June was one of the best months for hedge funds this decade. Anecdotally, as risk appetite improves, investors are starting to look at the sector once more. It does look like the industry is turning the corner but also facing an environment that is different from even one year ago.
There are challenges ahead. The draft EU regulations for hedge funds are causing consternation, and look likely to go through. The increasing institutionalisation of the investor base and increasing investor scrutiny is putting pressure on fees and raising infrastructure costs.
Looking at these challenges, it is clear that communications strategies are becoming ever more important. One way to reduce pressure on fees and to enhance confidence in a firm is to carry out brand building exercises involving third party media endorsement.
The current challenges to the EU regulation of hedge funds are an excellent example of good and bad PR by the industry. At the bad end are statements by hedge funds that they will “up sticks” and move to another, friendlier jurisdiction. This smacks of a fit of pique and is manna from heaven for politicians and those making the regulatory case.
The industry needs to speak with one voice if the EU is not to pick off the dissenters one by one and win the day.
Interestingly, this allergy to regulation seems to be an Anglo-Saxon view. At a recent breakfast that we hosted for French hedge funds, the speakers said that they were comfortable with the idea of increased regulation. For a PR professional, this indicates that the messaging used for UK consumption has to change to reach European ears. Stanley Fink seemed to understand this in an FT interview last month in which he indicated that US and European regulators could end up indulging in regulatory warfare if the present proposals go through. This is bound to get EU regulators’ attention.
The industry needs to speak with one voice if the EU is not to pick off the dissenters one by one and win the day. There are strong reasons why the draft regulations need amendment. These should be stated by both the hedge fund and private equity industries alongside the financial services industry. Also imperative is an agreed strategy which understands the key audiences, with common messages and with a clear end goal in mind.
AIMA’s initiative to establish a panel of leading managers shows coordinated action, as does working more closely with groups such as the NAPF. Such consensus building gives a much more positive impression, especially if it coincides with unified messages.
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