Advertising Advice for Hedge Funds from the Mad Men

As the hedge fund market prepares to advertise and attract more of the general public into its previously exclusive arena, advertising experts are urging the sector to reveal more of its inner workings than most managers will at first feel comfortable with.

Madison Avenue executives are suggesting that hedge funds consider highlighting the ideas behind some of today’s advertising lingo: the funds should aim for “transparency,” “access” and “performance,” in contrast to the reputation the funds have now of exclusivity, secrecy and exclusion.

"They have to find a way to be more transparent," said Rob Reilly, chief creative officer of Crispin, Porter & Bogusky, a unit of MDC Partners Inc. "They need to be honest and show how the money is made and how their process works."

It may take some getting used to on the part of hedge fund managers, but in today’s world businesses cannot disclose too much, says Reilly. As an example he explained the advantages of a recent ad campaign by Dominos Pizza, Inc. The pizza company played on information that consumers were not so happy with the taste of the product, so the ad campaign promised a new and tastier recipe.

"Being quiet used to be seen as a competitive advantage, but Madoff changed that, and being unknown and unheard of is no longer acceptable," said Allen Adamson, a managing director at Landor Associates, a branding firm owned by WPP PLC.

Bernard Madoff changed attitudes about disclosure after he was caught masterminding a multi-billion-dollar Ponzi scheme. Madoff pleaded guilty and received a 150 year sentence in federal prison.

Mr. Reilly added that hedge funds drop the word “hedge” from their name, because of the negative connotations that word inspires.

"In advertising it's all about using words that sound solid," he said. "Words are everything."

Hedge Funds Could Open Up After SEC Rule - Advertising?

By Zach Kouwe

Despite news reports earlier this month that the Securities and Exchange Commission was poised to delay important changes to marketing rules for hedge funds and other alternative investment funds, the S.E.C. published proposed rules yesterday that will have a significant impact on how hedge funds speak to the public and market themselves to prospective investors.

Both public relations professionals and reporters alike have quietly advocated for the loosening of these regulations, which have prevented hedge fund managers from talking publicly about their performance, investment strategies and even mentioning simple facts about their fund structure and fees. Now, if this new proposal becomes the law, more transparency will come to the hedge fund industry.

Dukas Public Relations, which prides itself on transparent and open relationships between its clients and the media, will be submitting a comment letter to the S.E.C. in support of the proposed rule. (Our letter will be available here and via the S.E.C.’s website soon.)

We believe this change will be welcomed by hedge fund reporters in particular, who often find it difficult to obtain simple information from hedge fund managers and the industry in general. Based on our conversations with clients and prospects, managers also support this change because most want to respond to reporters’ questions but fear running afoul of the rules. Even some managers who want to correct simple inaccuracies in the media can’t do so under the current regulations.

While some hedge funds and marketing execs have talked of full-fledged advertising campaigns, we believe most firms will opt to ramp up their public relations initiatives rather than buy ads in print publications or sponsor sp. While not opposed to advertising, we think engaging with the media and the public at large is the best way for the hedge fund industry to become more transparent and better understood. As a PR agency for hedge funds, we look forward to seeing this proposed rule become law. 

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Proposed Rules for Hedge Fund Marketing and Adversiting

Should hedge funds engage in public relations?

Here's part of an interesting blog post by Richard Dukas, CEO of Dukas Public Relations, a financial PR firm in New York. It talks about hedge funds and other alternative investment firms beginning to open up to the media.

A recent article in the New York Times by Nelson Schwartz illustrates my point.  Mark Lasry of Avenue Capital (not a client of Dukas Public Relations ) openly discusses his bet on a European turnaround.  He talks about how much of his fund’s capital he’s investing, why and his return expectations. (On the same day, the Times ran a story about famed venture capitalist Marc Andreessen and his firm’s willingness to speak to the press despite being part of an industry that shuns it.)

