How You Can Segment Hedge Fund Investors

As a hedge fund, you will meet many different types of hedge fund investors. When you first begin your fund, you’ll most likely be targeting individual investors, not large institutions. But instead of lumping all of your first investors under the category “individual investors,” you will benefit from categorizing them into clear groups, differentiated by income level. What follows is an effective paradigm for segmenting your prospects:

• The Upward Movers: Household incomes of $100,000 to $150,000
• The Middle Class: Household incomes of $150,000 to $250,000
• The First-Class Flyer: Household incomes of $250,000 to $1 million
• The Millionaire Next Door: Household incomes of $1 million and above

Differences between the Different Hedge Fund Investors

1. The Upward Movers: As the fastest growing segment of hedge fund investors, the Upward Mover should not be ignored. This segment contains a diverse set of ages, races and educational backgrounds. You’ve got single moms and dads who work in highly skilled jobs (think actuaries and family physicians). You’ve got small business owners. You’ve got blue-collar working families. These are people who are solidifying their positions as “affluent” and often moving into the higher levels of wealth through business ventures and investments (which is where you come involved).
2. The Middle Class: When you observe lifestyle alone, this group resembles the Upward Movers in many respects. However, one huge difference is in how they invest. The Middle Class often owns more than one residence. With real estate, investments and other assets factored in, their net worth often exceeds $1 million. In many ways, today’s middle class is yesterday’s upper class. Unlike the Upward Movers, however, the middle class has a much more homogenous way of thinking about investments, which is one reason they are where they are.
3. The First-Class Flyer: This group is the top 10% of U.S. households and the top 1% of households world-wide. These are the multimillionaires who no longer need to rely on income to maintain their lifestyles yet still continue working. In fact, according to the Federal Reserve, this group makes more than 1/3 of all the income in the United States. They also own over 2/3 of all the net worth, making them a huge target for hedge funds. But what’s most important for you to know is that this group that owns 90% of all publicly traded funds.
4. The Millionaire Next Door: Technically, the above to groups are also millionaires living in communities, but I reserve this term to describes those making at least $1 million in income per year. These are the guys who no longer see commodities. They spend over $1 million per year on travel, trinkets, furniture, restaurants and new residences. Whatever they want to buy, they can buy. Their spending power is technically without restrictions. These guys stay rich through both successful businesses and investing.

When designing your marketing campaigns, your best bet is to segment your campaigns to appeal to each of these groups individually, as they each emphasize different aspects of investing.