A manager for one of the world’s largest hedge funds, an old school friend of mine, asked me if I thought that "branding would make sense" for his firm. "Of course!" I answered. Your brand is how people think about your company. Don’t you want to convey the right values and attributes that will resonate with people? Don’t you want your customers, clients, and investors to perceive your firm as you yourself perceive it? It wouldn’t make sense to not think about your branding!
Nowadays just about every industry is at the least a little brand conscious. We have clients in industries ranging from cutting-edge fashion to construction conglomerates, and they are all extremely mindful of how their identity is conveyed and how their image is perceived. The world of alternative investment however, has yet to catch on.
In fact, a quick audit of hedge-fund websites quickly reveals that the opposite of branding seems to be de rigueur. The common aesthetic is that of anti-branding: a static page with a bad logotype and perhaps a brief descriptor. Some of the fancier ones invest a little more in design, offering color (blue) and perhaps even an image (sailboat). Of course, there are exceptions: A few firms, generally the industry leaders, clearly spend a lot of effort on their corporate identity.
I believe all that is going to change. Alternative investment firms, like hedge funds and private-equity firms, are going to have to start thinking about their brands and public perception. The firms that don’t will soon find themselves bypassed by the competition, because consumers flock to brands—regardless of the industry. And ultimately, I believe, branding will be beneficial to the investment industry, their clients, and society at large.
The impetus for these new branding initiatives is the bipartisan passing of the JOBS Act. JOBS is an acronym for Jumpstart Our Business Startups, and the legislation is intended to stimulate the funding of new ventures. Among several other measures taken to relax financial regulations, hedge funds will now be able to market themselves to accredited investors. Suddenly, an industry worth trillions of dollars is now permitted to start advertising and engage in "general solicitation."
I don’t think that we’ll see an advertising boom resulting in clever, ironic hedge-fund commercials during "American Idol." After all, we’re talking about a sophisticated financial product aimed at a sophisticated type of investor, generally those with $25 million in personal assets. So while industry media pundits may debate whether hedge funds will dive head-first into full-on advertising campaigns, or remain quiet, anonymous, and drab, I think the first thing that we’ll see is the emergence of careful branding strategies.
Whether markets are efficient is debatable. But we do know that the hypothesis rests on the availability of information. However, in an accelerated financial world with intense competition, it is not enough that information be available; it must also be accessible. So if a hedge fund is clearly defined, visible, and consistent in its messaging, it will have an advantage merely by being seen and remembered. This means that hedge funds should be readily accessible online, with websites that actually contain real information. And if a firm is managing several funds, it should treat each fund as a branded offering, complete with its own messaging platform and visual identity. It is a simple matter of brand architecture.
The argument against differentiation and visibility is that the average hedge-fund client doesn’t need to "be sold." Furthermore, given the public’s generally low opinion of the financial sector, many firms will prefer to remain on the dusky edges of the marketplace. This may prove to be a fatal strategy, as the competition starts hatching fresh brand initiatives. Also, with public institutional investors demanding more influence and transparency, the smartest way forward is to grab the bull (bear?) by the horns, take charge of the messaging, and publicly state who you are, what you do, and why you are great at it.
Adding to these external pressures, we are also seeing a change in the target demographic. The under-45 category doesn’t respond to old-school stealth branding. They value readily available information and are sensitive to how it’s presented. In fact, that’s how a lot of them have made their fortunes to begin with.
The benefits of branding to the alternative investment industry are obvious: With consistent messaging, firms can generate more demand, increase name recognition, recruit quality talent, and assume a leadership position and voice in the industry. As for us marketers, it gives us a whole new frontier to explore!