In recent years, the hedge fund industry has experienced challenging times due to financial scandals (e.g., Bernie Madoff, SAC Capital, The Galleon Group), the Great Recession of 2008–09, and weak performances by many hedge funds. Additionally, some major institutional investors have become disenchanted with low investment returns and high management fees. Some, such as the California Public Employees’ Retirement System (the largest pension fund in the U.S.), have pulled their multi-billion-dollar investments from hedge funds.
As a result of these and other developments, hedge funds are realizing that they need to provide exceptional client service to attract investment from institutional investors. Thomas Walek, president of Walek & Associates (a financial and corporate public relations firm) nicely summarized the changing expectations of investors in a speech to hedge fund managers: “Performance is not enough—even if you have it now—because no one has it forever. Today’s investors want to know what is going on. They want to know the people doing it. And they want to be in the loop and understand when things change, good or bad.”
As a result, many firms have expanded or created investor relations/marketing departments. These actions pay off, according to a seven-year study conducted by Chestnut Advisory Group, an investor relations (IR) firm that specializes in the asset management industry. It found that asset managers who implemented effective IR strategies brought in $133 billion more in assets under management during the seven-year study than managers who did not launch such initiatives.