How to Separate Your Hedge Fund from the Pack

 

 

If all the hedge funds in the world were reading this, only one will actually be able to say it will win in the performance category. If you aren’t that hedge fund, you cannot rely on performance alone to win over investors. After all, investors will have at least one better choice if they only care about performance.

 

The sad thing is that, just like in any other business, hedge funds fail to differentiate themselves. In fact, they take this non-differentiation to the point of looking at other hedge funds as examples of what their own hedge fund should resemble. This “industry incest,” if you will, just makes investors see all hedge funds in the same light, which makes you a commodity. Not good.

 

Think about the last time you bought sports shoes. Unless you’re a brand advocate, your shopping process was pretty much the same as someone across the country from you: Go into the nearest shoe store, look around, evaluate the prices, and make the purchase. My point isn’t that hedge funds resemble shoes but that they resemble the shoe stores themselves. A shoe store in Seattle is going to be essentially the same as a shoe store in Orlando. You don’t have a preference – you just want shoes – so you take the nearest shop. You don’t want your investors to “take the nearest shop,” because the nearest shop in the hedge fund industry is the one with the best performance and lowest performance and management rates.

 

If you are starting a hedge fund or rebranding your current hedge fund, you need to find a way to differentiate your hedge fund from the thousands of others on the market. You can often come up with an obvious way of differentiating yourself by examining your fund manager’s background, skills, and experience. Let’s say that your fund manager used to be a professor of management. He would therefore have skills that others don’t in evaluating companies with large amounts of employees or companies that highly rely on their human resources, companies such as Microsoft and Google. From here, you could brand your fund as method of investing in people, not the walls and rules that surround them. In this way, you could easily attract believers in the idea that it is the human resources of a company that determine its fate. Indeed, consider the growth of Google, Exxon Mobil, and Microsoft in comparison to companies that are more “industrial,” such as Proctor and Gamble. This is just an example, of course, but it can show you how easy it is to come up with a branding idea, from which you can build much of your marketing and target demographics.

 

When you brand yourself in this way, you show investors how you can fulfill a unique need in the market: a hedge fund that focuses on how a company works, instead of just looking at numbers (which is how most fundamental analysis works). Even if you don’t believe that this method of investment is the best, dedicating a small part of your portfolio to investments in line with this branding is enough to allow you to say it. Just like how Minute Maid Orange Juice is not real juice.

 

You also make your hedge fund more appealing to a general audience by focusing on a specific audience, as ironic as that might sound. But that’s also something you want, of course. By branding yourself in this way, now you have the ability to start a conversation about human resources, employee welfare, companies with interesting employee management techniques, and so on, and lead that conversion to the topic of your hedge fund.

 

For example, you can now write a full-page ad (that is written as an article) in a financial publication, the article discussing how companies with strong human management techniques tend to stocks that overperform. Near the end of the article, you can discuss how your hedge fund takes advantage of this fact, whereas no other hedge funds do. Finally, you can give them a means of contacting you for more information.

 

How to Find Areas in which to Differentiate

Follow these steps to acquire a set of areas that you can use to rebrand your hedge fund or begin branding your hedge fund startup.

 

1. Make a list of the investment strategies that you suspect differ from those of other hedge funds. Do you focus on a specific country? Or geographic area? Do you avoid unlimited risk by not selling straddles and naked calls?
2. Make a list of what’s special about your fund manager. Does he have a background you could leverage, such as having lived and worked overseas, thereby allowing you to call him an expert on overseas economies? Is his investment mindset unique or controversial?
3. Compare your fees to the rest of the industry. Both lower and higher fees work. For the former, you can attract investors who want to squeeze the most out of their investments. The latter can be leveraged, and you can present your hedge fund as a “premium product,” to match your higher fees.

 

There are more ways to differentiate your hedge fund. A lot of this differentiate relies on creativity. It’s best that you brainstorm with your hedge fund manager. After all, your differentiation is most likely going to lead to a slightly different portfolio strategy. Thus, you can say that part of the marketing is in the product itself.

 

Don’t expect to get this differentiation correct the first time. You might grab onto the right idea at first, but will likely need time to refine and test alterations in how you present your hedge fund in light of other hedge funds.

 

Overall, your main goal is to tell investors that your hedge fund is special in some sort of way. If you can do this, it’s no longer a game about referrals (“Hey, Bob, you should totally invest in this hedge fund my friend runs”), age of the fund, or budget hunting. By adjusting the playing field, you ultimately short circuit the standard choice procedure investors (and all consumers for that matter) make when choosing a product.

 

Think for second why you’re reading this article as opposed to any other marketing article? If I’ve done my job right, you’re reading this because I’ve differentiated myself from all the other marketers and marketing companies by teaching hedge-fund specific marketing strategies instead of general marketing strategies. The average marketer wants as many readers and clients as possible, so he chooses not to differentiate himself. However, when hedge fund needs marketing, who are they going to trust more? The industry-specific marketer or the general marketer?

 

And so it is so for hedge funds. An investor wants a hedge fund with a clear purpose. With a clear benefit.

 

One last tip: If you’re stuck on finding your area of differentiation, look at the hedge funds with which you hope to compete. Look at how they differentiate themselves, and find what’s missing. Use that missing aspect as your starting point for differentiation.