Email. How did we ever live without it? Quite well for thousands of years, thank you, but few of us in the workplace today can remember a time when it wasn’t our principal means of correspondence.

It does seem to have legs. Back in the 1970s and ’80s, government, military and university researchers were able to send messages from green screen to green screen by typing text on the command line. By the mid-1990s, nobody who had any kind of public-facing job could live without email. The fax machine came and went; chat rooms are on the long way out; and video calling remains an occasional — and often unwelcome —  conversation platform.

And, although social media as a whole might be eclipsing email for many purposes, no one social media milieu has been able to establish dominance and maintain it for more than a handful of years. But email keeps trudging along as the go-to communication platform in the workplace, particularly for small business — which means particularly for those who are starting a hedge fund.

Its purposes are many and invaluable, according to London-based market intelligence firm ProFundCom: lead generation, prospect management,  capital introduction,  investor relations, sales management. But whatever you use it for in your mix of hedge fund marketing tactics, there are at least eight rules that must be followed.

  1. Don’t use email for first contact. “You can buy lists, but the most effective way to reach people is through networking and interaction,” says Mary Jo Gracin, New York-based president of Fund Edge Consulting, a marketing advisor specializing in the alternative investment industry. She recommends attending conferences, seminars and other business card trading posts because the hedge fund field “is still a handshake, face-to-face industry.”
  2. Understand email is both time-sensitive and permanent. “It is immediate,” Gracin says, but still, “People can read the email when they have time. … It doesn’t disappear.” These are the reasons why email hasn’t been supplanted by the broader array of social media, she says, as well as the orderliness of email record keeping for compliance reasons.
  3. Keep it simple and avoid attachments. Gracin recommends using plain text and no graphics in hedge fund marketing emails. And be aware that the buy-siders’ spam filters are likely to block any email with an attachment over a certain — but unknown to you — size. It’s better, she says, to host the file you want to share behind your own firewall, then send a link with a password in the email. Incidentally, that firewall is important for security reasons. It’s not enough to just hang the file at some free site in the cloud.
  4. Be yourself. Literally. Gracin advises that, if your name is Jane Smith and you work at Dolla-Holla Investments, your email should land in your prospect’s inbox as jane.smith@dolla-holla.com, not as info@ or sales@. The personal touch always trumps the generic.
  5. No selfies, no pictures of your dinner. Maybe it goes without saying, but some professional distance between hedge fund managers and their clientele is a good thing. Yes, keep it cordial. Yes, you’re likely to go golfing together, have a couple drinks now and then, meet each others’ spouses. But there’s a purpose for email and there’s a purpose for Instagram, and you need to know the difference and practice it. “Email should be focused on the client. It should inform. … It should be clear and concise,” Gracin says. “No one wants to hear about what you’re doing all the time.”
  6. Your name is on the line. “Fifty-two percent of all hedge fund failures are due to fraud,” Gracin says, apparently citing a 2006 Journal of Alternative Investments study. A follow-up Congressional Research Service study suggests that’s an overstatement. But even so, it is at least one of the leading causes of hedge funds going under. Be honest and forthright in your email and other communications, and it won’t be yours.
  7. The JOBS Act has nothing to do with it. Recent moves in Washington enables small funds willing to jump through a couple more hoops to cast a wider blast-email net when it comes to direct solicitation. Even so, the pool of qualified investors whom hedge fund marketers can approach remains the same. “Your message is not going to change,” Gracin says. “You still need to be truthful, no matter what.”
  8. Host your own email for now. If you’re just starting out, Gracin advises that you host your own email. It’s less likely to get caught in spam folders. Don’t go with an email service provider until your business has scaled up to the point where you simply have to.

If you’re looking for a common theme in all this, it all boils down to this overriding imperative: Don’t write anything that you don’t want to read. And if you do, don’t put it in an email and click “Send.”

{ 0 comments }

In its January 21st, 2014 update, the IMF hinted at the specter of deflation. The United States has only had two experiences with a deflationary economy; the first from 1870 to 1890 and the second in the 1930’s—in both cases, beyond the living memory of most Americans.

Much of our 1930’s our experience with deflation ran concurrent with the Great Depression and as a result, many associate deflation with economic depression. However, this is not necessarily accurate. The two decades of the Great Sag, as the 1870 to 1890 deflationary period is known, was marked by fairly robust growth as the United States segued into the industrial revolution.

A more recent example is the Japanese economy, which has seen deflation since the early 1990’s, although the Japanese economy is categorically not in depression.

How Will Hedge Fund Managers React?

Conventional wisdom suggests that equities, real estate and gold are questionable investments in a deflationary economy.

As readers of our March, 2013 article will recall, several prominent hedge funds have recently made substantial investments in real estate. Among these are Blackstone Group LP and Paulson & Co., Inc. to name but two. Additionally, a significant majority of hedge funds pursue an equity investing strategy and most hold investments in precious metals.

