.
Posting information - Posting information is one of the most powerful ways a firm or individual can use LinkedIn to strengthen a brand and develop an industry reputation. Providing engaging and useful content to your contacts can significantly enhance a firm or individual’s brand within the industry over time. Brand is extremely important in the hedge fund industry. A survey by Preqin showed that 75% of assets were going to managers with over $5 billion in AUM and 90% were going to hedge funds with over a $1 billion. Many of the larger firms receiving assets don’t have the best performance and are not necessarily the best hedge funds; they are growing because of their strong industry brand. The same goes for service providers. If you are a law firm, administrator, accounting firm, or a prime broker and don’t have one of the top ten brands in the industry, it is very difficult to get new clients.
If a firm or individual writes an article, their objective should be to have as many relevant people read it as possible and social media should be an integral part of the distribution strategy. For example, Agecroft Partners’ strategy on distributing industry thought pieces the firm writes begins with a press release. Typically, it will be covered by a large percent of the hedge fund media, other mainstream print media, as well as one of the three top business television networks. Obviously, this media coverage is seen by a large audience. Once the media has covered the article, Agecroft posts the article to LinkedIn where it typically will receive between 10,000 to 30,000 views from a targeted audience of first connections and followers. Many more see it through postings in various hedge fund groups on LinkedIn or by other people sharing the post. In addition to articles they write, the firm also posts articles it has been quoted in and believe its target audience would find interesting. This is also appreciated by the publications which published the article and leads to more requests for quotes. Agecroft also posts its TV interviews and has discovered that more of its targeted audience sees the interview post on LinkedIn than from the live television coverage. LinkedIn is truly a powerful communication resource.
Following people’s careers - The hedge fund industry experiences significant turnover each year among people who analyse hedge funds. A large percent of these individuals end up in other positions within the industry. There are two ways LinkedIn can help keep track of people’s career changes. The first is to do a name search in LinkedIn whenever an email is returned as not deliverable. Many people will update their profile fairly quickly after accepting a new position. The second way is by receiving updates from LinkedIn whenever a 1st connection makes a job change.
Other social media used in the hedge fund industry - Twitter is used by a much smaller percentage of the hedge fund industry compared to LinkedIn, but can be leveraged to increase views. LinkedIn has a function that allows an automatic tweet whenever information is posted to LinkedIn. The industry also utilises YouTube where people can post or watch interviews that can then be shared through LinkedIn and Twitter, posted on websites, or emailed with a link. For example, earlier this year Agecroft’s top hedge fund trend video received over 60k views utilising this process. However, it is important to remember that unless a hedge fund has registered to participate in general solicitation under the JOBS ACT, they should check with legal and compliance before posting.
Summary - Social media is a powerful tool that is constantly evolving and every participant in the alternative investment industry should broaden their knowledge of its uses, but at the same time understand how it can be utilised based on the regulatory framework of their firm.
Don Steinbrugge is Managing Partner at Agecroft Partners
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