For decades, the federal government has found ways to prevent businesses from advertising products that were deemed bad for consumers. Restrictions on advertising impacted cigarette manufacturers, liquor producers and hedge funds. Few people will argue with the wisdom of limiting the promotion of cigarettes, but there are many who have argued to remove the limitations on hedge funds – so the rules have changed.
Hedge funds, along the with banking industry in general, suffered a reputation hit during the recession. The promoters of these financial instruments have been prevented from marketing since 1933 but recently changed legislation has opened the door to advertising. There’s no question that hedge funds are high-risk propositions. But that fact hasn’t deterred investors from sinking $2.1 trillion into these funds during the past few years. Some of the investment funds are coming from institutions but managers are also looking to connect with individuals who have an appetite for the high risk and rewards these funds can generate.
This is an industry dominated by a few well-known names and many smaller firms that are looking to build their reputations and business base. For the most part, industry executives do not believe they will be ‘marketing to the masses’. Strategies may be about branding and some managers envision reaching out to affluent investors through social media as well through traditional advertising.
The final rules on advertising for this industry will be issued in the next several weeks. But fund managers are already contacting ad agencies and readying their campaigns.[Source: Vranica et al. Fund Managers Seek Their Inner Ad Men. Online.wsj.com. 28 Aug. 2012. 10 Sep. 2012]