INFORMING THE HEDGE FUND COMMUNITY
ISSUE 83 FEBRUARY 2013
Fear, Overconfidence and Irrationality Psychological traits that impair stock-picking ability
Anti-Bribery and Corruption Compliance Can you bank on good faith efforts?
The Power of Tail Risk Not to be underestimated
Passport Capital
Embedding quant in a fundamentally driven shop
February 2013
Peregrine Communications The Leading Public Relations Firm STUART FIELDHOUSE
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t has never been as important for hedge funds to receive good public relations advice as it is today. Historically a very low-profile industry, the hedge funds business catered to private wealth in a quiet, even secretive environment. The market was small, and most funds were quite small too, especially when compared to their long-only brethren. In the last two decades, the profile of the hedge fund industry and of individual fund managers has been raised considerably, whether they liked it or not. The old tactics of simply keeping quiet and not speaking to journalists do not seem to be working anymore. Even if a fund manager shies away from the press, his investment activities can frequently find themselves into the business pages. Hedge fund managers are now turning to the PR industry for advice as a new era dawns for alternative investment communications. But the question of which PR firm to use when upgrading your profile can be a difficult one. Many are very broad-based financial practises, advising stock brokers, insurance companies and property firms as well as hedge funds. Because of this, core messages can sometimes be misrepresented or even garbled. It can therefore often pay to go with the specialists. Peregrine Communications was founded 10 years ago, and while it is not in the top tier of the City PR elite, it has never aspired to this status. It wins The Hedge Fund Journal’s award for the Leading Public Relations firm because of the conscious decision of its founders to specialise in advising investment managers. Specialisation, as CEO Anthony Payne points out, can pay dividends. “PR firms who aren’t specialised run the risk of dumbing down your message,” he explains. Because his team works with investment managers of all shapes and sizes, they have an appreciation of the pitfalls and the opportunities that can present themselves. Peregrine can also develop the right messages for the market a manager is seeking to raise money from, and to represent his strategy effectively. “We only work with skill-based asset management firms,” explains Payne. “We’re very focused. We offer an integrated marketing approach, and want our clients to think of us as part of their marketing team.” The hedge funds industry is entering a period of transition which is being increasingly reflected in the way funds and fund managers are covered in the mainstream media. From writing about managers’ lifestyles, newspapers are now increasingly turning towards their investment activities: the companies they invest with, their ethical and governance policies, how they procure their information,
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More than just media relations
assets through retail distribution channels, and talk in many alternative investment circles is how to develop the right marketing campaign for intermediary distribution. Any fund manager thinking of contemplating such a route will have to revisit his social media strategy. Peregrine’s strengths in this respect come from its understanding of the hedge fund market – many PR firms will be able to cobble together a social media plan, but few will have any idea what they are tweeting about. Payne thinks it is critical that a fund manager deals with communications advisers who fully understand his business, its challenges and opportunities.
Peregrine is more than just a PR agency, however. Its skill set extends far beyond engaging with journalists to a much wider menu of services that include brand development and core messaging. Its internal design team is working on web sites, marketing literature, PowerPoint presentations and other critical marketing collateral. To succeed in the grown up world of asset management, a more full service approach is required if a hedge fund is going to distinguish itself from the pack.
Peregrine has been working with hedge fund brands from its earliest days. It moved into the alternative space by advising fund groups like Dexion Capital and Brevan Howard, who were listing funds on public exchanges. More recently it has been working with successful groups like Cantab Capital Partners. As Payne points out, branding and communications goes beyond talking to the media and clients to the wider pool of potential recruits a firm might be chasing.
whether their activism creates or loses jobs. With institutions, and in particular pension funds, representing a larger share of the overall hedge fund asset base, what the man on the street thinks about the hedge funds he is invested with is becoming more important. “The bigger funds are now starting to communicate like long-only managers,” says Payne. “They need to begin to look authentic, relevant, to form that emotional connection with their stakeholders.”
Payne feels that hedge funds need to stop thinking in terms of the media as a hostile element, and seek to engage with the press in a more proactive fashion. This is needed if fund managers are to build the necessary brand of trust that consultants and pension fund trustees are looking for. In 2013 it is no trouble at all for a trustee to research a manager on Google, and the likelihood is that media coverage will be the first thing he reads about a prospective investment. Making sure that coverage is informed and accurate is essential. Peregrine has succeeded on the back of a strong team-based culture, bringing together different but complementary skill sets under one roof. Peregrine clients still have an individual account executive to look after them, but can also benefit from the other specialists within the firm as and when their expertise is required. It is a holistic approach to the industry that other PR firms are only just starting to wake up to, and it is likely to take them a while to catch up on Peregrine. As a result, Peregrine has been able to retain and support some of the better recognised names in hedge fund management. It works with Brevan Howard, including on its listed vehicles (e.g., the BH Macro listed fund) and with IMQubator, the seeding platform of the APG pension fund. Advice for the digital communications era Because we live in a digital age, Peregrine has been upgrading its capabilities in the social media sphere, which it feels is becoming increasingly relevant for hedge funds as well as traditional asset managers. Some larger hedge fund groups have already demonstrated their ability to raise considerable
For example, Cantab wanted to be seen as a great place for mathematicians to work as well as a leading investment manager. In the competition for the best talent, Cantab emphasised its scientific as well as its investment credentials as it knew leading maths prospects would be interested in more than just money. Establishing this intellectual culture at a public level has helped it to attract the personnel it needs. “We have hired messaging specialists who can help hedge funds differentiate themselves,” Payne says. “After 2008, and the consolidation in the hedge funds industry, managers were starting to look harder at their brands, at their edge. What was their essential DNA and how could they market that? They were moving on from that dot.com start up methodology to something more mature, something which could be communicated easily at the distribution and third-party marketing level. They knew that messaging had to get better.” Part of the messaging strategy has to be education, and the firm’s successful Peregrine Perspectives seminars have gone a long way in helping to educate the media about alternative investments. But this needs to reach further, and Payne says educational initiatives for pension fund trustees and other institutional investors should be part and parcel of future initiatives by his clients. While the CIO of a fund of funds might have a good idea about what a CTA is, the trustee of a pension fund may not. “The future, the building of successful hedge fund brands in the retail space, rests on solid education,” he explains.
