Choose open, transparent funds that keep you informed.
We are entering a new era for funds, one that is more transparent, more competitive and more regulated than ever before. And as such, you, the client should benefit from the greater transparency being adopted by the majority of funds. It is now no longer acceptable that a client sits and waits in the dark until the fund releases mandatory fund performance figures, the new era will see clients accessing performance related data on demand. It is no longer acceptable that you, the investor gets bombarded by unsolicited, indigestible fund prospectuses. Funds will, if they are to prosper, only target appropriate investors. If this epoch of the funds sector’s evolution is to be encapsulated under a single term it would be the ‘Communication Era’.
The fund sector is heavily congested and even though fund strategies may be heterogeneous it is still difficult to differentiate one from another when only given figures within tight parameters. So how do you find the funds that will deal with you through the most transparent processes? The funds that adopt best communication strategies to keep their clients edified are the funds that stand out in this congested market, they are the funds that convey their engaging story as well as the important financial figures to you from the outset. These players realise that their story is far more memorable to an investor than numbers alone.
The top 10% of best performing funds are successful because communications are an important and proven part of their strategy. According to Fund Radar, more than 70% of funds don’t reach their AUM objectives. Studies have shown that a great part of this failure is down to poor or zero communication strategy when attempting to raise capital. 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”. The best performing funds know that every link in their chain must be strong, if an investor is let down by the marketing and communications side of a fund he/she will inevitably begin to question whether the investment strategies are also sub par.
Running a Family Office carries great responsibility and therefor choosing a fund that you can trust is obviously of tremendous importance. Take time to select a fund that clearly has taken time to consider the best interests of the client. You will recognize these funds often through the language they use. Are they writing their marketing materials to tick a box or have they written these documents using ‘investor language’? It would be fair to say that in general there is a disconnect between an asset manager’s financial acumen and his marketing prowess. Asset managers are now beginning to realise that they are much more in the business of marketing than in the business of investing.
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”.
It is commonplace for asset managers to use complex financial jargon when presenting to investors. Vastly different to the type of language a fund manager would use day to day with colleagues and lacking resonance from the investor’s point of view. A relationship must be built between the asset manager and the investor before any capital is acquired. You are far more likely to build a relationship with an asset manager if you have been communicated to at your level. Asset managers should no longer rely on tired industry rhetoric. Strictly presenting figures on performance, portfolio diversification, portfolio risk management etc…no longer engages the majority of investors. You are now interested in ‘the story’ behind the fund along with the figures as a differentiator.
Creating a better client experience mutually benefits both investor and asset manager. This has led to an increase in the use of open, transparent and well-designed communications to investors. By allowing you to see how well the fund is being managed, the relationship will solidify. There is plenty of scope for this;
- NAV publication
- Meeting requirements in relation to Key Investor Information Documents
- Publication of semi-annual and annual financial statements
- Shareholder notifications
- Notices for Shareholder General Meetings
- Key performance indicators such as investment performance versus benchmark
- Online investor portals
Family offices’ own capacity to market themselves can also be tested when, for example, trying to partner with others to invest in a niche that they have identified. Communicating a new opportunity to others may not be successful. Very often they don’t have internal marketing resources and, once they are in such situation, they have to engage with Communication specialists who can help.
The facts, the stats, and our experience at Finscoms show that there is substantial room for improvement around fund communication and establishing the best route to the investor. Consistent communication with investors around the lifecycle of the fund is a critical issue for long-term success. KPMG stated in its Spotlight on the Asset Management Industry that “Achieving a better client experience is a source of competitive advantage, not just a ‘nice to have”. When choosing your next fund, first class communications should be a strong consideration for family offices and their clients, choose a fund that shows you the upmost respect.
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