July 26, 2012

Should Hedge Fund Managers Speak to the Media?

Hedge fund managers are a rare breed.  Not only are they some of the highest paid professionals in the world, but they also tend to be the most secretive and reticent about speaking to the press.

I’ve heard all the reasons why managers want to fly below the proverbialradar, including: “lawyers”, “I don’t want to tip my hat to my competitors”, “my investors don’t want to see me on TV”, “the press is uncontrollable—and dangerous!”, and so on…

In the coming weeks, the SEC is scheduled to publish new regulations for hedge fund communications and marketing, all as part of the JOBS Act that President Obama recently signed into law.  I expect that the SEC will comfort those managers who are nervous about running afoul of marketing regulations. In fact, I haven’t uncovered one instance of the SEC sanctioning a fund for speaking to the press to date.

All this said, there are a handful of proactive and ambitious managers who have been speaking to the media for years.  These managers understand the power of thoughtful publicity:  better communications with investors, demonstrating transparency, showing conviction publicly even during tough market swings—and dare I say, marketing!

A recent article in the New York Times by Nelson Schwartz illustrates my point.  Mark Lasry of Avenue Capital (not a client of Dukas Public Relations ) openly discusses his bet on a European turnaround.  He talks about how much of his fund’s capital he’s investing, why and his return expectations. (On the same day, the Times ran a story about famed venture capitalist Marc Andreessen and his firm’s willingness to speak to the press despite being part of an industry that shuns it.)

Is Lasry marketing his fund or violating his private exemption status?  Is the SEC shutting him down, or is he getting calls from investors telling him to keep his mouth closed?

Lasry is a sharp and very successful investor who knows exactly what he’s doing by speaking to the press.  And I have no doubt that he worked with an experienced PR firm or consultant that knows the ropes and how to work with a top-flight reporter like Schwartz to help insure a good outcome.

Lasry is but one of a handful of managers that understand that speaking to the media is good for business.  To be sure, there is a robust hedge fund and institutional trade media that regularly covers the moves and strategies of hedge funds.  Top-tier financial news outlets like Bloomberg, Wall Street Journal, Financial Times and New York Times regularly interview hedge fund managers, usually with positive outcomes.

While the JOBS Act will give comfort to managers’ lawyers, the question remains: Will managers themselves find religion and finally come to understand that public relations—like investor relations, accounting, compliance, risk management and operations—is integral to their long-term success as a business?

That is an answer I hope to find out soon, and I remain optimistic.

Richard Dukas