Given the significant numbers of hedge funds invested in equities, real estate, gold or more likely, a combination of all three, one has to ask how seriously the threat of a deflationary trend is viewed by hedge funds exposed to real estate and/or equity investments, and what, if any adjustments, managers are making to their portfolios.

Scant Evidence

While evidence is scant that hedge fund managers are making any sweeping adjustments, there are indications that a few are giving the possibility of deflation some credibility.

Anthony Scaramucci, founder and co-managing partner of SkyBridge Capital, in an August, 2013 CNBC interview was explaining why hedge funds were divesting themselves of gold. He offered four reasons, the most relevant in this statement:

“What’s happening now is the specter of deflation is way, way, way more fearful to the central banking community than inflation, and gold typically works when there’s a devaluation of currency, or inflation.”

Additional evidence that hedge funds are taking the prospect of deflation seriously becomes evident in this Wall Street Journal article dating back to August of 2010 which quotes Bill Gross, co-founder of Pacific Investment Management Company, LLC, as follows:

“Deflation isn’t just a topic of intellectual curiosity, it’s [sic] happening,” In a recent Bloomberg TV interview, he reiterated his concerns. Of course, Mr. Gross’ fervent belief in a deflationary event may be colored by the fact that his firm heavily invests in bonds, long regarded as a relatively safe haven in deflationary cycles.

Consider the recent statement from Saxo Bank’s chief economist, Steen Jakobsen, who suggests that while Europe faces a 50:50 prospect of deflation, the United States’ risk of deflation is nearer 25:75 against a deflationary trend.

While the IMF is not revered for the accuracy of its economic forecasts, the prospect of deflation is certainly one worthy of consideration. Many of the warnings signs are present—interest rates approaching zero, unusually low inflation rates, high levels of unemployment and declines in base metal prices are all classic indicators of deflation.

If hedge fund managers are taking the risk of deflation seriously, it is likely that strong evidence of shifting investment strategies will surface. At the moment, persuasive evidence does not exist.

{ Comments on this entry are closed }

Drumming Up Business With a Different Drummer

March 18, 2014

Counting the number of hedge funds in the world is like trying to follow the Major League pitching career of Octavio Dotel. It’s incredibly complicated and subject to sudden change. The former Met-Astro-A-Yank-Royal-Brave-Northsider-Buc-Dodger-Rockie-Jay-Card-Tiger free agent might be running out of teams, though, but the tally of hedge funds just keeps growing. At Hedge Fund Research’s last [...]

read more…

Preparing for Your First Cap Intro

March 4, 2014

What if you throw a hedge fund party and nobody comes? Maybe you’ve found a niche strategy nobody has thought of yet. Maybe you’ve built a financial model that looks like the Goldman Sachs’s income statement. You’ve got commitments from reputable third parties to handle all your back-office affairs. You lack only one thing: experience. Before [...]

read more…

Liquidity – The Small Hedge Fund’s Best Value Proposition

February 18, 2014

A hedge fund manager’s model needs to do two very important things besides its principal purpose of finding ways of growing investments in excess of market conditions. It also has to find a way of rewarding the sharp operator who developed it and marketed it. And it also has to have a mechanism for returning [...]

read more…

Perfect Pitch – How Not to Be Tone-Deaf to Investors

February 4, 2014

If you’re managing a hedge fund, it goes without saying that you’re off-the-scale smart when it comes to the math underlying investment analysis. You probably have a model that can pick winners, winnow out the losers and provide a return on capital that’s the envy of all your peers. What you need to understand is [...]

read more…

2014 Hedge Fund Compensation Report Released

January 14, 2014

The latest report on hedge fund compensation benchmarks shows these professionals received increases in both base and bonus amounts. The average compensation was up 16 percent in 2013 and totaled $330,000. Bonuses were the primary force for the increases, while base compensation increased only slightly this year. Base pay increased by 4 percent and bonus [...]

read more…

Hedge Funds in 2013 – The Year in Review

January 7, 2014

The year gone by: One of record-breaking index growth, an explosion in the growth of the number of alternative investment firms, strategies that stretched the bounds of human imagination, and the establishment of long-delayed and much-scrutinized regulations. Whether it was a good year or a bad one for the hedge fund industry is a matter [...]

read more…

2013 Hedge Fund Compensation Survey

October 20, 2013

Benchmark Compensation has opened its seventh annual Hedge Fund Compensation Survey. Each year, the Hedge Fund Compensation Survey provides a benchmark for compensation practices by collecting data directly from the professionals who work in the industry. The purpose of the annual Hedge Fund Compensation Survey is to create an accurate and affordable report that allows [...]

read more…

An Element of Hypocrisy

October 1, 2013

SAC Capital Advisers, LLC has been embroiled in legal battles with the SEC for more than a decade, most revolving around the issue of insider trading. When the practice of insider trading among members of the Senate and Congress (including their staffers) received heavy media scrutiny in November, 2011; the Stop Trading on Congressional Knowledge [...]

read more…