Modern investors are currently in their most proactive phase and making direct investment manoeuvres.
How prepared are funds to target/market effectively to the inbound investor?
Many funds prior to the recession were heavily reliant on their relationships within the investor community. The recession came and many investors suffered poor returns. Consequently, investors reconsidered their strategies and risk management. Investors looked to alternative ways and because direct approach in a digital world has taken centre stage, many investors upon research have decided on a direct investment approach.
My research for this article showed much has been written on this topic in trade press, spoken at conferences and so forth, what could I add to this topic that hasn’t already been said? In a recent discussion with a PE Manager, analytics showed they received 3000 approaches from funds, the majority of which were poorly written pitch book’s/prospectus’s/marketing materials, only 5 of the 3000 gained a commitment, that’s a lot of work and effort for very little reward?!
Clearly funds need help in their route to the investor, of more importance however is for funds to invest in first impressions to the direct investor, what I mean by this is the investor is looking for the next fund online, using smart phones to make an investment, and they are making use of Artificial Intelligence (AI)/Algorithm’s to find the highlights in a prospectus/pitch book – investors are taking direct control. How prepared are funds to target/market effectively to the inbound investor? For example a PE department within a pension fund are reaching out to a fund directly, family offices might have become their own LP’s/investing capital directly?
Forgive me as I tried to find a figure on the increase in direct investment, from institutional, family offices direct to funds, I didn’t find any – if you have an update figure/source do please send to me – the information I did gather from research within our own sphere was that direct investment is very popular, that the control rests with the investor.
What can the fund do then in the short term? This year, research from the University of Pennsylvania and Southern California calculated that a “1bp increase in marketing expenses leads to 1% increase in a fund’s size”.
Don’t get me wrong it is possible for a fund to raise capital through the handshake/roadshows etc, but that the direct investor is where the action is at…
For example if the fund invests into a website with a function (not just another brochurial site), digital marketing, then this is where the direct investor gains the first impression, researches more about the fund, we have seen good conversion rates of the direct investor making a direct enquiry on well written and well designed websites, it has to be all about telling a good story, a premium brand, a track record, investment strategy, and so on. Ticks the right boxes and you can engage with the direct investor.
If marketing materials are rewritten with AI in mind, if marketing strategies communicate to those using smartphones, this is a very efficient way to raise capital for little cost. This is what we do at Finscoms.
Don’t get me wrong it is possible for a fund to raise capital through the handshake/roadshows etc, but that the direct investor is where the action is at…
If you would like to learn more about how Finscoms can help with your fund reach investors please do make contact with Edward at emds@finscoms.com
