New SEC Guidelines on Social Media Clear the Way for Asset Managers

By Zach Kouwe

Last week the Securities and Exchange Commission issued an update to their social media guidelines regarding filing requirements under the Investment Company Act and other statutes. Overall, it appears the Commission wants to foster a more lenient regulatory environment on Twitter and other social platforms so investment companies aren’t stifled from using this new form of marketing and communication.

The update makes clear that the sharing relevant links, stories, white papers and other non-fund-related things over Twitter and other platforms are exempt from filing requirements. Here’s an example of a Tweet that is acceptable:

“Consumer Reports has written an article in which it mentions our ‘Brand X’ Rewards Card. Are you a member?" or ”The ‘Low Volatility Anomaly’ is explained in our latest white paper LINK”

Even mentioning the word “performance"or sharing a link back to a website that includes fund performance data is exempt from filing requirements. Stating specific performance data in the communication still needs to be filed. (ie. Fund X achieved a 3 month return of XX%) These new guidelines should allow asset management firms and other investment companies more leeway to communicate and influence via social media.

Many large alternative and traditional asset managers such as The Carlyle Group,Blackstone Group, Pimco, Blackrock and State Street are already using Twitter as a public relations tool to build their brands and communicate their thought leadership. (Pimco already has over 100,000 followers) While these large firms have the resources and extensive compliance departments to ensure adherence to the rules, these new guidelines make basic sharing of information on social media a much less burdensome activity. Every asset manager that aims to be an influencer in the community should be participating. 

Should Hedge Fund Managers Care About Their Brand?

I recently stumbled upon a new survey of what institutional investors look for in their hedge fund managers. The survey, from fund administrator SEI, was particularly interesting because it covered what investors think about a particular firm’s “brand” identity and how that factors into their decision to invest in the fund.

Not surprisingly, the results were mixed with many investors seemingly confused by the question. But from investors and consultants we've spoken to, having a solid and understandable brand in the market matters whether they admit it or not.

From the survey:

When we asked institutional investors to define “brand,” their answers diverged. Respondents were similarly torn on the importance of brand; one-third said it makes no difference in their selection of hedge funds, one-third disagree, and one-third are neutral.  

A hedge fund needs to able to describe its unique investment process in an understandable and concise way both to potential investors and the public at large. Take it from Bruce Frumerman, CEO of investment management industry communications and sales marketing consultancy, Frumerman & Nemeth Inc. from the survey:

“You know your firm has graduated from commodity to brand when, after stating your fund’s name and strategy category, a prospect can add two or three sentences of elaboration about how you invest," he says. “If a hedge fund doesn’t actively market its investment- process story, it won’t outgrow being perceived as a replaceable commodity, known only by the pigeon-hole category of its strategy and its most recent returns.”

This can apply not just for hedge funds, but for any type of investment product or service. Money managers across the board, whether they manage institutional or retail capital, are becoming much more scrutinized. If they can't define their clear narrative, they won't be able to distinguish themselves. Hedge fund managers in particular can’t just sit back and rely on their track record – indeed the survey points out that investment performance is not even the most important factor when investors choose a fund. (This is already starting in the hedge fund world)

“There are those who get it right, and gather billions in assets, and those with no idea of how to get their message across. They just use the same mumbled jargon and rarely convey what is actually happening. Marketers who think they don’t need to put it down on paper and convince others their process makes sense will get nowhere,” declared a managing director at a large European institutional investor. Our panelists also emphasized how important it is to spend the time and resources needed to make complex processes clear and simple. “Explaining simply just what it is you do is the single greatest feat for hedge funds,” said Michael Green, CEO, International with American Century Investments.  

-Zach Kouwe

Oaktree's Howard Marks on the Outlook for Equities

Howard Marks: The Outlook for Equities

QB Asset Management - The Fed's Exit

By Zach Kouwe

QB Asset Management - The Fed's Exit

Some news about me. . .

Here's an excerpt from The Bulldog Reporter's piece on my promotion at DukasPR.

Kouwe Promoted to Director at Dukas Public Relations  

Dukas Public Relations (DPR; www.dukaspr.com), a financial public relations agency, announced that Zach Kouwe has been promoted to a director in the asset management and hedge fund group. In his new position, Kouwe will increase his management and advisory responsibilities with many of DPR's leading clients to help them achieve their strategic communications goals. 

Kouwe joined DPR in early 2011 as a senior account executive after nearly a decade as a journalist. Over the past two years, he has played a key role in servicing clients in DPR's growing asset management practice, which has increased by approximately 60 percent over this time period.

The Low Volatility Anomaly

By Zach Kouwe Investors these days are searching for some way to protect their assets while still participating when the stock market gains steam. Bonds are yielding nothing and people are still fearful of market declines. The common theme throughout history has been that more risk equals more reward. But study after study has actually shown that low beta stocks (those that have less volatility and are hence less risky) actually outperform over time. Some have tried to explain why the anomaly exists. Old Mutual Asset Management (a client of the PR firm I work for) is out with a new white paper describing how low volatility strategies can be applied to 401k retirement account and target date funds.

Target Date Solutions and Low Volatility Strategies by Zach Kouwe

Investment Strategies Require You Stick With Them

By Zach Kouwe

There are a lot of different investment philosophies out there all competing for the attention of a limited amount of capital. The interesting thing in my mind is that there are so many different managers, strategies, fee structures and just as many investors out there ready to listen to them, including me. These days, with bonds yielding nothing and equities still very volatile, investors (especially retirees) don't know what to do with their money. 

Mebane Faber of Cambria Investment Management (Full Disclosure: Cambria is a client of the PR firm I work for) has devised very interesting ways to diversify by investing in several different asset classes including real estate, commodities and foreign stocks, which are trading at historic low valuations. Overlay a risk management process that tries to avoid massive drawdowns by going into cash when asset prices are going down. Cambria just published its latest outlook on the market and compared returns over the last 40 years in various different portfolios. Like anything else, it relies on investors who don't do stupid things, like pull their money out of strategy just because it doesn't beat the overall market. Cambria's strategy didn't do well compared to the U.S. equity markets in 2011 and 2012, but over the long term it has been better with much less volatility. It all depends on how long you stick with the strategy.  

Meb Faber's Outlook for 2013 by Zach Kouwe