Moody's Weekly Credit Outlook - 06-11-12

Moody's Weekly Credit Outlook 06-11-12

Sallie Krawcheck's Use of Social Media

By Zach Kouwe 

I recently shared my views on former Merrill Lynch executive Sallie Krawcheck’s use of Twitter in an article in RIA Biz, an online publication targeted at Registered Investment Advisors. Many RIA’s and financial advisors have begun using social media to establish themselves as thought leaders in the investment community and land new clients. While there are risks, especially if you’re inexperienced with social media, it can be effective if done correctly. Krawcheck is certainly making good use of the medium.

 From RIA Biz –

“She’s always been known in the industry as a straight-shooter,” says Zach Kouwe, senior account executive for Dukas Public Relations, a New York-based financial PR firm. “She’s trying to re-establish her voice in the financial community. I wouldn’t be surprised to see her start her own financial advisory firm.” See: Six things to consider when reading Sallie Krawcheck’s comments in interviews.

 “This is a great example of how social media, even in the very conservative financial space, can be used to get your message out there and establish yourself as a thought leader,” Kouwe says. “I think it’s a great move; I think she does it well.” See: Three ways to use social media in turbulent markets.

Howard Marks' Latest Memo - Deja Vu All Over Again

Howard Marks Memo (Deja Vu) 03_19_12

Howard Marks on Managing Penn's Endowment

The latest memo from Howard Marks, chairman of Oaktree Capital Management, is one of the best pieces I’ve seen from him in a while. With agreement from the University of Pennsylvania, Marks opens the kimono and talks about his stewardship of Penn’s $7 billion endowment from 2000-2010. It’s open and honest and includes some real gems about defensive investing and expectations about performance. 

Here it is:

Pensions and Hedge Funds - Ins and Outs

By Zach Kouwe

There’s been a lot of talk recently about pension funds being drastically underfunded. Somestudies peg the funding gap for state and local pensions at more than $1 trillion. To make up the gap, pensions either have to force their members to contribute more, cut back on benefits or make it up by earning returns in the market. (Sounds like social security, doesn’t it?)

Moody's Weekly Credit Report

By Zach Kouwe

Here's Moody's Weekly Credit Outlook for Jan. 30, 2012. Interesting stuff about the sovereign debt crisis in Europe and possible ways forward.


Moody's Weekly Credit Outlook 1-30-2012

Inside Citigroup's $54 million arbitration award

By Zach Kouwe

Gretchen Morgenson had a fantastic column in Sunday's New York Times on a little-followed arbitration suit brought by a group of high-net-worth investors from Denver against Citigroup's Wealth Management division. The amount of the award ($54 million) and the fact that a lot of internal documents are now available piqued my interest. So I dug up some of the documents in the court case mentioned in The Times, which involves Citi's appeal of the arbitration decision. Embedded below is the answer the high-net worth investors filed in response to Citigroup's appeal. 

It's intriguing not so much because of the alleged fraud that took place, but because the suit names Citi's top producing wealth advisor from 2001 to 2008  (who subsequently joined Credit Suisse) and the supporting documents include a letter written to Vikram Pandit and Sallie Krawcheck by a Citi wealth manager begging the bank to make their clients whole on a money-losing fixed-income product they say was misrepresented as a safe investment. It's the same old story from the Financial Crisis - did the bank intentionally misrepresent the risks or was this an unprecedented event no one could have foreseen? You decide. Here are some of the documents.

• Recorded conversation between Citi employees regarding the demise of the fixed income product
• Document outlining targeted investors
• Internal email between Citi employees asking "what if they are indicted? 

Citigroup Arbitration Lawsuit

Carson Block on Bloomberg TV

By Zach Kouwe 

My client, Carson Block of Muddy Waters Research, was on Bloomberg Television this morning speaking about Chinese companies and the outlook for China in general. In 2011, Mr. Block was named to the Bloomberg 50 - the 50 most influential people in finance.