It’s been more than a year since the SEC approved Rule 506 of Reg. D permitting the use of general solicitation and advertising. Broadstone Net Lease, a growing REIT, wasted little time thereafter marketing to new investors lowering their minimum from $500k to $250k and admitted approximately 300 new investors. Their estimated increase was over $100,000,000 in the first 60 days after the SEC ruling and by the end of 2014 they surpassed $1 billion total market cap.
While watching the March Madness games this past week each coach utilized every weapon they had on their bench for every scenario. In the competitive hedge fund world, it’s surprising that the industry as a whole hasn’t brought in their new 7-foot recruit to boost their sales practices thus far.
Every business is competitive. Especially those that require a steady stream of investment capital. Post JOBS Act, there will be winners and losers. Following are some predictable bets on the evolution of the category over the next few years:
1. Initially, most funds will continue as if nothing has changed. They will feel comfortable with the “let’s wait and see” approach.
2. A small portion of funds will better position their accomplishments online and through direct campaigns to small pools of investors already in their rolodex.
3. Funds will create new opportunities by altering their investment specs (new minimums, new investments like 40 Act Funds, highly specialized micro funds). Most companies won’t understand the difference between brand marketing and specific product or initiative marketing.
4. More fund mangers will start to escalate their PR presence. They will want “organic” press without fully committing to marketing their fund. This is why some mid-size and large PR firms are buying smaller PR firms right now that specialize in the category.
5. These funds will realize that PR doesn’t control the conversation, so a few early adapters will start to aggressively market directly to new investors – predominantly larger institutional clients with deep pockets and placement firms. We’ll see some good old-fashioned prospect poaching. Most funds will not understand how to brand themselves properly. The majority of funds in the industry will be blissfully ignorant of this shift.
6. A very small group of smart funds will develop a smart brand strategy that defines their reason for being and differentiates their company. Owning a core promise will be critical early in the process before budgets are wasted on marketing campaigns that have no clear brand benefit.
7. More placement agents will inquire about marketing plans, brand strategy and budgets to appeal to their pool of investors as standard part of the process.
8. Most funds will be caught off guard when they see their competitors marketing. Larger funds will ramp up quickly. If small and mid-size funds don’t develop marketing plans with a dedicated budget they will always be playing catch up.
9. Some large funds will employ in-house teams that will create marketing campaigns that will predictably look and feel “institutional”. Funds that outsource to advertising experts will create some campaigns that stand out.
10. As the investor share-grab intensifies, the net will widen for more investors. Highly targeted campaigns to qualified candidates with direct marketing (both digital and traditional), social media, collateral, B-to-B print, content marketing, etc. will give way to broader consumer brand marketing through mass integrated channels.
11. Similar to the mutual fund boom of the 80’s and 90’s, the number of players in the category will expand. Some smaller firms that have integrated campaigns will grow exponentially, some larger firms will become household names. While some funds will continue to “get by” doing the bare minimum, a portion will falter and begin to lose ground.
12. Overall the new paradigm will create an environment that continues to become more competitive for investor eyeballs.