Don’t expect to see hedge fund advertising at the Super Bowl anytime soon.
Despite fears that hedge funds would run amok with advertising schemes when President Barack Obama signed the JOBS Act in April, the reality is that most hedgies are as wary of a plunge into retail marketing as naysayers are of an advertising free-for-all now that the ban on solicitation has been lifted, according to BlackRock co-founder Barbara Novick.
An informal poll of about 200 hedge fund managers taken by keynote speaker Novick at Thursday’s FINforums Annual Hedge Fund Summit showed that while about 20 in attendance planned to launch a website and a dozen or so would feel comfortable reaching out to the media, absolutely zero hedgies said they planned to do any showy billboard or television advertising.
Novick, who currently serves as BlackRock’s vice chairman and heads the firm’s global government relations and public policy efforts, conducted the informal poll by asking for a show of hands during a lunchtime presentation that featured her thoughts on managing hedge funds in the evolving regulatory environment.
“The media has been talking about how much the JOBS Act will change advertising of hedge funds, but there has to be a reality check here,” Novick said.
She added that the word “advertising” is a loaded one, and that rather than blasting retail investors with giant marketing campaigns, the vast majority of hedge funds are more likely to sponsor targeted high-net-worth events.
“I think that most hedge funds will put a clear description of what they do on their website, and that they will talk more freely at conferences like this and with the press,” Novick said. “But advertising during the Super Bowl? It’s not a good cost benefit for a company.”
Congress passed the “Jumpstart Our Business Startups,” or JOBS, Act in April 2012. More recently, in July of this year, the Securities and Exchange Commission lifted the ban on advertising by hedge funds and private equity firms. The rule, approved by a 4-1 vote, was a congressionally mandated rule required by the JOBS Act. Under the rule, only accredited investors who have a net worth of at least $1 million or earn at least $200,000 annually are permitted to invest in these offerings.
In introducing Novick as FINforums’ keynote speaker, moderator Cathleen Rittereiser noted that Novick has been a pioneer in asset management advertising since joining BlackRock in 1988, and that since 2008 she has turned her focus to regulatory reform and the benefits of increased market transparency. Rittereiser is co-author of “Top Hedge Fund Investors: Stories, Strategies and Advice,” published by Wiley Finance.
In short, Novick concluded, “sunshine is a good disinfectant” for hedge funds in this new “no more secrets, no more fronts” world, whether that means openly introducing one’s firm at a high-net-worth conference or launching a publicly available website.
“Regulatory reform is not all bad,” she said. “The JOBS Act is a much-needed modernization of the rules. Before, you couldn’t stand up in this room and say, ‘I’m with such-and-such a fund.’”
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