When A Word Is Worth A Thousand Pictures
The JOBS Act promises a wealth of opportunities for private pools of capital seeking investment. The act allows private pools of capital like hedge funds and private equity funds and private start up companies to raise initial or additional capital by “remov[ing] the prohibition on general solicitation or general advertising for securities offerings” from accredited investors.
In an industry historically known for secrecy, advertising for a fund seems counterintuitive. Imagine clicking on a banner ad: “Invest in XYZ Fund! We returned 25% last year!!!” Are we going to see a 30 second spot for SAC Capital during the season finale of Dancing with the Stars? According to an Investor Relations professional at a hedge fund: “No, buying ads for hedge funds is like Ferrari buying a billboard on I-95.”
So what does the future hold for hedge funds?
“The first step in requiring greater disclosure by hedge funds came from the Dodd-Frank Act’s mandate that firms with at least $150 million in assets register with the Securities and Exchange Commission as investment advisers and file regular reports,” reports the New York Times.
More funds will come right in below the $150 million mark to avoid the additional overhead. With the startup fees of funds diminishing, we will see a long tail effect with hedge funds; since like venture capital funds some strategies don’t scale well. (See LTCM below). With more competition in the investment space, how will funds differentiate themselves?
Through the stories they tell.
Storytelling has evolved as technology has evolved. Television was once a product of self-contained episodic programs, now it’s a sprawling epic spanning into ever-changing websites to multiple seasons. Think of your favorite “80’s” television show: Good guy meets bad guy, bad guy runs from good guy, good guy catches and brings bad guy to justice. All within 48 minutes. Today, new epic television series’ like Lost, Breaking Bad, or The Sopranos span multiple seasons building upon the previous one in an ever complex, yet easy to follow storyline.
Financial storytelling has also evolved. The old way of marketing was to have a theorem named after you like the Black Scholes option pricing formula. This team then went on to form Long Term Capital Management (LTCM), the fund famously profiled in “When Genius Failed.” By publishing breakthrough research, these money managers were able to show a competitive advantage against the market and thus raise further capital from Limited Partners.
Getting discovered through content marketing.
Write a helpful piece, integrate your business in some way, develop a catchy headline, work some Google magic, and when people read it, they drive traffic back to your site. (Disclaimer: our company Cooperatize helps to distribute content through niche blogs). While new to the rest of the world, content marketing is not new to Wall Street, which is always pushing the boundaries: products as complex as credit default swaps to securitizing David Bowie’s music royalties.
Nassim Nicholas Taleb, the author of Fooled by Randomness and The Black Swan, is a former hedge fund manager. James Altucher has written many books and frequently blogs in well-known publications and is a managing director at Formula Capital. Peter Lynch of Fidelity’s Magellan Fund has authored three books and has a column in Worth. Ken Fisher, CEO of Fisher Investments, manages over $41 billion dollars, one of the largest wealth managers in the country. His publications are extraordinarily catchy – as if Buzzfeed editors wrote his titles: Super Stocks, the Wall Street Waltz, 100 Minds that Make the Market, The Only Three Questions that Count, The Ten Roads to Riches, How to Smell a Rat, and Markets Never Forget – How Your Memory is Costing You Money and Why This Time Isn’t Different are a sampling of some of this books.
(To see some of the other money manager’s stories check out Amazon’s finance section: The Dao of Capital by Universal Investments founder Mark Spitznagel, Warren Buffet’s Letters to Shareholders is #13, John Bogle, the founder of Vanguard and Joel Greenblatt of Gotham Capital are also traditionally on the best seller list.)
These books are slowly crossing into mainstream reading as opposed to something that would be relegated to a PhD level Wharton finance class. As we increase in specialization, financial (just like legal) writing needs to be written in easier to digest terminology. As the world becomes more specialized, we need to be able to understand how something works on a high level. (i.e. our own finances or how the law works). In fact, as Greg Cipolaro of crowdsifter.co notes, “The entire landscape of financial communication is changing from the ‘old way’ of formulas, newsletters, presentations, print, and television to the ‘new way’ including Twitter, web-based conference calls, YouTube videos, Slideshare, and the SEC’s own searchable EDGAR with 13D filings.”
Thus we start seeing the value of Twitter to the financial and legal communities, and how our words need to make sense in bit sized chunks. The hedge fund manager Carl Icahn demonstrated the power of Twitter with his one tweet that added nearly $12.5 billion to Apple Computer’s market capitalization; almost as valuable as the entire platform itself (or $90 million per character).
When a few simple words on a platform Justin Bieber uses to share selfies has the ability to move the entire financial market, the financial community has the opportunity to reach potential investors and partners beyond their traditional channels. A few simple word are now worth more than pictures, but rather millions of dollars.