strategy hedge pr
industry
Looking Over the Hedge
Time was, you had more chance of getting into a convent at shower time than seeing the inner workings of a hedge fund. Peregrine’s Anthony Payne is changing all that. By Jon Hawkins
Anthony Payne set up specialist financial PR firm Peregrine Communications in 2003, and clients now include Brevan Howard and Dexion Absolute. The firm handles every major listed hedge fund on the London Stock Exchange, and all FTSE 250 hedge funds. Peregrine won HFMWeek’s Best Specialist PR Firm award in 2009 and 2010, and was named Hedge Fund Journal’s Best Specialist Public Relations Firm in 2007. Is PR something hedge funds are embracing reluctantly, or do they see it as a necessity? Hedge funds are looking at different types of distribution. The introduction of closedend products like BH Macro, BH Global and Dexion’s listed products was the first time hedge funds really opened themselves up to the retail investor, and if you’re going to have a listed product like that, which is listed on the London Stock Exchange and is a FTSE 250 company, you need to have all the PR that goes with it. But I think there has always been a reluctance, because hedge funds come from a clubby, private world and they’re now being pulled into the mainstream. They really have no choice but to go in that direction because there’s so much interest in what they’re doing, but if they want to play they will have to become bigger, more organised, more commercial, more transparent and more willing to communicate. So reluctant, yes, but the world has changed around them. And what about UCITS? Once you’ve launched UCITS, you need to have a retail brand, and with the changes happening in regulation for IFAs this trend is going to increase. IFAs and intermediaries will increasingly want to look at hedge funds as well. How much of a challenge is the forthcoming EU directive on hedge
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funds for you and your clients? It’s a real challenge because the regulation is not based on any kind of logic, so it’s difficult to anticipate precisely what to do. It will probably just lead to a lot of annoying changes – re-domiciling in Dublin or Luxembourg, that sort of thing. Things will go on but it will mean far greater costs, and therefore the products clients can offer will have greater costs attached and returns will be compromised. It’s just silly regulation that will pass on a lot of cost to investors without any additional protection. In fact, the protection that you need is already there – when you buy BH Macro or Dexion Absolute you have all the UKLA rules, independent boards, and if you’re investing directly in the fund then you have huge amounts of information available to you already. So it’s a challenge, yes. The hedge fund industry was certainly a little bit arrogant about its communication but that shift has already happened. There is very little tolerance for a lack of transparency anymore; Madoff and the credit crunch have done away with that. Could things like the EU directive have been avoided had funds communicated better in the last five years or so? There was certainly a requirement to communicate, and I think the hedge fund industry has been a little late in telling its
“ Hedge funds come
from a clubby, private world and they’re now being pulled into the mainstream. They really have no choice but to go in that direction… ”
story because it doesn’t think of itself as an industry. Those in the industry thought of themselves as people who were doing what they should be doing, which is making money or protecting assets for their clients, and didn’t really see themselves as an industry in the way that the private equity industry did. There is a massive misunderstanding of what hedge funds do but, on the other hand, there is a strong recognition among investors of what hedge funds can provide – risk-adjusted and non-correlated returns in particular. There is no question that a fundamental shift is taking place in the world of investment, but there is the misconception – not within the investment world but in the political world – that hedge funds are somehow to blame for everything that goes wrong. But this, presumably, is good for you and your business… The reality is that hedge funds are good, but the perception is that hedge funds are bad, so one would think this is a fantastic opportunity for our business. The other thing one would think is that because hedge funds need to build brands and because hedge funds need to distribute to a much wider audience then that would also drive our business. And because hedge funds are limited in terms of advertising they don’t have other avenues to communicate either, so that should benefit our business. And does it? It seems to, because we’ve doubled in size in the last year. Crisis management is probably the sexier side of what you do – how much more of that kind of business have you been seeing in the last couple of years? I wouldn’t say that we’ve seen lots of crisis management going on – it’s more about making sure that hedge funds are
