Alternative investment fund managers have by and large not utilized the marketing opportunities resulting from the JOBS Act, according to Preqin.
After surveying over 150 private equity and hedge fund managers, Preqin found that only 4% of hedge fund managers and 5% of private equity managers said they registered to market under the JOBS Act. Many managers think their core client base of institutional investors is better reached through traditional methods of connecting and building relationships rather than through mass marketing, says Preqin.
Furthermore, most U.S. managers surveyed don’t think the JOBS Act is positive for the industry. 50% of these hedge fund managers said the law will have no significant impact, and 21% said it will be a negative for the industry. 55% of private equity managers think it will have no significant impact, 19% see it as a negative.
The most common barrier to marketing under the JOBS Act is cost, according to 42% of hedge fund managers and 24% of private equity managers. Another 21% of hedge fund managers said the largest obstacle is that they don’t want to be the first to market with this type of advertising. The second most common obstacle for private equity managers is the JOBS Act conflicting with AIFMD, according to 22% of these managers. 20% of private equity managers cited increased scrutiny from the SEC, and another 20% said the negative perception of marketing is the largest obstacle, a sentiment shared by 18% of hedge fund managers (their third most common concern).
However, more hedge fund managers than private equity managers are considering mass marketing in the future. 20% of hedge fund managers said they might advertise in the future and have discussed the possibility, whereas only 3% of private equity managers said the same. Another 5% of hedge fund managers definitely plan to advertise in the future, while 3% of private equity mangers also plan to do so. More private equity managers, 11%, are in the maybe category while waiting to see what their competitors do, compared to 8% of hedge fund managers in this boat.
The majority, 55% of hedge fund mangers and 63% of private equity managers, said they don’t plan to advertise at this time, and a further 8% and 14% respectively said they never plan to do so.
“[M]any fund managers are wary of being the first movers in this space, and with the first adverts already printed, we could see a shift in attitude in the future as alternative asset funds—in particular hedge funds—begin to think of new ways to attract a different audience to their vehicle. As the challenges of competing not only with other alternative asset managers, but also against the growing numbers of alternative mutual funds, continue to become more significant, we will see alternative investment managers think more broadly in how they market their funds. At this time, alternative asset managers are being rather conservative in their attitude towards direct marketing; however only time will tell how the industry will embrace the opportunities that JOBS has opened up for private funds and it will be interesting to see how this sector develops over the next five years,” says Amy Bensted, head of hedge fund products at Preqin.
Most Alternative Investment Fund Managers Wary of Advertising
Alternative investment fund managers have by and large not utilized the marketing opportunities resulting from the JOBS Act, according to Preqin.