By David A. Goldman
Hedge fund managers are notoriously reticent when it comes to talking about themselves publicly and, save for a few, they’ve always had a bias against speaking to the media. Regulatory barriers, including the ban on general solicitation have sometimes stood in the way. But those walls are close to coming down. Still, many managers wonder why they should even care about their online reputations. After all, most hedge fund investments are borne from private placements. Marketing has not been high on the list of a fund’s priorities and many want to maintain an air of exclusivity that negates any need for mass advertising.
Until recently, most hedge fund managers thought Google search results had no impact on their fundraising efforts. My firm recently met with a senior executive at a leading hedge fund who, just after using his iPad to pick a restaurant online, said to a colleague, “Why should our firm care what [expletive] Google says about us?”
Here’s why: Everyone uses Google as the first step in researching a company or manager. A recent Vanity Fair piece about SAC Capital reported that the Securities and Exchange Commission, with innumerable resources to aid their investigations, used Google to find a critical link in their case against the firm. As they begin to embrace the inevitability of the digital age, hedge fund managers and private equity firms need to take their online reputation seriously. When a potential investor Googles a fund and reads about their poor performance without the benefit of other more favorable legitimate content, the experience can tarnish the investor’s opinion of that fund indefinitely.
According to a recent survey we conducted on the industry, most funds have not taken steps to protect their online reputations. Nearly 30% of the largest funds don’t appear to have a prominent corporate website and, of those that lack a corporate site, 40% have either Wikipedia (24%) or Insider Monkey (16%), the 13F tracking site, as their top Google search result. These are powerful sites that can influence someone's first impression of a fund.
In addition, LinkedIn is the single most popular website seen in search results for top hedge funds – appearing at least once in the first page Google results for 80% of top hedge funds, according to our survey. But most funds don’t have a properly constructed LinkedIn page.
Many funds also have generic names that cause their search results to be littered with sites (from real estate brokers to lawn care specialists) that resemble the fund’s name. These “resemblers” can cause confusion among potential investors and others looking for information on a specific fund. Some firms have resemblers for at least 50% of their Google results.
A growing number of hedge funds we work with have heard from investors that they have a “Google problem.”
One of the biggest concerns investors have when allocating to hedge funds is so-called headline risk. Funds are run by people who also lead private lives and, given the public’s fascination with uber-wealthy individuals; a hedge fund manager’s personal life often becomes the story of the fund itself as portrayed in all forms of media.
News sites love to post stories with eye-catching headlines about the lives of hedge fund managers as celebrity fodder akin to Hollywood stars. One manager we work with saw his fund’s Google results dominated by negative personal headlines about him as he went through a particularly contentious divorce. Not surprisingly, investors in the fund became nervous. It didn't help the firm's recruiting efforts either.
Managers of hedge funds need to understand they have a public reputation whether they like it or not. Most managers are involved in their communities, support charities, teach courses at universities or pen opinion pieces about the markets. Unfortunately these activities are rarely reflected online because managers prefer to keep them private. Transparency can have positive effects and it follows that funds should make sure to refer to and promote existing sites that focus on the principal’s business achievements and philanthropic activity. They may also consider creating new content that speaks to issues they care about.
But a fund’s reputation is not always about one person. Many fund managers are approaching an age where investors naturally worry about who will run the fund in the future. More often than not, the candidate being groomed to take over has almost no digital footprint – a problem for investors who are already nervous about the transition. Positioning the new manager as a thought-leader with a proven track record is important for a smooth transition.
To raise the profile of the successor, the fund should anticipate the type of information that stakeholders will be searching for and consider creating and making discoverable content that addresses these questions. This may include working with a PR firm in order to be included in relevant news articles, creating business profiles on relevant financial websites, or working with a Wikipedia editor to ensure that coverage in Wikipedia is accurate and complete. Recently a large fund we work with was written about in a popular financial publication’s “top hedge fund managers” article. Virtually all of the sources and images used were taken directly from their Wikipedia page. This article led to subsequent profiles of the fund that helped create a positive and informative first page of Google search results.
Poor performance is also something that generates headline risk. Even one quarter of poor performance can generate nasty headlines that show up high in search results. These headlines tend to dominate the results when firms lack a corporate website or fail to create a corporate profile on sites Google favors, such as LinkedIn. This vacuum can result in opinionated bloggers or discussion group participants having a disproportionate voice in the online conversation about the firm.
Big consumer brands and public companies are obsessed with their online reputations for good reason. We're living in a new digital age when one blogger or disgruntled client can shape the image of a firm for years to come in the time it takes to click a mouse. Taking control of your own online reputation is the only way to protect it.
David Andrew Goldman is the chief strategy officer at Five Blocks, a technology and digital consulting firm with a focus on online branding and reputation for financial services companies and high net-worth individuals.