At long last, the SEC voted yesterday to lift the ban on general solicitation by hedge funds and other businesses as part of the Jumpstart Our Business Startups (JOBS) Act. Let the era of hedge fund public relations begin!
This ruling is decades overdue, and the implications are immense. It will fundamentally change how hedge funds and asset managers communicate about their strategies and products to an increasingly competitive marketplace. In order to articulate their value proposition in clear and concise language, they will no longer be able to “fly under the radar.” On the contrary, these businesses will need to shift from passive communications to a more proactive and strategic form of engagement, lest their competition beat them to the punch.
Contrary to what media coverage has suggested, the ruling does not deal as much with advertising as it does marketing.
In all likelihood, only a select group of larger firms—starting at around $5B—will take advantage of this change and actually pay for advertisements. However, the SEC’s decision opens the door for funds and managers of all sizes to be much more aggressive in their marketing. These funds will now have the chance to speak more freely to the press, appear on broadcast television, create more user-friendly websites, and leverage their brands through mass digital communications.
While concerns about the ruling are understandable—especially with regard to consumer protection and investment performance transparency—the reality is that the SEC ban has stifled job growth and inhibited accredited investors from properly evaluating their fund managers. Still, some degree of caution is prudent, and it’s important that these firms understand the rules and check with legal counsel before embarking on a proactive marketing program.
The industry will take some time to fully understand and adopt the SEC ruling, but we expect to see a significant uptick in the number of managers who engage in public relations and marketing services.
Moving forward, you shouldn’t expect to see Bridgewater Capital TV commercials during primetime or to go to the “Greenlight Capital Bowl” on New Year’s Day, but you will see many more managers on CNBC and quoted in the likes of The Wall Street Journal. Better yet, you’ll be able to go to a hedge fund’s website and finally be able to figure out what that manager does—and to that we say, “Congratulations to the SEC.”
– Richard Dukas