Alternative Investment Professionals Embrace Social Media Tools, Study Finds

Participants use social media to gather intelligence, network and exchange information

Alternative investment professionals understand the power of social media and are embracing it as a communications, research and productivity tool in both the workplace and the home, according to a new Horizon Cash Management survey released May 24.

The survey revealed that more than eight of 10 professionals in the alternative investment sector were at least somewhat familiar with social media. One-third identified themselves as frequent or avid users, while one-half said they were only occasional users.

More than half of respondents said they use one or more social media channels in both their professional and personal lives. Approximately 25% use social media only for work, and 15% do so only in their personal lives.

The survey found that LinkedIn was the most frequently used social media product, with seven of eight respondents reporting using it. Facebook was used by some 66% of survey participants, Skype by more than 40% and Twitter by 33%. The findings were in line with those of a survey of financial professionals released in March by American Century Investments.

Participants' frequency of use of social media sites they access divided roughly evenly: about 30% reported frequent use (20+ times per week), while a little less than 40% said they used social media five to 20 times per week, and nearly 33% said they did so less than five times per week. Based on these figures, Horizon surmised that 80% of usage was likely attributable to the top 20% of users.

The study identified three factors that prompt respondents to use social media in their professional lives. Six of 10 participants said their main reason for using social media was "capturing information and gathering intelligence." The same number of respondents cited "networking." Nearly half said that "exchanging information with the people in my industry" was why they used social media. Only a quarter of participants reported using these channels to share professional opinions with others. "These findings suggest that, at least among our respondent group, the professional use of social media seems to be more likely to draw in information that to express it outwardly," Horizon said.

This contrasts with the main reasons respondents gave for use of social media in their personal lives. For three of four participants, the main application of social media was to "stay in touch with friends or family," and the second most-cited one was "to recommend websites or discussions." Horizon noted: "This might suggest that survey respondents are mindful of the risks and consequences of broadcasting information related to their enterprise, even if not a single respondent indicated awareness of any firm-wide rules governing social media and its proper use."

Horizon asked those who identified themselves as current "non-participants" in the social media world why this was the case. Two-fifths said "I just don't want to" and "It's too complicated/I don't understand it." Less frequently articulated reasons were: "No one that I need to reach uses it" and "I don't have the time."

However, this does not mean non-participants are necessarily averse to social media, Horizon said. All non-users reported that they had discussed social media with families, friends and colleagues over the past year. And one in five said they planned to learn more about social media in the year ahead.

Horizon conducted its research over a two-week period in March, putting survey questions to a broad spectrum of alternative investment professionals, including representatives from hedge funds, managed futures funds, funds of funds, fund administrators and prime brokers. The respondents were attorneys, compliance officers, accountants, consultants, RIAs, corporate finance officers and market-makers.

In summarizing its findings, Horizon said that the most surprising one was that "respondents to our survey reported absolutely no impact upon their use of these new communication channels because of company-imposed restrictions," even though regulatory bodies within the alternative investment sector have issued guidelines addressing the appropriate use of social media by member organizations. Horizon commented: "We suspect that as the alternative investment universe intensifies its use both of existing social media sites and emerging new sites, firms will develop and articulate their social media policies with greater emphasis and end-users will be guided more strongly by these guidances."

Michael S. Fischer (msf7@columbia.edu) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.

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