Never thought a government shutdown would impact my wedding....

By Zach Kouwe

Of all the things that could go wrong during or leading up to a wedding I never anticipated having to deal with a government shutdown. I guess that's something you need to take into account these days when planning a wedding in Yosemite National Park, or any national  Once it looked like the park was going to be closed, we marshaled the forces of public relations....(BuzzFeed, trade publication and the BBC.) 

But as the wedding date approached, it was clear the Congress wan't going to get its act together in time. Well, in the end it actually ended up working out in our favor. We had the ceremony in the park anyway - the park Rangers didn't seem to care - and nobody was in the park. That made for some amazing pictures and a cool story. I can't wait to tell my kids mom and dad snuck into Yosemite to get married! 

Ray Dalio on YouTube – A Great PR Move

By Zach Kouwe

Ray Dalio, founder of the largest hedge fund in the world, the $150 billion Bridgewater Associates, has decided it’s time to really come out of the shadows and begin sharing his pearls of economic wisdom. Mr. Dalio, who has been called a “hedge fund cult leader” and “the world’s richest and strangest hedge fund,” has slowly been engaging with the media over the last few years, most likely to combat and explain his unusual management style.  But he never looked that comfortable providing a 30-second answer to a TV reporter’s questions about his outlook for the markets.

Now, instead of dealing directly with the media to demystify his theories on the economy, he’s taken his message directly to the people through YouTube. (As of this writing his video already had over 350,000 views.)

Mr. Dalio explained his move to YouTube to the New York Times:

“While I kept it confidential until recently, I now want to share it because I believe that it could be very helpful in reducing big economic blunders, if it was more broadly understood,” he wrote in an e-mail. He explained that, “I believe that most influential decision makers and most people cause a lot of needless economic suffering because they are missing the fundamentals.”

There’s no doubt Mr. Dalio wants to influence policymakers, regulators and academics. But another benefit of sharing his message on YouTube is that it humanizes him a bit and shows the world he’s a serious and transparent thinker – not just the billionaire leader of some hedge fund cult.

This is great PR for Bridgewater – it will help the firm recruit the best and the brightest thinkers from around the world and will likely attract investors as people from Asia to Africa learn about Mr. Dalio’s successful strategies and theories on the economy. (We wouldn’t be surprised if Bridgewater decides to open its strategies to retail investors at some point.)

Just a few years ago, you would never think one of the world’s best hedge fund managers would be appearing on YouTube. Most managers over 50 think YouTube is a service for funny videos or music. They’ve never thought about it as a way to actually reach the public, express their views and build their brands. But reaching out directly to the public and bypassing the media filter, even if the media does pick up on it later, is sometimes the most effective way to get your message out. Big and small asset managers should pay attention.

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

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.

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