In Reputation Communications’ work with hedge funds and other companies in the financial industry we’ve faced a number of common reputational issues. Let’s take a look at those issues, their impact and how we can address them.
The investor lawsuit, which we periodically cover on this blog, is one of the most common and potentially harmful challenges. Even when the litigation is isolated or insubstantial it can still easily shoot to the top of Google search results. And stay there.
Another important issue is the potential backlash stemming from an exceptional investment record that cools quickly, as happened with many prominent funds in the wake of the market crash in 2008 and 2009. Such fallout can inflict considerable damage, as one top hedge fund manager learned when he came under attack after his previously record-breaking portfolio underperformed in 2011. His fall from grace was widely reported, but he has since reestablished himself as a respected industry leader.
A growing number of hedge fund managers have seen their personal lives become the subject of high-profile media scrutiny. Whether this coverage is about marital difficulties, political views or real estate purchases it often has a resilient online life. When that coverage is only a couple clicks away from prospective investors, it can distract from a fund’s quality and performance.
Wikipedia is also crucial. Its unique system of authority and verification can overemphasize the types of legal records and media reports mentioned above, but hedge fund managers who are proactive in this area can increase the likelihood that Wikipedia provides a more fair and accurate account of their business.
Historically, most hedge funds have opted to maintain a low profile and cull clients by referral and from inner circles of experienced investors. Many will likely decline to take advantage of the SEC’s ruling on advertising. This choice may help managers and their funds avoid media attention, contain their public image and fly under the radar, but increased visibility for the hedge fund industry as a whole has made such a strategy much more difficult to pull off.
Funds that do choose to advertise and pursue a more public position will require an even more thoughtful strategy. Increased exposure is substantially raising the bar for branding. The future promises far more investor lawsuits and the potential proliferation of SEO-charged consumer review sites where investors can compare experiences and rate companies. Funds will need carefully maintained reputations, ample privacy protections (we recommend Tor) and advanced strategic customer service systems.
24/7 online monitoring crucial
When companies do not provide an effective online forum or platform where customers’ concerns can be acknowledged and quickly addressed, they are more likely to go to third-party review sites or forums. High-profile funds will also need to implement 24/7 monitoring of all mentions that they receive online, from social media and blog chatter to mainstream reports. This is especially important because of commentary on Twitter, Google+ and other platforms.
Some tweets and posts may appear to be a marketing message from a fund, when it is just commentary from a journalist or investor following that fund. We recently audited all the Internet content that has appeared online about a financial services firm. In addition to providing a barometer reading of the scope and sources of such information, the report provided insight into information that investors are increasingly following.
Online reputation management can’t hide the truth
Philanthropy, open dialogue and an appropriate stream of up-to-date information and new online content contributes to achieving balanced and representative search results and overall online presence. But it is important for fund managers to know that online reputation management can’t change the facts. When they are damaging and come from the types of authoritative sources prized by Wikipedia, attempts to hide them will fail. In such cases the best that can be done is to provide a counterbalance of new information, including clear signs a firm is moving forward…if it is.
Keeping a finger firmly on the pulse of online media is becoming much more effective than the reserve and silence that funds have favored in the past. Today’s hedge funds are facing new, complex and rapidly evolving challenges, but with the right strategy and set of tools – including a deeper understanding of social media culture and platforms — they’ll be better prepared to navigate them.