Four months ago, Blackstone’s president and chief operating officer, Jonathan Gray, was seen on LinkedIn highlighting the firm’s initiatives on environmental issues, diversity, and inclusion and improving communities. “We think of ourselves at Blackstone as a mission-driven company,” he asserted.
It’s one of many videos Gray has participated in, with other clips talking about everything from the firm’s quarterly performance to its philanthropic efforts and evolving investment strategies. Making a c-suite executive a central part of its communication efforts is largely the reason why Blackstone ranked No. 1 on Peregrine Communications’ inaugural Alts 50 report, which tracked the marketing performance of the world’s 50 largest alternatives managers.
“You need leaders to be out there — to be clear about where the company is going,” said Josh Cole, head of strategy at Peregrine. “It’s a human way to tell the corporate story.”
Blackstone, however, was found to be the exception. Even as most alternatives managers saw assets under management rise over the past year, their integrated marketing and communications performance lagged behind the industry’s traditional asset managers.
In an assessment of 20 hedge funds, 20 private equity firms, and ten credit shops, only a handful were competing at the highest level against their long-only peers, according to the report.
On average, the 50 firms scored lower compared to traditional managers in communications activities, including brand awareness, share of voice, media sentiment, Google page 1 — which measures the amount of positive content that appears about a firm on the first page of Google when its name is searched, and social media, among other metrics.
The key takeaway from the findings: in a fast-changing asset management environment, it is becoming increasingly important for alternatives firms to articulate their propositions to compete effectively.
“Alternative investments may have traditionally represented a fraction of institutional investors’ portfolios, but the tide is beginning to turn,” the report stated. “The corollary is that as alts managers compete more directly with larger asset managers for greater allocations, they must also catch up with regards to their integrated marketing communications, practiced by leading traditional asset managers.”
Peregrine found that high scoring managers have recently shifted communication efforts from a focus on performance to less tangible objectives such as a firm’s mission, vision and values. “One of the primary drivers of this shift from a business perspective is the need to attract talent,” the report stated. “The best firms are tapping into the fact that millennial workers want to work for firms that align with their values.”
What’s more, firms that outperformed on the communications front were 63 percent more likely to grow assets over time, according to Cole. Having a strong brand was also seen to help firms remain resilient when financial performance wasn’t at its best. “Bridgewater is a great example of this. They have not had particularly great performance even during times when other macro shops did well… but its AUM is still bigger than it was seven years ago. [Relative to] their size, they have enormous brand awareness; they compete with some of the biggest firms on the planet.”
Cole, like many of his peers, attributes part of Bridgewater’s strength to its outspoken founder and co-chairman Ray Dalio. “We looked at this a couple of years back. Dalio as an individual had a bigger share of voice than Natixis and Amundi combined.” The best firms, according to Cole, use a key leader to drive engagement and provide a human element to the organization. “A lot of the time, asset managers are afraid to do this,” said Cole. “Something we hear a lot is ‘I don’t want this to be all about me,’ but they actually have very important roles to tell the corporate story.”
Brand awareness, Peregrine’s key performance metric, was down across the industry with alts managers seeing a greater decline at 66 percent against 58 percent of their traditional peers. The average brand score for private equity firms was 6 out of 10, followed by hedge funds and credit funds, which each scored a 5; in 2020, the top 20 traditional firms scored an average of 7.
Less than 20 percent of alts managers scored in the top ranks. Blackstone, which is also part of Peregrine's global 100 list of asset managers, scored the highest, followed by Citadel, Man Group, Advent International and KKR in the top five. Bridgewater, Vista Equity Partners, Two Sigma Investments, Oaktree Capital, and Millennium Management rounding out the top 10. Oaktree was the sole credit manager to land in the top 10.
Some managers may take pride in their low marketing and communications score. Baupost Group, headed by legendary investor Seth Klarman, was last on the list of 50.
“As much of the last decade of unfavorable market conditions taught us, Alts managers cannot rely on performance alone to attract and retain investors, or indeed talent,” the report stated. “Moreover, with the proliferation in demand for sustainable products, and with a higher degree of scrutiny from investors focused on culture, values and purpose, managers will need to become increasingly proficient and capable at ‘3D brand communications,’” which Peregrine defines as effective storytelling.