By Hannah Smith – Edgefolio: Fund marketing and investor relations are two sides of the same coin. As with most subscription sales, there is no value in winning new clients if you cannot hold onto them. This is especially true when your client is an institutional investor; this is not an easy client to win.
When it comes to technology, there is a lot of focus on building pipelines and the investor onboarding journey. But what comes next? How can you continue to engage your investors? How can you continue to develop the relationship? How can you be one step ahead in every conversation and activity?
Always one step ahead
The relationship between investors and hedge funds is seemingly simple. They invest money; you deliver a return. A transaction between two parties. However, this simplicity is built on two fallacies.
The first is obvious: performance is not guaranteed. A challenge of investor relations is to expand investor relationships beyond this basic transaction. A relationship based solely on performance exposes you to significant flight risk should performance dip.
The second fallacy is that performance is all that matters. Investors will assess your understanding of how you achieved past performance, and in doing so, the probability you can deliver consistent returns. They want to get to know your leadership team and their pedigree. They want to know what your fund does differently from all the other funds out there. Putting performance to one side, why do you exist?
You could consider this evaluation “complete” once the investment is made, but in reality, this is an ongoing and perpetual assessment. There will always be a fund out there with better performance or a stronger brand, so you need to be proactive in defending your territory. The investor needs to have access to the information they want with sufficient transparency. They need to receive excellent service and always feel like conversations are meaningful and informed. They need to see compelling content that sets out your expertise and pedigree. There needs to be a personal relationship that leads the investor to want to work with you.
So how can IR teams get ahead of investor expectations? How can they drive relationships forward and be as proactive as possible?
Accessibility and transparency
Personal relationships are an important component of hedge fund investor relations. In-person meetings, phone calls, and individual emails build a rapport and cannot be replaced with automation. However, they can be heavily augmented through technology.
When it comes to sharing information, automation and digitization are very important. Whereas once a PDF distributed at a set frequency would suffice, investors now want to access performance data online. Similarly, they want important documents to be hosted online rather than shared by email. This is a far simpler method of exchanging information and contributes to a perception of trustworthiness and transparency. For emerging managers, it also conveys an appearance of sophistication that would usually be expected from a more established manager.
An investor portal lets the fund manager share performance data, content, and fund information in a single, protected, and compliant location. A data room delivers secure document sharing with watermarking and tight access control. This is all self-service, eliminating latency and delivering a great digital experience to sit alongside the personal relationship. This is a double win, as it offers a better service for the investor and eliminates an administrative burden for the IR team.
Investor balances are important information for investors but are often very challenging for hedge funds to visualize or share. This can lead to delays on ad-hoc requests and limited visibility for both the manager and investor. To deliver meaningful transparency to investors, hedge funds need to find a way to overcome this. Ideally, investor balances should be available in the customer relationship management (CRM) system alongside other key client information, at the manager’s fingertips at any time.
Educated and informed engagement
As already discussed, personal relationships are very important when it comes to investor relations. However, here too technology plays an important supporting role.
When an investor speaks to a hedge fund, they expect a certain degree of familiarity. This includes professional information—such as exposure, redemption terms, or team structure—and personal details, such as a recent holiday destination or family setup. To build a personal relationship, good salespeople will use information to build a sense of familiarity.
Information about clients is gathered through various activities and interactions and may involve several team members. It is important to take a “hive” approach to investor insight, ensuring information across the business flows to a central location and is accessible to all. This is essential in delivering educated and informed communication with your investors.
Investor engagement with your digital presence can also offer insight. Did the investor previously open your emails and recently stop? When did they last log into your investor portal? Did they view their redemption documentation in the data room? When did you last meet with them?
You also need to have access to the right investor insights to have a meaningful conversation that builds trust, addresses concerns, and warms the relationship up. Waiting for an investor to call you when they are unhappy puts you on the back foot.
