Keeping Up With The Manager Next Door
The fund manager next door launches a brand new, state-of-the-art website. The manager in the upstairs office announces that he’s a keynote speaker at 3 industry-renowned conferences next quarter. Your friend from college starts a fund, and begins by releasing a video with all kinds of bells and whistles; you’re positive that it didn’t come cheap.
It’s hard to grasp why on earth these people are doing this.
“Why are they spending so much on promoting themselves??”
Perhaps they’ve hired a young gun who’s pitched them on modernizing the firm. Or, they’ve given up some ownership to someone who’s insisted on attended conference after conference. Maybe they’ve just gone bonkers?
A backward-looking mindset: Running Shoes
Try answering the question: “What are the first 3 brands you think of when it comes to running shoes?”
A couple of decades ago, Reebok would have been in the top 3 for many. Now, Nike, Adidas, and Asics occupy the Top 3. Mizuno, New Balance, and even Under Armor (!) squeeze their way in sometimes.
Reebok has been undergoing a slow death – losing NBA jersey rights in 2006, NFL jersey rights in 2012, and finally, NHL jersey rights in 2017. And by the way, Reebok was acquired by Adidas at the turn of the millennium, but even that wasn’t enough to save it. A case of ‘too late’, even though it took a while for it to fully happen.
During a time in which Nike and Adidas were competing in advertising and branding, Reebok stuck to its guns – clinging to long-term contracts with teams and leagues, while continuing to run storefronts with much less advertising than its compatriots. Fast forward to today, and it is now a ‘tired’, ‘old’, and ‘forgotten’ sportswear brand.
A forward-looking mindset: Capturing the opportunity
There was once upon a time that lawyers and appraisers never had to worry about clients coming through their doors. We now see ads on billboards, print, and online , and cross-promotion in these industries. The same hasn’t quite happened with alternatives (yet!), but that in itself presents an opportunity to push one’s name above the rest while competition isn’t (yet!) red-hot.
Back to the earlier question…
“Why are some managers spending so much on promoting themselves?”
The state-of-the-art website, spend on conferences, new video are the results of a shift in the industry - in managers’ mentality - and are outcomes of decisions that you can’t see.
They’re spending on marketing because it is viewed as a long-term investment. Having a stronger brand (along with good performance) makes it easier to raise capital. Because they recognize the consequences of poor marketing (running shoes & Reebok). And on the brighter side, because they see untapped opportunities: viewing it as an investment, rather than an expense. They recognize the danger of thinking that what worked in the past will work in today’s market (clinging to the belief that remaining secretive is somehow a great way to market a fund), and its potential consequences.
By Alan Chu