A Hedge Fund Is Forever

Heard the phrase, ‘A Diamond Is Forever’? Probably.

It’s been in every De Beers engagement advertisement since 1948 (as of 2016), and was also awarded the “#1 Slogan of the Century” by Ad Age1.

How did this famous slogan come about? A quick step back into history…

Diamonds were seen as an extravagance for the ultra-wealthy, and sales had been declining since the 1920s. The Great Depression caused sales to plunge further and diamonds became the furthest thing in most women’s minds. Diamond brokers worried about when the final killer blow would be delivered.

Even the brains (Mary Frances Gerety) behind the slogan had said:

“Women wanted their men to spend money on a washing machine, or a new car, anything but an engagement ring”.

“[Diamonds] were considered just absolutely money down the drain”

Then came the birth of a slogan: A Diamond Is Forever.

Branding, A Story, Consistency, And Just Good Marketing

Of all the precious stones available in this world, why diamonds?”

De Beers hired N.W. Ayer (an advertising agency) in 1938 to make Americans fall in love with diamond engagement rings. Engagement/ wedding rings had been around for a long time, but having diamond engagement rings was never a tradition. De Beers made it one. Like Apple and Google’s customers decades later, De Beers’ audience didn’t know what they wanted until it was presented to them.

Thanks to the audacity of their branding and advertising proposition, and nearly 70 years of consistent messaging, the diamond engagement ring is de rigueur virtually worldwide, and the diamond is by far the precious gemstone of choice. Ads with the slogan appeared on newspapers, billboards, TV advertisements, and in the modern day, in online ads . It didn’t just happen overnight.

With their brand, they also created a story of timelessness.

In annual reports to De Beers starting in the 1940s, N.W. Ayer often made mention of advertising focused on “the engagement diamond tradition.” There actually was no tradition, but the more they told the story, the more the public came to see it as fact.

Becoming ‘Forever’

De Beers is a fine example of the power of branding, a great story, consistency, and just damn good marketing. When things aren’t looking so rosy, your brand helps you hold on and to take the charge in the fight. When things get better, it’s what helps you stand out as the preferred choice.

De Beers was (and arguably still is) in a unique position: they sold something that people didn’t want, and didn’t need. And yet, they continue to be one of the biggest providers of diamonds in the jewelry industry.

Hedge funds certainly are not in that position.

The top investment talent in the world is concentrated in hedge funds! Yet many still allocate their money or their clients’ money elsewhere.

Do they not trust hedge funds?

With great managers, drawdowns are consistently reversed with very aggressive recovery as the market shifts. Yet investors panic, and react by redeeming – even though they previously believed in the manager’s ability to rebound.

-  With all investor communication focused on performance, is it any wonder that there’s nothing to talk about – and rely on – when that performance inevitably falters?

The alternatives industry is maturing, and performance is becoming more homogeneous. Your brand, the story you tell, and the experience that enriches LPs has to precede and encapsulate messages about performance in order to make your hedge fund ‘forever’.

What that translates to? Re-ups and sticky capital, two things our industry places enormous value in.

By Alan Chu