The one simple thing that Bridgewater does regularly that you can easily replicate
As Kyle Dunn, points out in his book, Raising Institutional Capital: Fight $marter, it’s not possible to have an authentic relationship with an investor if you are always just asking for money. You need to first build trust, credibility and relevance.
Most managers that we speak with confuse “trust” with performance. Sure performance always matters – but it’s not the only reason that an allocator invests. If it were, how do you explain Bridgewater Associates – which despite mediocre performance in 2013 (down in one fund, up small in another against the backdrop of a monster year for the S&P) still managed to hold on to its $150bln+ in AUM .
Yes – it has had a history of high quality returns and no, it does not directly compete with the S&P. But is that really the only reason investors stick with it? Not a chance.
Show. Don’t Tell
Bridgewater does plenty that most investment managers cannot. But there is one thing that every investment manager not only can do, they should do. Bridgewater provides market with value-added content. And they do it regularly and in a variety of forms...research, white papers, letters, videos and interviews. So while many managers spend their time trying to verbally convince investors that they are smart, the team at Bridgewater provides content that makes other people smart. And it is not hard to replicate.
We hear all sorts of arguments from managers as to why they avoid social media and video. It’s purely rationalization. There really are no good excuses.
Think investors don’t want to see commentary? Sequoia Capital has 200K Twitter followers. Think that FINRA won’t allow you to create a video? Citadel – arguably once one of the most secretive hedge funds in the world, seems to disagree. It doesn't just have a video, it actually has an entire YouTube channel.
Not only do you need to start connecting with investors with content, you need to do it a lot. Investors sift through an enormous amount of noise. Start giving them value. Make an observation, identify an anomaly, extrapolate from your area of expertise to the overall industry…or general market….or broad economy…
You cannot be successful in this business if you don’t recognize interesting stuff. Share some of it.
And if you don’t have anything of value to share – why would someone want to invest with you?
By JD David