It is worth noting that not all investors look the same or want to be engaged in the same way. What is a warning symbol for one investor—e.g., declining a meeting—is standard behavior for another who prefers digital engagement. You need to build a baseline for each investor to understand what makes them tick and deliver more of that, and to identify when they are not happy to know how to best rectify the situation.
Investor relations that run on rails
Understandably, investors want to feel like they are working with detail-oriented and organized professionals. They have put their trust in your investment team, and your IR team needs to further build that trust. To achieve that, it is important to set out your minimum standard for investor relations internally.
Some aspects will be established in contracts—for example, your minimum reporting commitment. However, internally you can set a minimum schedule for much more and use your investor relations technology to manage this workload and visualize progress. This is especially important when working in a team, ensuring nothing falls through the cracks.
You may, for example, meet or otherwise check in with your investors in person at a set frequency, send a monthly newsletter, call investors in the event of negative performance, hold webinars to accompany performance reports, or suggest an interim meeting with any investor who has not opened your past three emails or hasn’t logged into the investor portal for a month or more.
The right investor relations platform presents these data points so you can prioritize your workload. It also automates reporting, offering real-time visualization of your achievements and what remains to be done. Often, IR teams spend a lot of time working on internal reports requiring a lot of manual effort. There are two problems here. First, this time would be much better spent with clients or working on client-facing activities. Second, this reporting is always backwards-looking, reporting on what has—or has not—been achieved. This might steer the focus for what comes next but with a significant lag, reducing your team’s impact.
Working with the expectation that the investor relations team will just know which investors need their attention can lead to missed signals and poor service for your investors. Ultimately, tight control of your IR operations benefits the investor, who will receive a consistent and professional experience and feel valued. They might prefer to imagine you wake up thinking of them each day—rather than them appearing on a dashboard—but the outcome is the same.
Technology: the great enabler
As a discipline, investor relations requires excellent interpersonal skills with robust organization and task management. The former is in the hands of the individuals in the team, and they should focus on execution; that is to say, directly servicing clients.
Technology can streamline, support, and even guide this interpersonal activity. A limited number of dedicated fund marketing and investor relations technology solutions—such as Edgefolio’s FundPortal—let IR teams deliver an excellent service, manage their operations and reporting, and free the team to focus on direct client work.
First, an IR tech solution can provide the “on-demand” accessibility and transparency investors want. Through an investor portal and data room, clients can access information in a modern and convenient way. The investor portal is also where you host content, letting you control the audience and track engagement. Your investors should feel like they are working with a solid and established fund and can access information as they need it.
Second, IR tech can underpin your interpersonal engagement by ensuring you have the right information for every conversation. At the core of the IR tech solution is the CRM, which is your single source of truth for your clients. Combined with the investor portal and data room, plus email marketing, this becomes a full-service IR tech solution. Every interaction across all channels goes into the CRM, and the CRM guides every interaction across channels. By selecting a solution that displays investor balances in your CRM, you ensure this vital piece of information is available.
Finally, your IR tech should let you set a standard of service, execute, report, and reiterate. IR tech lets you work in a consistent way that avoids a lack of focus. That is not to say the team has no agency as to how to engage clients, but it sets minimum engagement levels and keeps all the plates spinning. The IR operation should be immune to personnel changes, with the CRM as a single source of truth, and dashboards and tasks guiding your focus. The reports and dashboards that steer the team also deliver internal reporting without diverting time away from the core task.
Conclusion
Investor relations teams need to anticipate their clients’ needs and expectations to avoid being caught by surprise or disappointing the investors they serve. An IR technology solution is fundamental to achieving this.
Digital channels deliver the transparency investors seek and streamline information distribution. Investor data is captured across channels and is put straight into the hands of the IR team. Investor balances are available at the click of a button. Dashboards and tasks guide the team and automate internal reporting. The result is a team that can focus on what it does best: building great relationships with your investors.
This article is featured in HedgeNordic’s “(Em)Powering Hedge Funds” publication.
