Marketing Opportunities for Successful Hedge Funds

Until earlier this year, the world's hedge funds were the envy of the financial world having seen total assets under management surge fivefold since 2000 to about $2 trillion according to Hedge Fund Research. However, hedge funds likely lost 5%-9% in September, the worst monthly performance in more than a decade, according to a Hennessee Group report on 10/3. With a plummeting returns, many funds are facing high redemptions and difficulties in attracting big institutional investors such as pension funds and endowments.

According to a recent survey from Prince & Associates in the Wall Street Journal, 81% of investors with $1 million or more in investible assets plan to take money away from their current adviser. An even larger number, 86%, plan to tell other investors to avoid their advisor. Only 2% plan to recommend their firm to other investors. Interestingly, for clients whose investment returns are outperforming the market, fully half plan to take their money away from their adviser for reasons of bad service.

For the hedge funds that are performing well, now is a time of opportunity. Hedge funds which are outperforming the market should step up their marketing efforts and make sure to tell their clients that they are looking to grow through referrals. Positive buzz will resonate much more loudly in a world in which it is rare. The longterm hedge fund winners wil be those which continue to outperform the market while serving their clients well.