Simplify: Straight Talk About How Your Firm Builds A Loyal Following

Marketing a fund is a bit like opening a restaurant. It is putting your life, passion, knowledge and creativity into your business with the hope that customers will love what is being offered and served.

Every customer is different with varied expectations, needs and requirements. The best of the best spell out their messaging clearly and succinctly and tell customers just what they are offering and how they are doing it.

For funds, such messaging is like a menu and it is absolutely key. The best menus are short, targeted and have a clear description of the dish. Fund managers should also follow this basic format. When pitching to an institution or allocator, a fund manager doesn’t get much time to convince the client that the fund’s strategy is what they want and need. It helps to get right to the essence of what your strategy does.

The Quick Pitch

Creating a concise story of what you do, why you do it and what makes makes you exceptional should start with the creation of a pitchbook. The process of developing and delivering a straight forward message to potential investors can make the difference in getting a second meeting and an allocation. It also is a great exercise in honing and perfecting your pitch, working on your branding and marketing.

If your fund is running a trend-following strategy that is fine, but its just the beginning. What does it do and what makes it unique? (See our previous post What Makes You So Special?) Pitchbooks spotlight key elements of the fund but also introduces that interesting aspect about you or your firm. The wording doesn’t have to be fancy. Just hit the highlights.

“XYZ Capital Management is a commodity trading advisor that employs a unique, systematic trend-following strategy across 10 commodity and financial sectors.

Based on 15-plus years of research and trading, the XYZ SuperStar Program’s algo-driven strategy is designed to excel during major market downturns yet deliver solid returns in other market environments.”

Want to hear more? That setup tells an allocator plenty:

  1. You are a trend follower, systematic and algo-driven
  2. You’ve invested 15 years into the research and development of the strategy
  3. You trade 10 different markets
  4. You perform well in down markets yet generate alpha in other markets.
  5. You’ve also added the word “unique” leaving room to tell your prospective client what makes you so special.

In short, it is the set-up for more details as you go through your pitch book with allocators and potential clients. If you are talking further about the strategy, how can you quickly provide the key pieces of information and keep the story moving forward?

“Using 200-day moving averages as our guide, our algos identify long-term bullish and bearish trends that allow Superstar to take 2-week to 2-month positions.” Now you’ve detailed the strategy further and provided the time frame for your trading.

The question then is, what makes this unique from all the other trend-following strategies out there? The timeframe might be a bit different but does it utilize some new data such as Twitter sentiment? Is it triggered by buy and sell signals confirmed by another index or market? You are what you are. But if you have a solid trading strategy with a twist, you can grab an investor’s attention. Sometimes what is tried-and-true is just what allocators are looking for.

Bucky Isaacson, CEO of Future Funding Consultants and co-founder of CTA Expo, who has been around the managed funds space for more than 40 years, recalled a “Shark Tank” style competition at one of the Expo events won by a discretionary grains trader. Despite some very compelling presentations before his, the grain trader took the top prize. His knowledge of the market, explanation of his strategy and his delivery won the judges over.

“I thought another CTA may have been more compelling but he won because he was different from everyone else and he articulated his message well,” Isaacson said.

Failing To Business Plan…

That is just one part of the pitch however. Unlike a restaurant, fund clients are interested in the owner, the business plan, how many researchers, quants or traders you have and how you plan to support and grow the business over time. And this is where you must show your people skills and business savvy.

Isaacson said knowing your business and business plan may be the most important thing to allocators. Much is on the line for them, not just performance. Dependability, longevity and durability are also key components.

“The manager has to show the client that he or she is going to be there for awhile,” Isaacson said.

For emerging managers, explaining your business plan and cash flow management for the first two to three years is very important to allocators, Isaacson added. Introducing your team and how robust the operation is, is also key. Detailing your third party service providers such as the executing broker, fund administration, legal and accounting services shows you understand all of the working parts of a fund. These elements are also critical pieces in a pitch book.

Going one step further, Isaacson recommends buying a full, third-party background check on yourself and the team. This not only saves the allocator time in doing due diligence, but also shows how serious the firm is about doing business in the institutional space.

And finally, tell them about your marketing. Fund managers should know just how much a fund manager plans to spend on marketing and business development each year. Simply showing up at an industry conference or two is probably not enough and choosing the wrong events for the wrong purposes may drain precious marketing resources. To save some cash, consider where the most funding sources are located, say Chicago and New York, and focus on multiple meetings there several times per year. Isaacson said remaining in personal touch with existing key clients is key to keeping customers long-term.

And keep it professional. A professionally created pitchbook stands as your calling card for allocators. A simple PowerPoint slide presentation may look cheap or even boring. Wrapping your message into a professional package and bringing your personal touch to the meeting helps separate your from others who often offer amateurish materials and presentations.

In the end, it really isn’t so different from a restaurant. You want your customers to feel great about you, your product and generate a loyal base for years to come. Being straight forward and delivering on your menu will go a long way to making that happen.

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