What are the options to properly market a hedge fund? The team of marketing experts at Deke Digital is ready to help you to advertise your hedge fund effectively. We understand the complexities of hedge fund marketing rules and how to use them to connect you with new and accredited investors.
The discussion and creation of hedge fund marketing rules is relatively new. Prior to September 2013, hedge funds were not permitted to advertise. The restriction was intended to prevent funds from touting potentially fraudulent offers or marketing their services to ineligible or inappropriate investors.
Now, however, with President Obama having signed into law the JOBS Act, the ban on general solicitation has been lifted. This change creates many new opportunities for hedge fund managers and for their investors. Many see it as enabling a new transparency in the market. Even though the restrictions have been relaxed, hedge fund advertising has its limits. It is important to know what the restrictions are.
The SEC and Hedge Fund Marketing Restrictions
Form D – the SEC wants firms to submit a Form D. This must be filed 15 days before an advertisement is sent out. This would provide information into what the firm intends to offer and how. This is done so that the SEC may better regulate the market and prevent fraud.
Ad Materials – the SEC wants a copy of ads to be filed with them before or just after they are sent out so that they may ensure that the information being disseminated by the Hedge fund is accurate.
Investors – The new rules do not change the fact that Hedge Fund investors must be accredited. No one can invest who does not bring in $200,000 per year, or have a net worth of 1 million or above, property holdings not included.
It is the job of the company to ensure that these requirements are met. Non-compliance with these guidelines could result in disciplinary action on the part of the SEC.
Benefits and ways to use the new hedge fund marketing rules
The new hedge fund marketing rules have opened up opportunities for hedge fund managers to spread awareness of their industry. They can now promote their offerings using many new forums. Magazines, newspapers, TV, radio, websites, Twitter, Facebook and other social networking sites are all available to them.
This freedom enables stronger communication between investors and managers. These new capabilities should not be used frivolously. Hedge funds are an important and growing part of the worldwide economic system. They are an exclusive market, and that will not change, but that does not mean there is no opportunity for them to expand.
Since the type of person who may invest in a hedge fund has not altered, marketing efforts should be directed only towards specific sectors of the population. Advertising to the general public would be a waste of funds and time. Despite the availability of so much social media, it would also be advisable to limit advertising efforts to credible publications that specialize in similar financial and investing topics.
Remember, honesty is key in hedge fund advertising. Misleading potential investors about a proposition could be dangerous for the company. The SEC will revoke a company’s ability to take advantage of the general solicitation policy if it determines a marketing campaign violates the intent of the new rules.
As long as a hedge fund remains truthful in its advertising and properly monitors new investors, the hedge fund marketing rules could provide them with an important opportunity for growth and development.
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