In the sixth season of the AMC show Mad Men, Don Draper and his colleagues find themselves facing a new world: television. Previously, the Mad Men were smug and glib about their professional abilities to create ads that pleased clients and lined their wallets so that they could afford the lifestyle portrayed on the show about the advertising world in the 1960s and all the cigarettes, alcohol and chronically inappropriate behavior that went with it. The introduction of television into the advertising world changed all of that.
While some of the firm's partners embrace the benefit of getting their clients in front of a much bigger on-air audience, other Mad Men saw it as nothing more than fad, much to the frustration of the firm's head television sales guy.
Similarly, Type-A hedge fund guys whether they are the scotch/smokers or organic water/kale eaters have been comfortable with their ability to raise and increase assets for their funds. Many times these funds are one in the same as their managers: large behemoth funds with managers who are larger than life themselves: showy, self-assured, and watched and frequently imitated.
While most hedge fund managers thought that they were still in season 5 (minus the TV advertising) the SEC at long last raised the curtain on allowing hedge funds to advertise. Through a provision of the JOBS Act (Jump-Start Our Business Start-ups), hedge funds will be allowed to mass-market their products, including TV. Once again, television rocks the "stable world of the macho men" whether on Wall Street or Madison Avenue. Magazines, newspapers, radio, online and certainly through digital and social media channels, come this fall hedge funds will be able to promote themselves in ways they were never before allowed. But will they take advice? The problem is, the hedge fund industry isn't even close to being prepared for it. They were lulled into a deep sleep due to the lengthy period that it took to be enacted.
That is where is see the world of "Mad Men Meeting Wall Street" which I wrote about a year ago. Where there is money to be made, there is money to be spent on creative advertising. Witness the marketing machine that is most of Wall Street and the confusion that has become a landmark of heated debate, lawsuits, and regulatory penalties. Some bigger hedge funds are likely to use this opportunity to lever Madison Avenue's prowess to market investments to consumers who are unable to understand the risk or unwilling to read the reams of "unreadable" and complicated disclosures that come with these investments.
But there is so much more to consider. For starters, not every hedge fund has the same target audience: chances are that taking out a 30-second spot during the Superbowl touting the benefits of alpha isn't going to impress many pension or foundation investment boards. Then there's the HNW segment. The next generation of wealth doesn't read the paper version of the Wall Street Journal every morning and watch the 6 o'clock news. They get -- and receive -- their information on the fly, through Twitter and other social media channels. They proactively seek it out online. How does a hedge fund get in front of that audience, or at least make sure it's saying what it wants to say in the right way when that audience finds them?
There is a real opportunity in the hedge fund industry to educate investors, create strong brand identity through differentiated, compelling messages to drive interest in specific funds or strategies. Social media platforms and a demographic shift toward a younger wealth make this opportunity perfectly timed for some funds to on-board many new investors especially those which have an impact investment aspect. NextGen wealthy are interested in "doing good while doing well." Affinity and community are key components for funds to succeed.
There are also the naysayers and the "old skool" crowd who refuse to change or accept the importance much as some of the Mad Men did until Episode 6. There are plenty of hedge funds who say they don't need or want to advertise at all. "We are oversubscribed". "We don't want to draw attention to ourselves". "We already know who our potential investors are". "Our potential audience isn't that big". "We don't want our competitors to see our numbers or our strategy". Please. Did GM stop advertising because people were buying Chevys?
It's riskier to do nothing. Hedge funds have an opportunity to be transparent and describe their core values, investment strategies and much more than just "track record." But, I'd argue that the biggest challenge facing the hedge fund industry with respect to the JOBS Act is that they can no longer hide. A hedge fund without a website, blog, Twitter feed and LinkedIn profile will be the equivalent of a bank or investment firm that only does business in person from 11-2 three days a week. They will need to be "schooled" in best practices on allocating their marketing budgets toward real targeted clients and new AUM. Put down the scotch, drop the cigarette and listen.
Just like in Mad Men, hedge funds will need the help and expertise to hone their message, get their "pitch" right, target it to the right audience and do it in such a way that makes sense for their investors and prospects. While the JOBS Act poses incredible opportunity for an entire industry previously forced to keep quiet about themselves, it also opens the door to massive risk for those who think they don't need to do anything about it or worse for those who think that they know it all and can do it on their own.
Those guys will be the ones nursing a three-martini lunch with a pack of smokes a la Mad Men. But come one night in January, you may see hedge fund ads during the SuperBowl 2014 forever replacing the Doritos and beer.