By Bryan Johnson – Johnson & Company

MARKETING IS OXYGEN.

We constantly compare things to the critical requirements of the body to sustain life.

The “rule of 3” shows how long our bodies can go without critical needs and survive:

3 minutes without oxygen
3 days without water
3 weeks without food.

OXYGEN: THE BODY’S LIFEFORCE.

I know you’re saying “What about blood?!?!”. While blood may be the most important bodily fluid we possess, the reason this is true revolves around the transport of oxygen. Humans are aerobic (We have lungs!). We need oxygen to breathe and release the energy in the food we eat. The brain normally takes up about 20% of the body’s oxygen. It is the brain’s lack of oxygen that is most urgent. We’ve all heard the term: “brain dead’!

MARKETING: THE “OXYGEN” OF A HEDGE FUND

The above also applies to MARKETING for new and sub-$50 million AUM funds. Just as a human being struggles without “oxygen”, so does a new or smaller fund without marketing. It is a new or smaller funds lack of a MARKETING PROCESS that brings persistent struggle, permanent damage and ultimate death (closure).

Raising assets now requires a comprehensive MARKETING PROCESS with an INVESTOR-CENTRIC approach. Gone are the days when the investment decision was based almost solely on investment performance. Plainly speaking, consistently raising assets on the back of performance is a dead issue! Investors now use a multi-factor qualitative/quantitative process to evaluate and select new and smaller managers/funds. This results in a much longer time to convert prospects to allocations. As such, a new or smaller fund must have a consistent, structured, focused and disciplined MARKETING PROCESS to navigate, identify and appropriately engage highly-stringent and idiosyncratic prospects to raise assets

Without a MARKETING PROCESS (oxygen!) a new or small manager/fund will chronically struggle raising assets and eventually shutdown.

THE GOOD NEWS!

Human oxygen deprivation is typically involuntary; MARKETING DEPRIVATION is not!

TO MARKET OR NOT IS A CHOICE!

As humans, we don’t choose to breathe! It’s an involuntary action but a manager/fund does choose to market! The choice, if there is one, and how to do it resides solely with the fund principals. Unfortunately, most new and smaller funds fail by choosing to delay marketing until they have some level of “performance” or more AUM (more money to invest in the marketing process). Finally, when they do begin marketing, they often use inadequate, inconsistent, inappropriate and ineffective approaches leading to chronic failure raising assets. The closure rate among smaller managers/funds is extremely high, not due to lack of investment performance, the research is clear and abundant: Smaller managers out-perform larger managers! The reason for high failure rates among sub-institutional managers/funds is most often lack of a MARKETING PROCESS.

WHAT’S THE TAKE AWAY HERE?

Marketing is an existential process for new and sub-$50 million AUM managers/funds. We don’t go around on a daily basis seeing how long we can go without “oxygen”! Similarly, a new or smaller manager/fund shouldn’t operate without a MARKETING PROCESS – it really is THE lifeforce of a fund.

As always, continued success to all!

Bryan Johnson
Managing Partner
Johnson & Company
Direct: (512) 786-1569 or bkj@johnsn.com