As we head into the second quarter of 2020, we have seen an increase in market volatility, primarily fueled by the emergence of the coronavirus, leaving the investing world uncertain about the markets and global economy.
Markets have seen their biggest drops since 2008, and managers have lost a significant amount of money. This has especially affected boutique managers. Because market volatility and uncertainty may continue for some time, active managers with a proper strategy will be well-positioned to retain clients and have a better opportunity to capture more assets when the market recovers.
Also, with fewer people investing in active strategies and more options to choose from, competition is extremely fierce. Due to a generally strong market over the years, AUM, profits and bonuses have grown. Though many firms have seen record-breaking revenue, these signs are a false positive.
"Strong revenues do not guarantee a strong business. Firms need to grow their client base to thrive in 2020," says Dan Sondhelm of Sondhelm Partners, a marketing consultancy. "Firms need strategies that help them truly differentiate if they want to survive."
Here are three ideas asset managers can use to be more competitive going forward.
CHOOSE YOUR NICHE AND FOCUS
Don't fluctuate.
You can't be everything to everybody. You have to choose a niche and focus.
Donna DiMaria, founder and CEO of the third-party marketing agency Tessera Capital Partners says the trick is figuring out what you're doing that's a bit different than everybody else.
"Everyone does research and everyone talks about their process. But what's different about yours? For instance, if you're a dividend manager and you're tracking dividends by hand, there you have a differentiating quality," she says.
To determine your niche, step back and interview your senior managers, every PM and every team member. This will give you a sense of who your organization is and what drives your entity. It will also help unify your firm around brand messaging. It's also important to identify your weaknesses.
Morningstar finds that active managers have left a lot to be desired.
"If you have an investment strategy you're not good at, maybe scale down or sell it," Sondhelm says. "If you're a great money manager that doesn't have a strong marketing and sales program, you might partner with a firm through a sale or fund adoption."
Figuring out your positioning and messaging is also dependent on the competitive landscape. Ask yourself: How do you differ on structure, messaging or storytelling?
DiMaria offers some suggestions for doing competitive research, including reading the press and investing in industry databases. She also recommends keeping your investment strategy consistent with the brand positioning you're putting out into the market.
"If you're known for being a concentrated manager and all of a sudden you're adding stocks, people are going to start to question your track record," she says.
"Or if you've always been overweight in a certain sector and then all of a sudden you become underweight, they're going to question that," she adds. "Gatekeepers are looking at this carefully. How much style drift are you having? How true to your process are you, and how complementary are you with the other managers? This is especially important if you're dealing with a manager-manager program or a multi-manager allocation; these style bends become so important.”
Key takeaways
- Know what you're good at and focus there.
- Interview your team to get a sense of who your organization is and what drives your entity.
- Know what you're not good at and minimize or remove those weaknesses.
- Figure out how to position the firm based on the competitive landscape. Once you've identified your niche, be consistent.
RETHINK YOUR CONTENT STRATEGY
Stand out by saying less. To get discovered and stand out from the competition, you must have compelling content. The problem is, there is too much content out there, and readers are tired. In order to capture your readers' attention, you need to say something different and say it quickly.
Sandra Powers, founder and CEO at marketing consultancy Ark Global, says asset managers must rethink how they're communicating.
"There seems to be a disconnect between what investment managers are putting out and what the market wants," she says. "Investment managers have a deep sense of investment acumen, so they want to put out a 20-page white paper, but that's not what the market wants. You have seconds to capture someone's attention.
"One thing you can do is to take that 20-page white paper and break it up into several pieces for video, social media, blog posts and emails. You can say a lot in a few words, just make sure your content is in line with your channel strategy in terms of who you're focusing on," Powers says.
There seems to be a disconnect between what investment managers are putting out and what the market wants.
Asset managers are already creating a ton of content that can be reused and repurposed. Long-form content such as presentations, white papers, database responses and commentaries can be broken up into bite-sized pieces.
For example, RFP responses can be turned into short blog posts. Longer-form content can also be formatted to give people the option to skim or go into a deeper read.
For example, write shorter paragraphs, stay away from industry jargon and use bullet points to sum up the highlights.
Other ways to create strong content are to take notes during sales meetings or have a monthly meeting with the PMs where they talk about what they're seeing in the market and in their portfolio.
To bring in more of the voice of the team, marketers can interview subject matter experts on a given topic and then let those experts review and edit a draft. This is much more effective than asking them to create content from scratch.
Once you've created your content, make sure you're consistently getting it out there in the right places. Using a visual content calendar can help you effectively plan your distribution strategy.
Key takeaways
- Strong content wins, so say something different and say it quickly.
- Bring in more voices, like subject matter experts, from the team by collaborating cross-departmentally.
- Break up longer-form content into bite-size piecesUse a visual content calendar to plan your distribution strategy.
FOCUS ON CULTURE
Integrity and diversity are differentiators. In today's environment, it's important for firms to recognize success goes beyond performance or hiring top talent.
It's about creating a culture of integrity and diversity. Also, it's about building trust with investors and employees, and doing everything you can to protect that trust.
Late last year, we saw evidence of this when individual investors pulled $20 million from Fisher Investments following sexist comments from the billionaire founder, Ken Fisher. Institutional investors pulled several billion dollars.
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Fund managers may be better equipped to weather the market storm than their passive peers because of their ability to quickly cut risk.
March 9 -
Passive ETFs are often among the first to feel the pain of investors fleeing risky emerging markets for safer assets.
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Your goal should be a visually compelling site with brief, concise content that immediately tells a visitor who you are, says marketing expert Dan Sondhelm.
March 30
DiMaria says, "Integrity has always been important, but the Fisher incident goes to show that it's paramount today. It also showed us that there is a lot of resilience left in the marketplace, and it's not all about performance. It's about integrity and it's about infrastructure, process, repeatability and managers that people can count on."
That said, success is heavily dependent on the people you have on your team. Not only do you want to hire good people, but you want to hire people from diverse cultural and generational backgrounds to take advantage of different skill sets.
Powers emphasizes this by noting, "Organizations have to understand cultural and generational differences and take advantage of them instead of pushing them away. You can't run things from a tyrannical perspective.
"There is a big difference in how the new generation does their job, but there needs to be a meeting of the minds. Some of the more compelling people make up the junior staff. Pick their brains and get their ideas," she says.
Many firms claim they are focused on diversity after checking the box with one diversity hire. That is something investment managers need to change going into 2020.
Other firms are becoming more diverse, but fail to showcase their advances. So, to the public eye, they fail to portray diversity.
Powers recommends starting by making some simple changes on your firm's website.
"Instead of displaying an organizational hierarchy, showcase your entire team to highlight the diversity and talent beyond senior management," she says.
Key takeaways
- Develop a culture of integrity and trust with investors and employees.
- Embrace different talents and strengths from both younger and older generations.
- Highlight your diverse team, not just senior management.
