How to Convince an Investor You’re the Best Choice

So you have an investor who may or may not be interested in investing in a hedge fund. Now what?

Though not a requirement, hopefully, your investor has demonstrated his interest in you, whether through signing up on your website or calling you to request more information. It’s best if you’re not trying to open a “cold” lead, though you still can send a direct mail package to a cold list of your target demographic. Nevertheless, the advice below applies to either case.

Differentiate Your Hedge Fund

Most hedge funds contact investors one of two ways:

1. Annoying cold calls during the workday.
2. Sending marketing materials to the investor’s office.

You, in contrast, will avoid these routes, as they do little to generate genuine interest in your hedge fund. Instead, you send value.

What counts as value? In short, education. Instead of marketing materials bragging about your fund, you will send a package of educational material. This material should be carefully crafted to both educate the investor and lead him to a clear investing perspective. For example, if your hedge fund is focused on emerging markets, your marketing materials should speak of the potential of the emerging markets. At the same time, your materials should make it clear that investing in these emerging markets properly is an activity that requires years of experience and specialization, thereby implying that standard investment methods will be inferior to hedge funds – without actually stating so explicitly!

What Your Hedge Fund’s Direct Marketing Package Should Contain

Your hedge fund marketing package should have one or more of the items below:

1. A book on how to choose an alternative investment vehicle. E.g., “How to Choose a Hedge Fund.”
2. An interview of someone from your hedge fund on DVD or CD.
3. Past articles written by your hedge fund or staff within.
4. Past newsletters from your hedge fund.
5. A book on the industry in which you specialize. E.g., “Investing in Emerging Markets.”
6. A DVD of someone from your hedge fund speaking at a conference.
7. Investment advice and stock tips.

Sound time-consuming and expensive? Good. This only means that you’re providing something that other hedge funds are not providing. The time barrier to creating these materials stops most hedge funds from even considering these options. The extra shipping costs involved in sending packages of books and DVDs instead of mere pamphlets will shut the idea down for most marketing managers. But if you spend the time and money in getting such a package to your investor, you’ve already differentiated yourself, even if your hedge fund is fundamentally the same as your competitors. Even if your investors see hedge funds as a commodity, you’re going to win based on marketing alone.

Is it overkill? Won’t prospects ignore most of what you send? The answers are no and yes, respectively.

Prospects will ignore some or most of your marketing materials. That’s why you’re including different forms of media. Some investors prefer to listen to interviews. Others like reading. Still others would rather watch a presentation in front of an audience. You include everything to hit all preferences. Should you only include a book, investors who “don’t have time to read it” are lost. Should you only include audio, investors who don’t make a commute to work might not find an opportunity to listen. Hit all preferences.

What Not to Include

Avoid materials that can be seen as marketing. Remember that your goals are to provide value and educate, not sell. By not selling, you actually sell. That’s the paradox that makes this direct package pay off with a huge ROI. A $20 package can pay off in millions of dollars in investments. While other hedge funds are spending thousands on “pay and pray” advertising campaigns, you’re sending useful information to investors.

Even if your investors don’t act on your information, they are likely putting it on their bookshelves. They could very well pick up your materials in a month and reconnect. They are equally likely to share your materials with others, provided the material truly is educational. To prove a point, a prospect interested in investing in emerging markets might give his skeptical coworker the book you sent, thereby granting you access to prospects you wouldn’t be able to reach via any other means.

But the avoidance of marketing materials that look like marketing materials isn’t a hard-set rule. If you’ve already put together a valuable, educational package, you can consider adding one or two of the following:

1. A collection of testimonials from your fund’s investors.
2. Interesting press releases.
3. A letter urging prospects to contact someone at your fund to set up a risk-free appointment.

Remember to provide value before you even think about marketing to your investors.

And if you think this huge direct mail package isn’t right for your hedge fund, just ask yourself this: How much is an investor worth to you? If he’s not worth the extra hundred bucks you spend on printing books, CDs, and shipping the package, you’re probably in the wrong business.