Monthly insights for investment marketing and sales professionals
August 2011
During times of market turmoil, investment managers have an obligation to communicate swiftly and decisively with their clients. Yet decisive communications can be tough when the market oscillates daily between fear and greed. This issue of Excess Returns considers how some investment firms excel at communicating effectively when times are tough. We also provide a few topical favorites from our reading list — including a novel reminiscent of Edith Wharton with real-life stock charts.
With best wishes,
Liz Hecht
Founder, Principal and Director of Research
Alpha Partners is an investment marketing firm specializing in research and presentation strategy. Our goal is to create alpha (excess returns) by helping investment firms win, keep and diversify assets under management.
On the eve of the US long-term debt downgrade, my husband and I are preparing for our regular quarterly meeting with our investment advisor. We manage our portfolios separately. He is conservative and I am moderately aggressive, so we tend to balance one another. This time, though, he is asking me questions that I cannot readily answer — about the implications of the downgrade and how he should position his portfolio given the recent Sisyphean activity of the markets (one step forward, three steps back).
So I head to the Internet to gain some perspective, visiting the websites of some of the largest investment managers — all companies with billions of dollars under management and impressive communications teams. What I find there ranges from feast to famine. Some firms offer so much rich, diverse, timely commentary on current market activity that it’s almost overwhelming (in a good way). I invest with some of these companies and I am happy to see that they are cognizant of what is going on in the world. Other sites for multibillion dollar asset managers, however, prominently feature commentary on news that is now many months old, just as if this mess of a market had not happened yet, and still others bizarrely ignore current events altogether.
I visit the site of a firm renowned for the accuracy and timeliness of its macroeconomic insights and all I find is a lot of brand messaging and public relations blather about what a cool place it is to work. I find this insulting and I bet other people, including prospective clients, feel the same way. Presumably the macro insights are reserved for paying clients, but this firm, which is not closed to new assets, would be better served by at least affording prospective clients a glimpse of its legendary acumen.
Communications Strategies for Volatile Markets
When times are tough, asset managers — all asset managers, but especially large, multiproduct firms — have an obligation to communicate. In my review of dozens of websites for multibillion dollar global firms from August 8, the Monday after the downgrade, to the end of this month, I encounter several commonsense strategies that strike me as being particularly effective:
Move Fast. The best websites always have new information and insights, with postings time-stamped for freshness.
Educate. Moving this fast might mean that these firms don’t necessarily have fully formed views yet. But they can still help investors by explaining what is going on and what it might or might not mean. On certain asset manager websites, for example, I was relieved to find answers to questions about the downgrade that I had not even thought to ask.
Be systematic. The investment business at the higher levels has become a publish-or-perish enterprise. By having a series of regular publications, the best firms are automatically geared up to address big-picture events in a timely fashion.
Communicate with a human face. Fireside chat-style video clips with Chief Investment Officers and lead Portfolio Managers present a human face when investors are most in need of reassurance and accountability from the people managing their money.
Consider the big picture. Communications are never more important than during times of stress. Your firm has a simple choice regarding what message you want to send on your public website: “We have no interest in the larger top-down world around us” or “We are here for you and we want to help.”
Fortunately, most global investment firm websites want to help. I read everything I can and I start feeling a bit more hopeful, a bit less like Sisyphus. I have a well-informed conversation with my husband prior to our portfolio review meeting and we are both well prepared. This process gives me a huge measure of sympathy for those who are responsible for investing billions of dollars of other people’s money. I am grateful to the asset managers who have helped me to understand what is going on; in the future, I am more likely to visit their websites, and to continue investing with them.
A Tale of Reach and Grasp
“‘Only fools and charlatans try to time the market,’ he announced, looking at Joe. ‘Which are you?’ Listening to him, Joe thought how satisfying it would be to punch him in the face.”
— From A Hedge Fund Tale of Reach and Grasp … or what’s a Heaven for?
In addition to scouring asset manager websites for perspective on the current markets, I head to Amazon where I am happy to find the latest book by Barton Biggs. I am delighted to find that it’s a novel — and a novel with stock charts no less! The dust jacket compares A Hedge Fund Tale to An American Tragedy and Bonfire of the Vanities, but to me it also reads like the best of Edith Wharton.
Eyefuls of Bark
“Here I was, obsessing over all these individual companies, and never once giving thought to the bigger picture, geopolitical or otherwise. I not only was missing the forest for the trees, I had my face pressed up against the trunks so closely I had eyefuls of bark … I vowed that I was going to try to do more macro research and risk management, a high concept that had permeated the hedge fund world after LTCM [Long-Term Capital Management], but that I and a lot of others viewed with ambivalence.”
— From Diary of a Hedge Fund Manager, From the Top, to the Bottom, and Back Again
Diary of a Hedge Fund Manager, by Keith McCullough and Rich Blake, provides one investor’s firsthand account of the manic, lemming-like orientation of the stock market during a boom. As with A Hedge Fund Tale, the perspective of history provides balm to the soul. As I always say, when the going gets tough, the tough … read.
So I head to the Internet to gain some perspective, visiting the websites of some of the largest investment managers — all companies with billions of dollars under management and impressive communications teams. What I find there ranges from feast to famine. Some firms offer so much rich, diverse, timely commentary on current market activity that it’s almost overwhelming (in a good way). I invest with some of these companies and I am happy to see that they are cognizant of what is going on in the world. Other sites for multibillion dollar asset managers, however, prominently feature commentary on news that is now many months old, just as if this mess of a market had not happened yet, and still others bizarrely ignore current events altogether.