Hedge fund branding is increasing as institutional investors' presence within hedge funds' client bases is forcefully nudging even the most tight-lipped firms to open up and explain what they do.
The Jumpstart Our Business Startups Act of 2012 might have lifted the ban on advertising private funds, but sources said the most important impact so far is the reassurance it provides to hedge fund managers about establishing a brand identity for their firm and investment strategies.
To date, only a few very institutionally focused hedge fund and hedge funds-of-funds companies have deliberately set out to develop a brand presence aimed at clients, prospects and to some extent, the general public.
Industry sources said companies already promoting brand awareness include Aetos Capital Management LLC, BlueMountain Capital Management LLC, Bridgewater Associates LP, Caxton Associates LP and Diversified Global Asset Management Corp.
For branding newcomers, initial steps might include ramping up their Internet presence, tiptoeing into social media, and producing brochures that won't initiate an SEC investigation should an average Joe get hold of one.
The target audience for these communications is the chief investment officer of a large institution.
“Ten or 15 years ago, hedge fund managers were so secretive, they would scarcely open up even to investors in their flagship funds,” said Richard Dukas, president and CEO of Dukas Public Relations Inc., New York, whose clients include Morgan Creek Capital Management LLC.
“But as institutions have become a much more major part of their client base, hedge fund managers have been forced to start communicating,” Mr. Dukas said, adding his PR firm and others have seen a sharp rise in the number of hedge fund companies seeking branding advice.
The “logical progression of institutionalization” is firm and product marketing, said Glenn M. Buggy, a partner based in the New York office of executive recruiter CTPartners LLC.
“Hedge fund managers are focusing for the first time on being able to, and having to, talk about their firms and their culture. Most have never had to deal with it before and it makes many very uncomfortable,” Mr. Buggy said.
Accustomed to acquiring — and being able to afford — the best talent for a given task, hedge fund managers are turning not only to PR firms for branding advice, but also to executive recruiters.
A “primary theme” has involved hedge funds searching not for more standard sales and marketing executives, but instead for investment product specialists, marketing communicators and, for the first time, consultant relations experts, said Matthew Jabinsky, director, asset management and alternatives for executive recruiter Sheffield Haworth Inc., New York.
To date, most of the branding has been done by big funds, Mr. Jabinsky said, those with $10 billion or more under management that he called “the blue-chip, household hedge fund names.”
One such firm is BlueMountain Capital Management, New York, which has been perfecting its branding campaign over the past few years and managed $13.1 billion, all institutional, as of June 30.
“Branding starts with standing for something. You have to decide what you stand for, what value you offer to investors, employees, the broader community,” said Stephen Siderow, founder and president of BlueMountain Capital Management.
“BlueMountain is about creating an enduring partnership that consistently delivers the performance our investors expect,” Mr. Siderow said, noting every interaction or “proof point” with investors and prospective clients has to deliver that message of the firm's value.
“Institutional investors are very buttoned up and they expect consistency and professionalism in everything. The days of doing things fast and loose are gone,” Mr. Siderow said.
“Branding is about solidifying a lasting memory. And it's all about building a lasting relationship,” said M. Sa'ad Shah, managing director at Diversified Global Asset Management Corp., Toronto, which managed $6.7 billion in customized hedge funds of funds as of Oct. 31, all for institutional investors.
To build and reinforce the DGAM brand, clients and prospects are offered an array of communication from client conferences, videos about the firm and its culture, intimate dinners with well-known investors, and one-on-one interviews with investment managers.
“One of the most important things we can do is to go in to see a client or a prospect with a gift of knowledge, solutions or fresh ideas. Being able to do this shows that DGAM is a thought leader and capable of helping the client across the entire portfolio,” Mr. Shah said.
Black River Asset Management LLC, Hopkins, Minn., just hired Michelle Tressel as its first director of marketing, communications and client solutions, to fill “a classic branding role,” said James Gruver, global head of investor relations. Ms. Tressel was director of marketing at crosstown hedge fund rival The Clifton Group Investment Management Co.
Not well known
Black River managed $6.5 billion in hedge funds and private equity as of May 31. Despite its lineage — it is the investment management arm of Cargill Inc., Minneapolis — it isn't well known yet within the institutional investment world, Mr. Gruver said.
“Branding is really important, and we will go through the exercise of deciding how we should describe ourselves, what our capabilities are,” Mr. Gruver said.
One of the first areas to get the branding treatment will be the firm's website. “The web is our new front door and at the moment, our site is dark,” Mr. Gruver said, referring to the retro black theme the site features.
Big institutional hedge fund managers don't have a lock on the branding market, however.
Comparatively tiny at $100 million managed in a single low-volatility hedge fund for family offices, Darchuk Stewart Capital Advisors LLC, Monterey, Calif., recently rebranded and became Topturn Capital LLC.
Dan Darchuk, co-founder and managing director, said the firm's eponymous name never really conveyed the company culture and its investment approach. Mr. Darchuk came up with Topturn after poring over many not-quite-right names with Greg Stewart, co-founder and CIO.
“You're an old southern California surf dude. Come up with a surfing name,” Mr. Stewart challenged Mr. Darchuk.
Mr. Darchuk thought of a topturn, which in surfing parlance is a sharp turn off the top of a wave that helps the surfer regain the momentum of moving water and elongate the ride. That kind of efficient nimbleness characterizes the hedge fund's strategy perfectly, he said.
To further reinforce the strong, agile surfing branding, Topturn hired veteran surfer Joe Curren to be the firm's brand representative and featured him in a video.
The video is below.
This article originally appeared in the December 9, 2013 print issue as, "Firms seek to set themselves apart".