The long-awaited ruling on the Jumpstart Our Business Startups Act has come to pass. The Securities and Exchange Commission July 10 voted 4-1 to end a decades-old ban on “general solicitation” by many private issuers, including hedge funds, private equity funds and startup companies.
In short, this means private issuers will soon be able to publicly discuss, advertise and publicize investment opportunities and performance. The change is now up for a 60-day period for public comments before the rule is finalized.
So will we be seeing hedge fund or private equity fund ads on the Super Bowl? Unlikely. But we will see very big changes, and the funds that take notice and plan for change will win, and the others will be left behind.
Here are some predictions now that the ruling has passed:
nThe brand bar will be raised. Marketing will become more sophisticated across the industry and brand development will become a discussion in the board room. All funds, large and small, will be more focused on their corporate identities, brand positioning, messaging and marketing execution.
nOffensive public relations activity will increase. Speaking to journalists about your fund's performance becomes fair game now. Public relations already has been the favored marketing and reputation management tool for hedge funds, but it's mostly been a defensive activity — “Just keep me out of the press.” Since public relations firms are already in place at most larger funds — more than $1 billion in assets under management — this will be an obvious hotbed of change.
nHedge fund websites will change dramatically. Fund sites traditionally have been uninviting and scared away investors. They didn't showcase and humanize their managers, they didn't tell a fund's story and certainly didn't post any numbers. Tomorrow's sites will showcase the fund, its brand and its managers. Disclaimers will remain, of course, but we will see websites become more modern and inviting.
nSophisticated marketers will take market share. With mutual funds buying hedge funds and hedge funds of funds lately — think Franklin Templeton Investments' purchase of K2 — you now have sophisticated marketers and chief marketing officers with alternative products to sell. The Franklins and BlackRocks of the world know how to market and have deep advertising and marketing budgets. They will run circles around the others. And big funds will hire, if they haven't already, sophisticated marketing and communications talent inside. Citadel Advisors LLC, D.E. Shaw & Co., and Elliott Management all have chief communications officers or chief marketing officers already. Others willTempleton Investments' purchase of K2 — you now have sophisticated marketers and chief marketing officers with alternative products to sell. The Franklins and BlackRocks of the world know how to market and have deep advertising and marketing budgets. They will run circles around the others. And big funds will hire, if they haven't already, sophisticated marketing and communications talent inside. Citadel Advisors LLC, D.E. Shaw & Co., and Elliott Management all have chief communications officers or chief marketing officers already. Others will follow.
nSmall funds will lead the way. Smaller funds that need to use every possible angle in fundraising are predicted to be first to experiment with and benefit from “new” marketing channels. But again, their investment in marketing will raise the bar for the whole sector.
If you dismiss the impact of the JOBS Act, you're making a big mistake. The JOBS Act will raise the branding bar across the board and all funds — big and small — and managers should be ready to embrace the opportunity.
Jennifer Prosek is CEO of Prosek Partners LLC, a New York-based financial communications firm.