What is your investment brand?

by Sharp | December 4, 2014


Our creative director, Bob Ireland, digs into what financial firms and funds can do to establish trust in their brand with individual investors. Here he gives a nod to Carlyle Group’s freshly minted Carlyle Private Equity Access Fund 2014 as an example.

Recently, the Carlyle Group announced it had opened its doors to individual investors with $5 million in investable assets. Those with a minimum commitment of $250,000 can have direct access to the newly established Carlyle Private Equity Access Fund 2014. Like most private equity funds, the same rules apply: a similar fee structure of 2% of assets and 20% of performance over a certain threshold, plus a multi-year lockup. The fund is essentially a direct investment in four Carlyle funds diversified across the globe (i.e. Asia, Japan, Europe) and sects of the economy (e.g. energy).

So what does this mean for private funds in general? Sit back and wait to see what happens? After all, why bother making the effort to target individuals when there are big pensions and endowments to court? Yes, but with pension funds growing slowly and in some cases falling out of favor with private funds (e.g. CalPERS exiting hedge funds) perhaps individual brokerage accounts and eventually 401(k)s could be a ripe, new target for private funds.

So if this is the case, what does one do to convince an individual investor to participate in an alternative asset class that offers considerably more risk than many of the other investment vehicles they have favored over the years? After all, the upside in private equity is not what it used to be, but the risk still exists, as does the illiquidity and higher fees.

The key is to build your own investment brand. And what do I mean by that? Consider establishing a brand image for your firm that clearly exhibits how your investment philosophy and overall strategy is unique. After all, individuals by nature are more image conscious and tend to respond better to transparent, recognizable brands like Carlyle.

Any firm entering this space needs to convince individuals that a particular investment doesn’t just diversify their portfolio but rather provides better long term value (and, we hope, returns)  over time that will warrant the apparent risk, additional fees and lockup. One might say  you are making an implicit promise to them, which is what any sound, stable and successful brand does.

So how does one go about doing just that? In looking at the Carlyle fund, what makes it interesting — aside from investing with a proven firm— is the unique access and exposure one gets to private deals in Asian and in such key growing sectors as energy. What Carlyle Private Equity Access Fund 2014 appears to be offering is “exposure” in the most positive sense of the word. Given Carlyle’s reputation and track record, it has unique and exposure to investment that do not correlate to the broader markets. Give sophisticated and proven management, the firm will ultimately, over time, provide superior returns to its investors. Carlyle has a unique and compelling proposition and a stellar investment brand that give it an implied superiority over others in the market.

So when it comes to your firm, like any good marketer, you need to put yourself in the individual’s shoes and think about what would compel them to pay more and take more risk versus investing in any of a plethora of more conservative vehicles.

Chances are they will need to fully understand and feel a real connection to the product/service/fund— that is, to your brand. What you need to do is create a level of trust and confidence in your firm and fund’s ability to perform; you need to make a promise just like any other successful consumer brand does. To do so will require you to dig deep and think about what makes your firm, fund and investment brand different and what value that delivers to an individual investor. Chances are it’s there somewhere; you just need to identify what it is that differentiates you versus the more traditional investments, not to mention other competitive funds. Most importantly, it needs to really resonate with the individual investor audience.

You might be surprised, once you poke around, just what that is. Think of it as a little soul searching, which never hurts from time to time, and what you unveil just might convince someone that you are the logical, trusted choice. If anything you’ll get to know your firm and fund even better.

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