CalAlts
February 27, 2017

Richard Dukas Offers Counsel to the California Alternatives Industry

As California’s Alternatives Sector Grows, So Do Its PR Needs

For too long the alternative investment industry’s approach to public relations and communications has essentially been two words: “No Comment.”

As the industry is beginning to realize, hedge funds and private equity firms consistently allow others to tell their stories for them. California has always been a place where innovation thrives and, as more alternative managers come to the state, they have an opportunity to lead the way to change the industry’s communication with the public.

California’s alternative industry is uniquely positioned to lead. Today, for example, California is home to the second largest concentration of hedge funds outside the New York metro region. The number of alternative asset managers of all kinds based in the state has tripled since the turn of the millennium, and now totals almost 1,000 firms, representing nearly $1 trillion in assets under management.

The rising prominence of California’s alternatives sector can be a mixed blessing, however. With greater visibility comes the need for California’s alternative managers to think more carefully about their public image and avoid getting branded as “secretive” and “unregulated.” A well-crafted, strategic public relations program is an essential tool for creating a positive image of the asset class, differentiating fund managers from the competition, supporting fund raising and deal making efforts and building a sustainable business for the long-term.

PR as a Marketing Tool. The proliferation of alternative managers of all types—including hedge funds, private equity funds, credit funds, real estate and real asset funds—makes it essential for such firms to raise their profiles and differentiate their strategies in a crowded marketplace. This will be important in raising funds, as well as providing greater visibility that may help stimulate deal flow. An agency that is experienced in and knowledgeable about the alternative investment sector can be valuable in helping fund managers develop relevant messages and mount effective campaigns consisting of periodic news releases, traditional and social media, firm-generated content, conference and speaking engagements, website design, marketing collateral and other activities as appropriate.

Professionalizing a Fund’s Image. Small-to-mid-sized alternative managers, and those launching first-time funds, have a particular challenge competing with larger and better established funds. Working with a PR advisor can help a fund to define and articulate a concise and compelling message, especially with regard to investment strategy and performance. A public relations consultant can help to professionalize a manager’s image through presentation coaching (invaluable for pitch meetings and investor calls), and can assist in developing effective communications with LPs, including writing or editing investor letters and scripting investor calls. The agency also can evaluate (and, if necessary, upgrade) a fund’s marketing materials and website to ensure that they compare well against competitors and convey a positive impression.

The Media and “Intellectual Capital”. While some alternative managers prefer to keep a low profile, trying to “fly under the radar” is increasingly impractical and counter-productive in today’s “always on” media environment. In fact, a perceived lack of transparency is a key reason that hedge funds and PE firms are all too often seen as “secretive.” It is far more productive to work with a public relations agency that has solid relationships with reporters who cover the alternative sector, to promote a differentiated message about the fund and enable managers to take control of their public and online reputations. Asset managers may want to consider building “intellectual capital” as thought leaders by engaging with influential media outlets and serving as trusted resources on subjects related to their fund’s strategies.

Social media is a vital channel of communication for any business today, and alternative investors are no exception. Even if a fund does not wish to pursue an aggressive social media program, it can be important to have professional help in creating and maintaining accurate and compelling profiles on social media such as Wikipedia, LinkedIn and Twitter. The agency also can serve as “fact checker” by monitoring social media and all digital and print content in which a firm is mentioned, to correct or counteract factual mistakes, erroneous stories and defamatory websites or comments. In today’s world, everyone is a storyteller and has the ability to publish their thoughts online. If you don’t tell your story, someone else probably will.

Supporting Key Transactions. A fund’s transactions, including acquisitions and strategic investments, activist campaigns, and IPOs or other liquidity events, call for specialized communications. It is important to convey not only the financial rationale for a deal, but also to properly communicate factors such as a portfolio company’s post-transaction operating strategy, and the impact on jobs and the community. An agency can assist in messaging and proactive media outreach for transactions, while also anticipating and preparing for leaks and likely media questions. The agency also can work with portfolio companies and fund management to communicate with key stakeholders and address possible concerns of employees, government, regulators etc.

Crisis Communications and Reputation Management. In today’s environment, a communications challenge can easily become a communications crisis. Subjecting an alternative manager to an unwelcome spotlight has the potential to impact the fund’s reputation, relationships with investors and regulators, and future prospects. Bringing a public relations advisor on-board in advance of a full-blown crisis can enable a manager to get ahead of a potentially volatile situation. But, regardless of whether crisis communications are handled proactively or reactively, a comprehensive approach to crisis management is vital. The right counselor can work closely with a manager to understand the dimensions of the issue and the fund’s response, develop credible messages, and create ways to deliver the messages to audiences such as investors, portfolio company customers and employees, media, regulators and government officials, and/or the general public.

The growth of California’s alternative investment sector does not appear to be slowing anytime soon. Consider that since 2010, more than 230 new hedge funds managers set up operations and launched 750 new funds. The need to distinguish one’s fund in this increasingly crowded marketplace, along with the challenges of communicating effectively and maintaining a sound reputation in a an environment of 24/7 media, argue strongly for alternative managers to have professionally run, comprehensive and proactive public relations strategies.

Submitted by Richard Dukas, the Chairman & CEO of Dukas Linden Public Relations, which has offices in Irvine and New York.