HEDGE FUND DUE DILIGENCE STARTS – AND OFTEN ENDS – WITH GOOGLE
By Christina Bertinelli is a Senior Partner of Lumentus, based in New York.
There is no more valuable asset for an investment manager or a fund than its reputation. Establishing a solid reputation used to take decades to build and weeks or days to damage. In today’s fast moving business world, reputation is defined by what can be found with the click of a mouse or the touch of a smart phone. What takes many years to achieve can now be severely damaged with a keystroke.
Where the due diligence process had been a complex and opaque affair, it now starts – and often ends — with Google. Profiles and information found online define an executive or fund’s digital reputation that will dictate if investors even choose to have a first meeting.
An analysis of Google keywords found that investors using search engines as part of their due diligence process is still on the rise. Between 2014 and 2015, key search terms such as ‘hedge fund manager’, ‘hedge fund’, ‘venture capital’, ‘CEO’ and ‘managing director’ increased between 25 and 50 percent. Not only are the funds themselves being searched, but the executives who run them are being actively scrutinized as well.
With more than 5 billion queries a day, managing the first page of results on Google, Yahoo and Bing is more crucial than ever. Pension funds and institutional investors scrutinize the reputations of asset managers, in addition to their track records.
At the Wildlife Conservation Society, Sean Cover serves as the Director of Treasury and Investment Operations. In this role he manages and oversees the endowment investment portfolios for a global conservation non-profit that also manages the Bronx Zoo, the New York Aquarium, the Central Park Zoo, the Prospect Park Zoo, and the Queens Zoo. An integral part of his due diligence process is to use search engines to uncover any instances where the fund or its executives are linked to scandals or negative news.
“We use search engines to ensure that firms and managers we have interest in are not making negative headlines for billion dollar divorces, scandalous issues or spending tons of money on mansions, art, yachts or hunting trips,” said Sean Cover. “Even after initial investments, I often set up daily Google news alerts to inform me if any of our fund managers are making headlines. I have had a daily news alert on one hedge fund with a flamboyant CIO for over four years now. If there is bad news, I need to know it before my CFO and Investment Committee. That goes for prospective fund managers as well as ones already in our portfolio. It’s crucial for firms to be aware of the image they are portraying online if they want to attract and maintain allocations from institutional investors.”
A fund’s performance is more closely linked to its reputation than many investors realize. A Focus Consulting Group study found firms with “clear missions that developed a solid set of core values and built solid working relationships on trust and respect outperformed the control group of firms that didn’t.” A full 95 percent of investment professionals said they ‘agree’ or ‘strongly agree’ that culture matters. Performance alone is no longer a ticket to an investment or allocation.
Perception is reality and the good news is executives and firms can directly influence the impression generated in search results, as well as the culture reflected by the firm’s website and other online content. Basic common-sense approaches to building and maintaining a strong online profile can mean the difference between a bump in the road resulting from an executive departure or litigation, and a full-blown crisis.
We work with many of the largest funds and managers – and some of the smaller, specialized family offices and PE firms. A number of these funds came to us having believed that negative stories or comments appearing in search results made little or no difference to their bottom-lines. They were severely disappointed when they discovered otherwise.
In one case, we worked with a highly successful investment manager who engaged us for both personal and professional online reputation management. While his fund was performing very well, he was unable to secure new investments from major pension funds. Personally, he didn’t want his children Googling him only to find news about past affairs, a prior divorce and salacious news stories focused on extravagant spending.
The executive and his firm were philanthropic and thought leaders in their investing philosophy, but the reality didn’t match the negative perception online. Because 90 percent of users never make it past the first page of search results, few – if any – potential investors, employees and potential recruits would ever find these attributes.
To positively impact the digital landscape we created and executed an integrated communications plan to project the company’s brand and enhance its reputation. We developed new written content, expanded and “optimized” the firm’s website, authored executive profiles for Bloomberg and other listing services, and secured branded social media channels such as LinkedIn. We generated news coverage and even created separate websites focused on the executive’s philanthropic efforts.
The result is a first page of meaningful search results filled with positive, client-controlled content. The less flattering content did not disappear, but most of it is back where it belongs – in the past and many pages into search results.
The fund’s management team soon noticed a shift in conversations during meetings. Instead of initially having to defend questionable content that dominated search results, the meetings focused more on the future and the value the hedge fund offered to its investors.
Managing an online reputation doesn’t mean any consulting firm can remove negative headlines from the news or from search results. No firm or executive is perfect, and issues may arise, but a story from five years ago shouldn’t be the first headline a potential investor reads. Dynamically managing digital reputations means those potentially damaging stories no longer define a firm or its executives. Part art, part science, digital reputation management successfully implemented, can at least balance the playing field and at best ensure that stellar performance can own the spotlight.
Banking2 days ago
In-Store, Online & In-App – Unifying Payment Authentication
Top Stories3 days ago
Oil markets steady as investors weigh banking crisis, Russia
Technology2 days ago
3 Ways BFSI Brands can use Low-Code to Accelerate Migration from Legacy Systems
Technology2 days ago
How technology can help public sector organisations navigate austerity