Hedge fund managers testing the social media waters

Lifted advertising ban and pressure from liquid alts drive secretive managers into the open

Jan 22, 2015 @ 12:45 pm

By Jeff Benjamin

+ Zoom

Hedge funds, long known for restricting investor access to complex and secretive strategies, are ever so slowly coming out of the shadows and embracing social media.

It's still a far cry from your favorite celebrities tweeting out what they had for breakfast, but it shows that the alternative investing universe is starting to tap into the Internet for basic marketing and communication purposes.

“If you go to hedge fund conferences now, you'll see people tweeting out the information, which is something that would have been unheard of a few years ago,” said Thomas Walek, president of capital markets and financial services at Peppercomm, a public relations and market research firm.

According to a study released earlier this week from Peppercomm, 91% of the 100 largest global hedge funds now have websites, a concept that was virtually unheard of just a few years ago.

In terms of proactive social media activity, the study found that 66% of hedge funds have LinkedIn accounts, with an average of 2,300 online connections.

Twitter, which is considered to be more social than LinkedIn, has been embraced by about 10% of hedge funds, the study found. Those hedge funds average 15,000 followers each.

The primary tipping point for the hedge fund industry, according to Mr. Walek, has been the JOBS Act, which went into effect in September 2013 and lifted many of the marketing and advertising restrictions on private investment products.

“People generally want more transparency and you want people to invest in you for more than just your most recent performance numbers,” he said.

While the JOBS Act might have created the opportunity, Mr. Walek believes the explosive growth of retail-oriented products using alternative strategiesis a major factor in convincing hedge funds to embrace some kind of marketing approach and online presence.

“Hedge funds are becoming more mainstream and they're going into different markets and they're competing with liquid alternatives offered by traditional asset management firms,” he said. “It all adds up to marketing being more important.”

Of course, if the hedge fund industry is not adapting at the same pace as other areas of the financial services industry, it might have something to do with the examples of regulatory beat-downs that the industry has endured in the past.

Phil Goldstein, hedge fund manager and principal of Bulldog Investors, learned the hard way a few years ago when he responded, via his website, to some basic questions about his strategy to a prospective investor.

This simple online interaction was deemed by the state of Massachusetts to be in violation of the 70-year-old ban on hedge fund advertising but the order was vacated when the JOBS Act took effect.

Mr. Goldstein said the problem “cost me seven years of my life and $25,000 in legal and court costs.” Today, he maintains a very basic web page that simply includes his email address and phone number.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Women's retirement needs and the opportunity they present for advisers

Assistant managing editor Lorie Konish speaks with contributing editor Mary Beth Franklin about the unique planning considerations for women as they prepare for income needs later in life.

Latest news & opinion

Will Jeffrey Gundlach's Trump-like approach on Twitter work in financial services?

The DoubleLine CEO's attacks on Wall Street Journal reporters is igniting a discussion on what's fair game on social media.

Fidelity wins arb case against wine mogul but earns a rebuke from Finra

In the case of investor Peter Deutsch, Fidelity doesn't have to pay any compensation, but regulator said firm put its interests ahead of his.

Plaintiffs win in Tibble vs. Edison 401(k) fee case

After a decade of activity around the lawsuit, including a hearing before the U.S. Supreme Court, judge rules a prudent fiduciary would have invested in institutional shares.

Advisers get more breathing room to make Form ADV changes

RIAs can enter '0' in some new parts of the document before their annual filing next year.

Since banking scandal, Wells Fargo advisers with more than $19.2 billion leave firm

Despite a trying year, the firm has said it will sweeten signing bonuses for veteran advisers.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print