Sunday, October 5, 2008

Hedge Fund Communications 2 - Redemption Season




Hedge funds are facing a truly unprecedented confluence of events, and when they need it the most, communications seems to be the skill that too few have an adequate store of right now. To date the success of the hedge fund industry has grown largely on the back of its ability to deliver uncorrelated alpha - i.e. performance. As such, many funds simply haven't felt the need to leverage the power of PR. For years performance remained high and when a particular fund was down it didn't matter: overall market confidence in the sector remained strong. Even uniquely spectacular blow ups like Long Term Capital Management and Amaranth were seen as just that: isolated incidents, worth examining from an intellectual standpoint but hardly denting the exponential investment in the hedge fund market.

Today several things are happening at once: 1. Performance is the worst in many of these funds' histories and shows no sign of improving soon 2. knee-jerk regulation like the short-selling ban is complicating hedge funds' business in ways they could not anticipate and, most importantly, 3. for the first time ever there is endemic fear and uncertainty in the market. These are confusing times in which institutional investors will inevitably fly to safety and poor performing hedge funds are having to explain to a panicked investor base not just why performance is down this quarter but why this string of poor performance does not mean that they are going out of business. Suddenly communication has become very important and too few fund managers have these skills available on hand...

With redemption season upon us - now, more than ever before, is the time for funds to seek professional support.

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