Hedge funds have seen a healthy inflow of investment in 2023, with a net increase in money invested for all three quarters of the year so far. According to The Economist¹, the total sum invested in hedge funds is now over $4trn, compared to $3.3trn at the end of 2019.
This investment comes from a diverse range of allocators, from pension funds to ultra-high-net-worth individuals. Targeting a variety of allocators with the same fund, same team, same data, and same brand is a challenge for hedge funds looking to diversify their LP base. Information and messaging that resonates with one investor type might actively deter another.
Some hedge funds stick to their sweet spot, targeting one investor type that they know their product aligns well with. This greatly reduces the complexity as all decisions around investment strategy, messaging, risk, communication, and brand are focused squarely on this single investor type and their requirements.
However, this will undoubtedly result in missed opportunities and restricted AUM growth. It also leaves the fund vulnerable to any changes in fund positioning for the chosen allocator type.
So what are the considerations for funds looking to diversify their investor base and/or appeal to a wide range of investors?
• What is the risk appetite of the segment(s) you’re targeting? This should be reflected in the data you provide them and the positioning of your fund.
• How does your target segment want to be engaged? Do they value data-heavy reports, or would they prefer the personal touch of a phone call and a lunch meeting?
• What regulatory or stakeholder challenges does the potential investor face, and how can you address those in your marketing?
• What is their decision-making process? What level of due diligence is involved and how can you facilitate that?
Whilst a hedge fund will struggle to position itself as a safe bet to a risk-averse pension fund and a unique and novel investment opportunity to an adventerous sovereign wealth fund, it can decide which aspects of itself it promotes to which investor audiences. Content can be produced and shared with targeted lists where the messaging will most resonate. Marketing is never about misleading your audience, but rather focusing on what matters to them.
In our latest white paper, “Marketing to diversified hedge fund investors: a blueprint for fund marketers”, we consider the primary investors into hedge funds and what their priorities and decision drivers are. We also consider how fund marketers can efficiently run simultaneous marketing campaigns for different investor types without impacting efficiency. Read it now!