getting the correct information into the marketplace. We try to stop mistakes and kill stories with facts. Is that crisis management? Not really, but our clients have had lots of challenges – continuation votes, big discounts and, of course, there are continuing attacks against hedge funds. So what we have tried to do is get more real, solid information into the market through big interviews. What should hedge funds be doing to prepare themselves for attacks from politicians and the media? It’s absolutely critical, given that hedge funds have a very bad reputation anyway, that they are organised. Even if a hedge fund is not going to be proactive, it needs to have a specialist on board who is monitoring the media and is therefore ready to respond or try to stop things from developing. We have clients for whom we monitor constantly, and we use ex-GCHQ people with incredible search technology so we can find anything that’s written about our clients. Has social media made your job harder or easier? Social media has made it more difficult in that the threats are greater – firms need to upgrade their monitoring because they need to be able to respond quickly. A story in a blog can jump into a trade magazine and then into the broadsheets very easily. Are enough hedge funds using this level of monitoring? No, not nearly enough, and this is where hedge funds really need to put in some basic communications management – they need to have a specialist like us who’s working with them to prepare them for a story that might suddenly take off. They can do this through monitoring, but also by having all the background information and carrying out media training. Any hedge fund manager should have hedged their communication risk by putting that in place. Why do UK hedge fund managers appear to be less prominent than their US counterparts in the media? As far as the general perception of hedge funds in the broader public is concerned,
it’s going to take a while for that perception to be managed, and it’s going to have to be managed by the intermediaries. At the moment the whole intermediary population is orientated around old-style investing: buy equities, sit on them, they go up. That model is busted – it simply hasn’t delivered – so investors are now putting a lot of pressure on consultants and intermediaries to bring them better investments, such as hedge funds, private equity and other alternatives. It’s this group in the middle that needs to change first. Do we need to convince the general public? I think industry bodies like AIMA should do that… Do you think AIMA is doing enough? I think AIMA has been as good as it can be, and the organisation hasn’t really taken off until recently. When Christen Thomson and Andrew Baker came in things really started to move, but that’s only in the last year or so. AIMA is only just beginning to fire on all cylinders but, yes, more could
“ We have clients for
whom we monitor constantly. We use exGCHQ people with incredible search technology so we can find anything that’s written ”
have been done earlier in the day. Does it help to have public figures who are more willing to defend and talk about hedge funds? Yes, it would be great to have a Warren Buffett-type character, but I think the people that should be telling that particular story are the big investors, and they are not particularly good at defending the industry. Should hedge fund managers be standing up? I think they should certainly be communicating more, but it’s all about balance. Hedge funds could go and talk to the broadsheets about what they do but I’m not sure what they would get back from it, though I do think there is a job to be done in terms of proactive communications within the specialist press. Hedge funds should dedicate more time to educating journalists, and more time educating intermediaries – that’s all about brand building. That brand should be about a new way to invest. They talk about the new politics – well, this is the new investment, because the old way of investing just hasn’t worked. IFAs, intermediaries and private client stockbrokers are simply selling what they’re being paid to sell, and they’re selling it on performance. They’ll pick one fund because it’s performing well right now and they’ll pick another fund next week, but actually it’s about risk-adjusted returns rather than straightforward performance. On the one hand you’ve got hedge funds offering a better product, on the other some talk about the death of hedge funds as the EU directive looms. In five years, where’s the industry going to be? Hedge funds will become a mainstream way of investing without any doubt, because it makes more sense. BH Macro’s Ian Plenderleith, who worked at the Bank of England for 30 years said: “I think our grandchildren will look back on what we are doing with our mainstream savings, our pensions and our core savings and say it’s quite extraordinary that our grandparents used to put their savings into equities and bonds, markets that can fall 40% one year and rise 40% the next, in a long-only, unhedged basis.” The volatility of the FTSE is around 15%: that’s shocking. You’ve got a 15% chance of losing your money, and with ▶
45
hedgefundclub.co.uk
strategy hedge pr
industry
Looking Over the Hedge
Time was, you had more chance of getting into a convent at shower time than seeing the inner workings of a hedge fund. Peregrine’s Anthony Payne is changing all that. By Jon Hawkins
