Alternative investment managers slow adopters of digital marketing says 2018 PWC + AIMA survey

The 2018 Global Alternatives Distribution Survey published by PriceWaterhouseCoopers and the Alternative Investment Management Association takes a deep dive into the rapidly changing alternative funds industry and increased investor hypersensitivity to value for money at fee levels that many in the industry would never have considered 10 years ago.

What does investors’ sharp ROI focus mean for fund managers?

According to the 2018 Survey, it means fund managers are changing business and marketing models where they can. Increasingly, marketing and sales are conducted via email and over the phone. Introductions still remain primarily face-to-face ventures. However, new technologies used to market and distribute products in other sectors – including traditional fund management – is still rarely used – an interesting wrinkle in a sector that obsesses over data mining and technologies to unearth and implement investment trends.

Is there a role for digital marketing tactics?

Yes, but, according to the Survey, it is not yet highly developed. Technology has the potential to bring down the high costs of distribution but plays a minor role given the highly specialist nature of many alternative fund strategies, and an investor population that resists marketing automation processes. Responding to the Survey, one Hong Kong-based manager says his firm has “no interest in digital marketing,” other than using email to send out monthly newsletters to potential investors.

This resistance to digital marketing contrasts strongly with the sectors early and rapid adoption of technology for enhancing investment strategies. Hedge funds, in particular, were early adopters of Big Data techniques to uncover market and other trends that could give them an investment edge. Alternative fund managers have also been at the forefront of using technology in their middle offices. But, up until now, not for marketing and distribution strategies.

Digital marketing will expand as millennials move up the wealth chain

No one wants to be the first to test, although some respondents did say they might consider digital marketing if others were doing it. Nonetheless, many of those firms surveyed did say they think digital marketing does have a place in their marketing toolbox.

There are firm websites, of course – step one to bolstering a firm’s profile and digital presence. Interest in social media marketing to communicate with clients and prospects via Facebook, Twitter, or LinkedIn messaging for hedge fund remains low. However, while not appropriate to the current investor base, the understanding is that this will likely change as millennials move up the wealth chain.

The primary means of communication will still be face-to-face and by email. However, there will be an increase in the importance of web-based platforms and, to a lesser extent, of social media.

Is regulatory compliance an obstacle to digital marketing?

Maybe. Despite the growth of millennial high net worth investors, among the barriers to expansion are regulation (both SEC/FINRA and GDPR, etc.), closely followed by a lack of in-house expertise to operate platforms and a lack of willingness on the part of existing investors to engage and transact via a digital platform. The latter will likely change as tech-savvy and tech-comfortable investors come onboard.

 Will more alternative investment managers jump on the marketing bandwagon?

Absolutely. But not willingly. Unlike other investment sectors, this sector still finds its prospects and clients less technologically fluent. But the world is changing. Technology is changing. And the alternative investment marketing arsenal will change too.

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