Every fund conducts in-house marketing to varying degrees. Herein, in-house marketing is defined as a directed, coordinated, and supervised effort with resource and time allocation, measurable progress criteria, and an expected ROI.
In recent years, fund managers who invested time and resources in in-house marketing have been the most successful in increasing the AUM of their funds. Legal and political developments have increased the likelihood of success from internal marketing and have thrown up barriers to some forms of out-sourced marketing.
Infrastructure investment is minimal, often less than what a fund manager invests in a new analyst, trader, or junior partner. Several infrastructure investments carry over into investor relations and so should be set up immediately on fund formation, regardless of a conscious decision to begin in-house marketing.
Fund managers are often reluctant to consider a structured in-house marketing program due to perceived time and personnel investment. The majority of the time investment comes prior to going live with the Investor Contact Program. Rather than planning from a blank slate, many fund managers engage a consultant to provide their funds with an integrated turnkey solution. Although not recommended, some managers have even found the ability to have the same consultant provide ongoing supervision of the fund’s investor contact efforts.
Personnel investment is likewise more intensive in the pre-hire stage. Smaller funds can make acceptable progress with a single internal marketer, but the quality and experience of that individual is crucial to the success of the plan. Mid-sized funds can produce disproportionately larger results with a team of four marketers, with one marketer acting as the team leader and coordinating efforts of the team and liaising with fund management. Larger funds, in excess of $1b AUM, can profitably employ as many as ten marketers, but often see diminishing returns beyond that number.
Verbal and written communication skills are a must for a prospective marketer. Spelling and grammatical errors cannot be tolerated by the fund manager and members of the marketing team must adhere to correspondence styles established by the fund to distinguish their correspondence as professional, meriting attention, and containing valuable information.
A comprehensive, centrally managed contact management system is imperative for the effective operation of an Investor Contact Program. There are several commercially available systems that allow a fund manager to track a prospective investor through the conversion process to closing and then transfer that investor into the fund’s Investor Relations Program.
High-quality databases of investor contacts have been the most difficult item for a fund manager to source. In the past, purchase of multiple lists from a variety of sources, followed by conversion to a common format, and de-duplication of contact information was a time consuming and expensive task. A fund manager could spend up to $75,000 and still have 100 man-hours required by a skilled database administrator to produce a viable list of potential institutional investors. Luckily, Carpe Victoria has such a list it provides to its clients as the cornerstone of its consulting services.
Personnel management is an area where fund managers often encounter problems. The first hurdle is to determine whether to bring on members of the marketing team as independent contractors or employees. Due to the degree of direction required to successfully implement an in-house marketing program, it is recommended that marketers be brought on as employees, rather than independent contractors, to ensure operations in concert with both IRS and SEC guidelines.
Compensation structures vary in the same manner as with third-party marketers: commission only, draw plus commission, and salaried only.
Due to the lead time between introduction to allocation, the marketing team that is structured as commission only compensation will invariably suffer high personnel turnover.
Draw plus commission and salary only structures will help to ensure team continuity and allow the marketing team to develop rapport with potential investors. For small to mid-sized funds, a draw plus commission structure is recommended, combining a livable salary deducted against lucrative future commissions. This process allows a lower commission rate to be offered. For large funds, a cost-benefit analysis between a well-compensated salaried team and a draw plus commission structure is warranted. A salary only structure will attract and retain top quality talent, but the very best talent will often break out on their own in search of more lucrative compensation.
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