Positioning & Messaging During Heightened Volatility
Following the boisterousness and glitz around strong performance and fundraising activity over the last 18+ months, GPs are being confronted with how to address this period of sustained volatility and drawdowns in portfolios. It’s not apocalyptical just yet, but everything’s relative: performance in Q1 2022 vs. the last two years has gotten LPs unsettled.
In the preceding quarter, we observed an increase in redemption requests and a nearly +20% surge in LP engagement (Q1 2022 vs. 2021 average). So, what now for Fund Managers?
Be careful of what you wish for
Over the last decade, data from our clients has shown us consistently that LP engagement (email opens, web visits, LinkedIn traffic, webinar attendance, etc.) spikes when performance is down. GPs which had the most heavily-impacted portfolios saw email open rates go up as much as +100%.
Read through GPs’ lenses: Investors always want updates, but during periods of heightened volatility, they need to hear from you. "Never let a good crisis go to waste”: use this to build trust and solidify your messaging.
"Live by the sword, die by the sword.”
Performance isn’t the underlying reason where LPs choose to place capital. Focus your messaging on that, and lose all integrity when financial hurricanes hit. The alternatives industry is maturing at a precipitous pace, and performance is becoming more homogenous. Your brand, value proposition, and the story (i.e. messaging) you tell have to precede messages about performance in order to earn the right to communicate to investors during these times.
With so much investor communication focused on performance, is it any wonder that there’s nothing to talk about – and rely on – when returns inevitably falter? Positioning and messaging your fund during times of heightened volatility doesn’t have to be so difficult – if you're equipped with the right foundation: reminding your audience of your brand and value proposition... that’s why they sought you out in the first place.