Opalesque Exclusive: Breaking out from the pack – how branding can focus a firm’s future – Part One

September 15, 2009

(Part One of a three part series)

For many of those funds which made it through the battlefields of the past 18 months, 2009 marks an opportunity for managers to look at their firm, their funds, their strategy and their approach to the markets, and define their brand to the investors returning from the sidelines.

As the number of hedge funds has decreased significantly, now may be the best time to break out from the pack and determine what images, principles and motivations best define you to investors and potential investors.

“Branding is arguably more important today than it has been in the past for managers defining their investment style for investors,” Troy Buckner Managing Principal of New Jersey-based NuWave Investment Management told Opalesque.

Brand Management: The application of marketing techniques to a specific product, product line, or brand. It seeks to increase the product's perceived value to the customer and thereby increase brand franchise and brand equity.

Marketers see a brand as an implied promise that the level of quality people have come to expect from a brand will continue with future purchases of the same product. This may increase sales by making a comparison with competing products more favorable. It may also enable the manufacturer to charge more for the product.

“I think hedge funds are beginning to very slowly understand that they need to market themselves like an ordinary business,” Richard Dukas, President of New York public relations firm Dukas PR told Opalesque. “The mystique of flying below the radar is over, and funds by and large cannot get away with that anymore. They really need to implement brand building strategies.”

Hedge fund rebranding strategies in the headlines
Recently renaming/rebranding announcements made news as two very different firms seek to re-define themselves to clients.

1. Sydney based St. Helens Capital has rebranded itself to Lanterne Strategic Investors. "…having delivered strong and consistent performance during the challenging markets of the last 12 months as well as reinforcing our capabilities, we decided to adopt a new name that embodies our energetic, forward-looking approach,” said Lanterne’s Co-founder and CIO Michael Brookes in a statement released by the firm regarding the rebranding.

2. Citadel Investment Group renamed its hedge fund administration services to: Omnium. The word refers to an elite bicycling competition held on a track, which in the course of five stages is designed to single out the athlete with the best all-around skills in both sprinting and endurance riding. The rebranding of the administration services seems to have a two-pronged goal – separating the administration branch from the hedge fund business, and marketing themselves as an all around competitor in fund administration.

Branding gains recognition within the hedge fund industry

Until recently hedge fund firms generally gave very little thought to their “brand”. The lifecycle for a hedge fund and its strategy was widely believed to be a limited amount of time and expectations for founding a fund that would eventually have a track record of a decade long (or longer) was not the norm.

For NuWave, part of the approach to defining their brand to potential investors includes focusing on both the portfolio and operational aspects of the business. The brand recognition that the quant firm hopes to achieve with investors and potential investors is one of transparency, liquidity, the broad diversification – all available to clients due to the firm’s approach to its strategy. “We are an absolute return manager,” says Buckner. “We are expected to make money in bull or bear markets, even if 90% of traditional funds are losing money.”

For the first time many managers that successfully handled the 2007/2008 markets now consider being around for the long haul to be a very real goal. But with the changes and challenges in the industry, brand management is one of the best ways for bridging the gap that has appeared between managers and investors.

“The extraordinarily challenging market environment, coupled with intensified fears associated with manager fraud (the Madoff effect), have created a scenario that requires a more distinct brand message,” says Buckner.