Brand Over Performance

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Brand Flow Chart Blue Marker

 

Hedge funds and PE funds need to position their brand in front of their performance…

 

Hear me out.

 

This is what the landscape looks like today:

 

Service Providers         Brand         Pedigree         Performance

Less important ————————————— Really Important

 

This is what I think it should look like:

 

Service Providers                              Pedigree         Performance      Brand

Less important ————————————— Really Important

 

Did you notice that “performance” didn’t move on the scale? We simply re-positioned “brand.”

 

My Rationale

 

The alternative investment sector is maturing.  In plain speak, the luster is gone. Nowhere is this more evident than the recent press about hedge funds – there isn’t much in the way of positive stories these days. Private Equity is doing OK, however, it is not immune to the logic herein.

As it relates to hedge funds, the press would like you to believe the sky is falling because those stories attract more eyeballs (the old adage is “if it bleeds, it leads”). It’s not. The industry is just growing up. There was huge growth.  Everyone piled in. Now things are saturated. This is what happens when industries mature. It is inevitable.

 

What’s Next?

 

Well, things will start to consolidate. The managers that probably shouldn’t be managers will die off.  The strong will prevail, and a shift will occur.  We will end up with fewer, but better managers.

With fewer, better managers in play, the gap between the best performer and worst performer starts to narrow.  It becomes harder to spot the difference between players.

This is why brand building is so important in mature industries.  As competition intensifies, products – and performance – become more homogeneous. Focus shifts from the attributes of the product to the reputation of the company building the product, which directly points to the importance of building a brand

Case in point, what is the difference between Coke and Pepsi, Ford and GM, BMW and Mercedes, etc.? Your perception of these goods has less to do with the actual product than with the attributes of the parent company.  I don’t know a damn thing about any given BMW vehicle, however, I have a very favorable appreciation for the company.  This is where all good marketing starts. It ends with intense loyalty. In our industry, this translates to re-ups and sticky capital, two things our industry places enormous value in.

 

Tying it off, if you expect to achieve longevity in the asset management game, you are naïve to think you can accomplish that based on performance alone. It won’t be long until you are standing amongst peers that look like you and talk like you. I will gamble a guess that you might already be there.

To achieve success in a mature industry you need to build a reputation that extends beyond the product you sell. Conducting commerce needs to be a rich experience, not an isolated event.  That is what it means to be a brand.

 

By Kyle Dunn

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