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

Hacks and Flacks - The Financial Follies 2012

Mary Kate Dubuss, Zach Kouwe and Stephanie Dressler of Dukas Public Relations

The Financial Follies, which is put on by the New York Financial Writers Association every November, is a tremendous place for public relations folks and journalists to get to know each other better. Every time I go, I get to know someone interesting I didn't know before and meet someone I had only dealt with over the phone. 

Oaktree Sees a Bubble Brewing in the Debt Market

By Zach Kouwe

The always interesting Howard Marks of Oaktree Capital Management shares his latest thoughts on where we are in the market today. Hint: He is seeing a huge bubble brewing in the debt markets as investors reach for yield in junk bonds and accept larger risks in Treasuries. Marks is one of my favorite investment managers, primarily because he started a firm that invests in all sorts of complex financial instruments and works on behalf of large, sophisticated investors such as pension funds, but still finds a way to explain his thoughts in a way that can be easily understood by people with little background in finance. 

Marks' public relations skills have enabled him to become a leading voice in the investment community. All he has to do now is get on social media and he can raise his profile even more. Sally Krawcheck, formerly of Merrill Lynch, has done this successfully as I mention in RIABiz. Thought leadership pieces like this one below are important for any company, no matter what industry, to demonstrate to the public their unique philosophies and position in the market.   

Latest Letter from Oaktree Capital Management's Howard Marks 1-08-2012 by Zach Kouwe

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.)