Anthony Payne set up specialist financial PR firm Peregrine Communications in 2003, and clients now include Brevan Howard and Dexion Absolute. The firm handles every major listed hedge fund on the London Stock Exchange, and all FTSE 250 hedge funds. Peregrine won HFMWeek’s Best Specialist PR Firm award in 2009 and 2010, and was named Hedge Fund Journal’s Best Specialist Public Relations Firm in 2007. Is PR something hedge funds are embracing reluctantly, or do they see it as a necessity? Hedge funds are looking at different types of distribution. The introduction of closedend products like BH Macro, BH Global and Dexion’s listed products was the first time hedge funds really opened themselves up to the retail investor, and if you’re going to have a listed product like that, which is listed on the London Stock Exchange and is a FTSE 250 company, you need to have all the PR that goes with it. But I think there has always been a reluctance, because hedge funds come from a clubby, private world and they’re now being pulled into the mainstream. They really have no choice but to go in that direction because there’s so much interest in what they’re doing, but if they want to play they will have to become bigger, more organised, more commercial, more transparent and more willing to communicate. So reluctant, yes, but the world has changed around them. And what about UCITS? Once you’ve launched UCITS, you need to have a retail brand, and with the changes happening in regulation for IFAs this trend is going to increase. IFAs and intermediaries will increasingly want to look at hedge funds as well. How much of a challenge is the forthcoming EU directive on hedge
44
hedgefundclub.co.uk
funds for you and your clients? It’s a real challenge because the regulation is not based on any kind of logic, so it’s difficult to anticipate precisely what to do. It will probably just lead to a lot of annoying changes – re-domiciling in Dublin or Luxembourg, that sort of thing. Things will go on but it will mean far greater costs, and therefore the products clients can offer will have greater costs attached and returns will be compromised. It’s just silly regulation that will pass on a lot of cost to investors without any additional protection. In fact, the protection that you need is already there – when you buy BH Macro or Dexion Absolute you have all the UKLA rules, independent boards, and if you’re investing directly in the fund then you have huge amounts of information available to you already. So it’s a challenge, yes. The hedge fund industry was certainly a little bit arrogant about its communication but that shift has already happened. There is very little tolerance for a lack of transparency anymore; Madoff and the credit crunch have done away with that. Could things like the EU directive have been avoided had funds communicated better in the last five years or so? There was certainly a requirement to communicate, and I think the hedge fund industry has been a little late in telling its
“ Hedge funds come
from a clubby, private world and they’re now being pulled into the mainstream. They really have no choice but to go in that direction… ”
story because it doesn’t think of itself as an industry. Those in the industry thought of themselves as people who were doing what they should be doing, which is making money or protecting assets for their clients, and didn’t really see themselves as an industry in the way that the private equity industry did. There is a massive misunderstanding of what hedge funds do but, on the other hand, there is a strong recognition among investors of what hedge funds can provide – risk-adjusted and non-correlated returns in particular. There is no question that a fundamental shift is taking place in the world of investment, but there is the misconception – not within the investment world but in the political world – that hedge funds are somehow to blame for everything that goes wrong. But this, presumably, is good for you and your business… The reality is that hedge funds are good, but the perception is that hedge funds are bad, so one would think this is a fantastic opportunity for our business. The other thing one would think is that because hedge funds need to build brands and because hedge funds need to distribute to a much wider audience then that would also drive our business. And because hedge funds are limited in terms of advertising they don’t have other avenues to communicate either, so that should benefit our business. And does it? It seems to, because we’ve doubled in size in the last year. Crisis management is probably the sexier side of what you do – how much more of that kind of business have you been seeing in the last couple of years? I wouldn’t say that we’ve seen lots of crisis management going on – it’s more about making sure that hedge funds are
