Barclays Capital has published a study showing more investment in marketing and communications. The Report noted that managers see a heightened need for dedicated relationship building with investors and more due diligence before any commitment of new funds. Key trends include additions to marketing personnel and better asset gathering techniques.

Marketing and IR are now important functions for alternative fund managers. Additionally sales processes are changing. The old ways are now old fashioned.

Andrea Gentilini, Head of Strategic Consulting Barclays Capital Prime Services division notes:

"the dramatic changes in the hedge fund landscape caused by the market dislocations have forced managers to be more strategic in their asset raising practices and brand management. Managers can no longer let returns sell themselves - today’s investors want more communication, more due diligence and more transparency. Funds that focus on this have clearly been recognized by investors."

Investment in marketing and IR personnel

Headcount at moderate size and smaller alternative investment managers looks set to increase proportionately more than at the largest firms. There is a clear trend of investing in new calibre marketing and IR people. Traditional rolodex of contacts has become less important managers are seeking individuals who can manage multiple leads and follow through to secure assets. Growing IR and marketing functions shows the importance these areas are now having in alternative investment management firms.

The chart shows the current and target size of IR/marketing departments across different size alternative investment groups. 

Changes to the asset raising process

Barclays Capital study shows that finding, prospecting and closing of investors has changed. This is easy to understand given the environment in the past two years but many sales teams may be plugging away in the same manner. The biggest shift has been that sales cycles have approximately doubled in length, with potential for this to increase further. This creates a business challenge as firms need to operate more effectively across the full sales cycle and while requirements have grown, resources and time have not. The table below shows the changes over the past year.

The mathematician’s approach to improve the asset raising game is to generate better quality leads then focus more effort on converting a higher portion of those through to the close. From a resource perspective targeting and closing is easier when the right leads come in the door. This makes sourcing the most important and challenging activity in the sales process. Our analysis is that institutional investors have become more elusive and reaching them in the first place is more difficult as investors need to do more desktop work before opening the door to developing a relationship with investors. This means that sourcing, despite changing little according to BarCaps study, is the area that needs smarter activity. 

To improve the sales funnel fund mangers need to increase their visibility and opportunity to engage with investors. Ironically, a more passive marketing approach increases the chances of inbound interest for the fund manager. If an investor has an opportunity to learn about a fund remotely, through reading regular monthly reports for example, they build a relationship with the fund. If they then choose to take this a step further they contact the fund manager. A warm lead coming to the manager more often means greater chance of converting to a sale. So fund managers' need to get the message out to qualified investors - broadcasting is imperative here. Though what to broadcast is another fundamental basic that fund managers' need to get right before they even think about sourcing - producing institutional grade materials is imperative as well.

The need for marketing skills as the investment landsacpe improves is more fundamental as competitition for capital is intensifying.