Making the case for hedge fund managers to leverage the power of social media
Despite evidence of social media’s financial and business impact growing every day, most hedge fund managers are still hesitant to leverage this powerful tool to communicate with potential investors and portfolio company shareholders. In fact, only 11.1 percent of the 300 largest hedge fund managers globally had any kind of social media presence other than LinkedIn in 2015, reports Pensions & Investments. The reason is that most managers are afraid to damage their name. That is too bad because they are missing out on potentially game-changing results for their efforts.
Consider the story of Bison Interests. This was a previously little known hedge fund out of Houston run by 32-year-old Joshua Young. Bison landed a $20 million commitment from a university endowment as a result of building a profile on SumZero, a social media platform for managers and institutional investors to meet.
“Young bypassed an old-boy network that prizes relationships, credentials and word-of-mouth referrals,” explains Bloomberg. This kind of targeted communications can drastically increase efficiencies and productivity, while saving significant amounts of time along the way. All of which are critical executions for the upstart manager. Leveraging the power of social media is a strategic tool to amplify hedge fund managers’ voices, which is especially critical when in activist mode
“We wanted to use social media to educate and inform, but also to communicate and engage. You can’t get the message across in an ad,” explains Paul Farrow, head of corporate communications at £14 billion fund manager Woodford IM. Farrow’s strategy eschews traditional advertising and focuses on social media entirely. (FT)
Some of the brand name hedge funds are recognizing the potency of having a platform to speak directly to its consumers, which include current and potential investors, as well as shareholders of portfolio companies. None other than hedge fund legend Ray Dalio, founder of Bridgewater Associates, is getting in on the social media act. He joined Twitter in April 2017, was immediately verified and had nearly 32,000 followers within weeks. As his social audience grows, so too does his ability to speak directly to his constituencies.
For hedge funds without name recognition yet, social media presents a tantalizing communications tool to enhance the business’ public profile with potential investors. By presenting his or her firm in the proper light and leveraging the power of the right platform, managers can surface in a sea of competition. Executed properly, social media can level the playing field for a crowded space of brand names and upstarts.
While social media may sound like an elixir to cure all of the startup ailments experienced by newfound funds, it is not as easy as a few clicks. Rather, there is a significant amount of thoughtfulness, strategy and consistency that are required to reach a desired audience and to build a following every single day. Having a dedicated communications expert managing the process is crucial. All it takes is one tweet from a well-meaning fund manager to create a sea-change of negativity. “Once something foolish is said on social media, it can be very difficult for a company to take it back or limit the reputational damage.” (FT)
To be sure, social media in its current form is not a replacement for much of the tried and true fundraising and activist methods, but it clearly is a powerful tactic in the manager’s arsenal of communications toolbox. The trick for managers is knowing how to wield its strength properly.