getting the correct information into the marketplace. We try to stop mistakes and kill stories with facts. Is that crisis management? Not really, but our clients have had lots of challenges – continuation votes, big discounts and, of course, there are continuing attacks against hedge funds. So what we have tried to do is get more real, solid information into the market through big interviews. What should hedge funds be doing to prepare themselves for attacks from politicians and the media? It’s absolutely critical, given that hedge funds have a very bad reputation anyway, that they are organised. Even if a hedge fund is not going to be proactive, it needs to have a specialist on board who is monitoring the media and is therefore ready to respond or try to stop things from developing. We have clients for whom we monitor constantly, and we use ex-GCHQ people with incredible search technology so we can find anything that’s written about our clients. Has social media made your job harder or easier? Social media has made it more difficult in that the threats are greater – firms need to upgrade their monitoring because they need to be able to respond quickly. A story in a blog can jump into a trade magazine and then into the broadsheets very easily. Are enough hedge funds using this level of monitoring? No, not nearly enough, and this is where hedge funds really need to put in some basic communications management – they need to have a specialist like us who’s working with them to prepare them for a story that might suddenly take off. They can do this through monitoring, but also by having all the background information and carrying out media training. Any hedge fund manager should have hedged their communication risk by putting that in place. Why do UK hedge fund managers appear to be less prominent than their US counterparts in the media? As far as the general perception of hedge funds in the broader public is concerned,
it’s going to take a while for that perception to be managed, and it’s going to have to be managed by the intermediaries. At the moment the whole intermediary population is orientated around old-style investing: buy equities, sit on them, they go up. That model is busted – it simply hasn’t delivered – so investors are now putting a lot of pressure on consultants and intermediaries to bring them better investments, such as hedge funds, private equity and other alternatives. It’s this group in the middle that needs to change first. Do we need to convince the general public? I think industry bodies like AIMA should do that… Do you think AIMA is doing enough? I think AIMA has been as good as it can be, and the organisation hasn’t really taken off until recently. When Christen Thomson and Andrew Baker came in things really started to move, but that’s only in the last year or so. AIMA is only just beginning to fire on all cylinders but, yes, more could
“ We have clients for
whom we monitor constantly. We use exGCHQ people with incredible search technology so we can find anything that’s written ”
have been done earlier in the day. Does it help to have public figures who are more willing to defend and talk about hedge funds? Yes, it would be great to have a Warren Buffett-type character, but I think the people that should be telling that particular story are the big investors, and they are not particularly good at defending the industry. Should hedge fund managers be standing up? I think they should certainly be communicating more, but it’s all about balance. Hedge funds could go and talk to the broadsheets about what they do but I’m not sure what they would get back from it, though I do think there is a job to be done in terms of proactive communications within the specialist press. Hedge funds should dedicate more time to educating journalists, and more time educating intermediaries – that’s all about brand building. That brand should be about a new way to invest. They talk about the new politics – well, this is the new investment, because the old way of investing just hasn’t worked. IFAs, intermediaries and private client stockbrokers are simply selling what they’re being paid to sell, and they’re selling it on performance. They’ll pick one fund because it’s performing well right now and they’ll pick another fund next week, but actually it’s about risk-adjusted returns rather than straightforward performance. On the one hand you’ve got hedge funds offering a better product, on the other some talk about the death of hedge funds as the EU directive looms. In five years, where’s the industry going to be? Hedge funds will become a mainstream way of investing without any doubt, because it makes more sense. BH Macro’s Ian Plenderleith, who worked at the Bank of England for 30 years said: “I think our grandchildren will look back on what we are doing with our mainstream savings, our pensions and our core savings and say it’s quite extraordinary that our grandparents used to put their savings into equities and bonds, markets that can fall 40% one year and rise 40% the next, in a long-only, unhedged basis.” The volatility of the FTSE is around 15%: that’s shocking. You’ve got a 15% chance of losing your money, and with ▶
45
hedgefundclub.co.uk
strategy hedge pr
industry
