NEW YORK - Performance and then marketing, not advertising, are the best strategies for building a fund start-up, executives from small fund complexes said at a conference here last week.
The marketing should focus on cultivating relationships with distributors, supermarkets, transfer agents, ratings agencies and the press - not advertising, they said. Well-crafted, one-on-one marketing efforts are more effective in attracting assets to small funds than are huge advertising budgets, the executives said.
The conference, "Strategies for Small Fund Complexes," was sponsored by International Business Communications of Wellesley, Mass.
The speakers urged small fund executives to use their entrepreneurial talents to develop fruitful marketing relationships.
For instance, even though Firsthand Funds of San Jose, Calif. has grown in its five-years from $2 million to $2 billion today, it is only now budgeting funds for advertising, said Steven Witt, managing director at Firsthand.
Small funds can not allot enough for advertising to effectively reach direct retail customers or distributors through the myriad financial media that exist, said Ashley Raburn, principal of InvestorReach, a public relations company of San Diego, Calif. Even if the messages are reaching the right audience, they will get lost unless the messages are reaching that target audience repeatedly, she said.
"I would invest money right out of the box on public relations, not advertising," Raburn said. "PR gives you third-party endorsements."
Witt of Firsthand agreed that the wide press coverage that his company has received is one of the main reasons his small firm has enjoyed tremendous growth.
To gain mention in the media, Firsthand both cultivates relationships with reporters and has something unique to say, he said. Firsthand's story is quite different from other funds because the portfolio managers have all worked in the technology and biotechnology industries in which the firm's four funds invest, he said. They have many contacts in many different departments of the technology and biotechnology firms in which they invest and are active in obtaining firsthand information, Witt said. Hence, the name of the company, he said. Firsthand is also the only technology mutual fund company located in Silicon Valley, he said.
The fund has commanded enormous attention in the media, he said.
"I like to call us the Blair Witch Funds,'" he said. The Blair Witch Project, a film released this summer that grossed over $100 million but was made on a very low budget, gained popularity by word-of-mouth.
"The mutual fund industry in general is terrible at telling its story, whereas the financial service industry is excellent," Witt said. "You should be able to explain your story in one to two sentences, with passion."
Small fund companies also need to have "competent, friendly, helpful, responsive call center people capable of delivering valuable, personalized information," said Duane Hughes, senior consultant with InvestorReach. That is what investors expect, he said.
Although staffing a call center with people of such caliber is known to be difficult, one great source of call center reps is trainees who have failed their broker/dealer Series 6 or Series 7 exams, Hughes said. The employers of those who have failed are anxious to place these people and the trainees themselves are anxious to find work, he said. Fund companies can retain these people by making the work exciting and showing them a career path, he said. This route has worked so well for some call center reps that they have gone on to become junior portfolio managers, he said.