MATTHEW FEARGRIEVE sets out five behavioural protocols that investment fund managers need to adopt to survive the impact of COVID19 on their business.

It is not only turbulent, highly volatile markets that investment managers have to grapple with. In these days of lockdown and self-isolation, managers, like all businesses, have to work harder at reaching out to their clients. Especially when the portfolio is suffering losses. In the unprecedented circumstances in which we all find ourselves, a feeling of disconnection from the manager, or of being kept in the dark, will drive investors to the exit just as surely as portfolio losses. So now is the time for the key personnel of all management firms to think of their investors and develop their interpersonal skills.

A look at how some managers have stepped up their client outreach programmes yields useful insights and teaches us valuable lessons about how managers can work to retain clients throughout the pandemic and its fallout.

We looked at two managers, from each end of the active management spectrum (this sector having the hardest task to ride out the downturn), FundSmith and Bridgewater Associates, and extrapolated five behavioural protocols for investment managers in general.

Embrace the opportunity. Consider how your investors’ daily lives and routines have changed during the pandemic, and embrace the opportunity that this presents. You have a captive audience, sitting at home in front of their screens. So, whilst you might be underwhelmed in other areas of your business, formulating and communicating to your investors a key message is essential. Leverage online communication and content distribution channels like LinkedIn and Twitter to convey your message and, importantly, regular updates and commentary as the lockdown continues. Remember, there is a lot of panic and fake news circulating the web, and your second biggest priority- after protecting your fund’s assets- is to keep your investors in the loop and duly provided with high quality information around portfolio performance, portfolio positioning and significant strategy adjustments. Adopt the digital tools at your disposal. While CRM has likely never been your primary focus as a portfolio manager, this is the time to find out what your front-of-house colleagues know about it. Your firm’s CRM platform will likely have the ability to provide updates and data via email to investors, and your first task will be to take a view on whether this capability needs to be enhanced to meet the special challenges that the pandemic presents. Again, put yourself in your investors’ shoes. Their inboxes are going to be fuller than usual of emails competing for their attention, and it is also important to ensure that the data flow emanating from your firm reaches all investors, big or small, equally. A virtual dealroom (like Intralinks) can be used to centralise all crisis-related communications. Consider also whether your CRM interface can be used to handle virtual due diligence requests and other remote communications that will be incoming from investors during the lockdown. Don’t be proprietary, be generous. We have seen many companies taking down their paywalls in response to the crisis, and this technologically-easy action will generate a huge amount of client goodwill. You should review your firm’s proprietary analytical resources and consider making them accessible to your investors. They will be grateful to you for having provided them with a useful dashboard or other online tool. Ramp up your virtual meeting capabilities. Again, be sensitive to how your investors’ daily routine has changed, through lockdowns and incapacity through illness of key personnel, friends or family. Those weekly or monthly investor calls that you scheduled may no longer be convenient or possible. And, as the manager, you may well now be feeling the need to reformulate both the timing and the medium through which you give your investor updates. Now is the time to reevaluate your firm’s use of videoconferencing and webinars, both with a “record” function so that content can later be made available to investors on your CRM platform or online dashboard. Zoom, UberConference and Google Hangout are all seeing a big rise in uptake by individuals and corporates and by making use of them, you are sharing technologies with which your investors are likely newly familiar as they find ways of communicating remotely with friends and family. Establish a Crisis Comms team. Again, as a portfolio manager or key person in an investment management firm, your primary focus will likely not be on investor communications. But the coordination and dissemination of information and messages to your investors is all-important during the crisis, and you will need a dedicated team to handle this. This communications team can be drawn from suitable personnel from front, middle and back offices, and should report at least once a week to the firm’s COO or executive committee. The team’s central task will be to implement steps one through four that we have just described, starting with a review of the capabilities of your firm’s CRM platform, with a view to increasing the frequency and moderating the content of performance updates, risk reports and commentaries, and utilising suitable distribution channels to provide this information to investors. In addition to communicating with investors, this team should also interface with the fund’s service providers (prime broker and administrator being chief among them) and, when market or competitor news requires, the financial media, and be capable of relaying relevant intelligence back to investors.

Whilst the pandemic presents real challenges for the fund’s portfolio, it also provides managers with a golden opportunity to reach out and connect with a captive audience. A dedicated communications team will be essential for all medium-to-large sized firms, to coordinate and assist with the uplift of informational requirements that the crisis, and the manager’s response thereto, will generate.

Being in touch with investors during this crisis and keeping them in the loop will be key to retaining them when we are all able to return to business-as-usual. But the lockdown will not last forever, and now is the time to act.

By MATTHEW FEARGRIEVE