▶ volatility of 15% the performance has got to be at least 30% to compensate for the risk, and you’re certainly not getting 30% returns from the FTSE. Investors should have investments with low volatilities because you don’t want to lose money, and that’s the point. The only way to make money is to have compounding returns. The current private client stockbroker will say “invest in this, because you’ll get a 15% return,” but with 15% volatility. Once it goes down 45% you need to make about 80% to get back to where you were because you’ve lost money, and that’s the issue. There’s no question that riskadjusted returns are the future of investing. How did you arrive at running a financial communications firm? I trained originally as a lawyer before moving into financial PR about 25 years ago. I worked for several big, global agencies – Shandwick, Burston Marsteller and Hill & Knowlton – and my last job was with Hill & Knowlton, where I was managing director for their financial business in Europe, the Middle East and Africa. My view was that specialist communication was going to become more important for companies wanting to market themselves, and particularly for alternatives, including hedge funds. In order to do this firms would need to have senior people actually delivering the communication. So in big agencies senior management would be winning the business before passing it down to juniors, and they were then doing the donkey work. But complicated subjects like hedge funds, structured products and private equity need people that really understand finance, who have got broking qualifications and are able to really help journalists understand what’s going on, so the role of the intermediary is really important. In 2003, I decided to specialise in alternatives, and consequently we now have more hedge fund clients than any other PR firm in Europe. We were helped greatly by the credit crunch because transparency obviously came to the fore, as did the requirement for hedge funds to market themselves more aggressively owing to redemptions. There were therefore two things working in our favour: the investors
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The eight elements of crisis management, by Anthony Payne A sensible crisis management plan consists of just eight elements: 1 SCENARIO PLANNING Identify worst-case scenarios and group them by category. Come up with broad strategies for dealing with each sort of crisis you might encounter. 2 FACT SHEET Simply put, this is a generic list of facts about the company – useful in ensuring that everyone in the company is singing from the same hymn sheet, or indeed fact sheet. If your company hasn’t got one, create one. 3 MEDIA LIST Know who you need to deal with. You should keep a list of all key reporters and journalists, with upto-date contact information. 4 ROLES AND RESPONSIBILITIES Work out who is going to be dealing with the media, who is going to be the spokesman for the company and who is responsible for messaging (in other words, creating and ensuring consistency in the company line). 5 TRAINING The spokespeople should be trained in dealing with the press. 6 REHEARSAL Role-play a crisis to test how the team responds, and keep role-playing until it seems to go right. 7 Q&A Much like the fact sheet above, this contains an updated Q&A with all approved information that can be given to the press. 8 MONITORING You should ensure that all media, including social media, are being monitored for any mentions of your company or key staff. All firms, even small ones, should take the time to set up a crisis plan. After all, you never know when a small issue will be blown into a threat to your company’s reputation.
wanting more transparency and, of course, the requirement to raise money. And we accordingly have two different roles and duties: to protect, and to help raise assets.
“ We have strong working
relationships with the journalists. If they’re going to write about our clients, or a subject that affects our clients, we hope that they’ll talk to us first ” Proportionally, how much of your business deals with each of these? It’s mostly on the proactive, positive side; trying to help companies raise assets and communicate. Only a few clients are actually on the protection side, but we’re always aware of the subjects, always trying to be aware of what might be threatening to clients. We have a very intensive monitoring side to our business, so we’re trying to monitor every aspect, whether it’s on the main internet or in social media. That’s a very big part of what we do and it helps clients be aware of anything that’s being talked about that affects them. The other way we can protect them is because we have very strong working relationships with the journalists. Hopefully it’s a respectful and mutually beneficial relationship because we are providing them with information, research and data – we can help journalists understand different strategies or clients, and also give them all kinds of experts among our clients who can help them understand what’s going on in the markets. We hope that if they’re going to write about our clients, or about a subject that affects our clients, they’ll talk to us first. Do you deal predominantly with journalists from within specialist publications or mainstream press? The most threatening, if you like, are the mainstream media, and the least threatening are the trade publications, but we have to work across the board. As hedge funds start to move into the mainstream pensions space they need to have a brand, like an Artemis or like a Jupiter. PR is going to be a critically important part of that process of building a brand, because it’s about building a reputation. H peregrinecommunications.co.uk