Chestnut Helps Asset Managers Level the Playing Field
Chestnut Advisory Group provides business development consulting for asset managers. Operating an asset management business is difficult. Aside from delivering strong investment performance, asset managers must establish a strong firm culture, document and implement impeccable compliance processes, recruit and retain talent, and much more. Each operational element provides the opportunity for an asset manager who excels at that piece to share this excellence with clients and prospects. Over time, a consistent effort to educate the marketplace about a particular asset manager’s strengths builds a strong brand and investor trust, making that asset manger less reliant on near-term investment performance to maintain and grow its business.
Over the last two decades, the asset management industry has become increasingly competitive, with thousands of new entrants every year. Investors’ standards and demands for insightful, timely and helpful communications have increased substantially. As investors continue to experience capital markets volatility, extreme economic and political events, and media reports of asset manager fraud, great IR will only become a more crucial component of building a trusted asset manager’s brand.
The Evolution of IR
The view of investor relations in the asset management community today is very similar to public companies’ attitudes toward IR 40 years ago. At that time, public companies simply issued dry, rote 10-Ks that most investors never bothered to read. This resulted in huge market inefficiencies that some of the largest public companies began to exploit by building a dedicated investor relations effort. Today, every public company either has a dedicated IR staff or hires an outsourced IR firm to provide this vital service. It is now common knowledge in the public equity markets that great IR, coupled with good performance, leads to higher equity valuations.
This same IR adoption cycle is already underway in the asset management industry today, led by the largest asset managers, who are early adopters of this new model. These same large asset managers that have built robust IR programs are now perceived as the most trusted by institutional investors, and have meaningfully increased their market share.