February 2013
Successful retail hedge funds to date have tended to either piggy-back off an established long-only franchise with built-in distribution networks, or have gone down the listed shares route. Building a meaningful brand as a hedge fund manager in a demanding market will require careful development and the advice of a firm that has plenty of experience of brand management. “It is no longer simply a case of stating performance,” says Payne. “You need to be building a brand based around trust as well. Is my money safe in your hands? Hedge funds need to be able to explain to investors issues like risk-adjusted returns while at the same time getting rid of some of the misleading baggage about the industry still lurking in the mainstream media. Education is a key part of this.” Peregrine does not just work with big names like Brevan Howard or Skybridge Capital: the firm has smaller clients as well. It will take on fund managers who are still in the early stages of their business if there is a feeling that this manager, this strategy has real potential. “We want to back exciting firms that we can believe in,” says Payne. “We want to help them with some of their marketing activities.”
Future plans With the passage of the JOBS Act in the US, the whole issue of communications is moving up the agenda for hedge funds in North America as well. It is an exciting time to be in this space. Peregrine has big plans for the future, even as it looks back on its first successful decade. “The JOBS Act will certainly change things,” says Payne. “I expect to see US groups starting to communicate a little more than they have done historically. But even here it is early days, and it will take a while before we see the alternative investments industry embracing many of the communications principles that the long-only business has.” Payne is optimistic about Peregrine’s growth prospects. He feels the firm’s experience of advising listed funds in the UK has stood it in good stead when it comes down to advising hedge funds. “It is a really interesting time to be involved in this business,” he concludes. “We offer a highly differentiated service to hedge funds which I believe will help them to connect to people in ways they have not been able to before. It is no longer a case of just focusing on the individual superstars: managers now realise they need to emphasis team and brand, to offer that feeling of consistency that investors will be able to embrace and trust. We can help with that.” THFJ
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PROFILES ANTHONY PAYNE, MCIPR Partner & CEO Anthony Payne is a multi-award winning integrated communications consultant with more than 25 years’ experience. Prior to founding Peregrine in 2003, Anthony was Managing Director and Director, Europe, Middle East and Africa, Financial Practice of WPP-owned Hill & Knowlton Financial, a global financial communications firm. Anthony is recognized as one of the leading figures in public relations by industry publication PR WEEK (PR WEEK POWERBOOK).
ERMANNO MATTIO Partner & Head of Research Since 1992, Ermanno has worked in business development and research roles for a set of diverse institutions including Barclays De Zoete Wedd, Credit Suisse First Boston, Commerzbank, Dexion Capital and MSCI Barra (Morgan Stanley). Most of his business development work has focused on institutional investors across Europe, concerning the full spectrum of fixed income products (including derivatives and structured products), investment management (both traditional and alternative investments) and multi-asset class quantitative risk management.
ALAN PITCHFORTH Head of Design Alan has more than 25 years’ experience of creating and building brands; 16 of which have been specifically focused within the financial sector. His extensive creative experience is voiced in a multitude of disciplines: typography, graphic and product design, reprographics, photography, print finishing, brand creation and management.
MAX HILTON, MCIPR Senior Consultant Max joined the firm in late 2006. Since that point, he has been involved in a number of integrated communications programmes, as well as successful branding campaigns. His clients include some of Europe’s largest hedge funds and FoHFs, an alternatives seeding platform, half a dozen listed alternative investment companies and a leading fixed income focused institutional asset manager.
MEGLENA PETKOVA, MCIPR Senior Consultant Meglena Petkova joined Peregrine in 2011. She has been working in asset management marketing communications since 2009 across a diverse range of both long-only and alternative asset management clients including hedge, quantitative, fixed income and equity fund management groups.
DANIEL JASON Consultant Since joining Peregrine in early 2011, Daniel’s clients have included some of the largest and best-known firms in the hedge fund, investment company, family office and long only space. He is also responsible for the firm’s social media offering, and the firm’s asset management industry debate series, Peregrine Perspectives, currently running in conjunction with Imperial College Business School.