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.
