There was an average of 160 articles a day last year mentioning hedge funds. Someone must have been counting. The Alternative Investment Management Association (Aima) has just published its 2012 Guide to media relations for the hedge fund industry, a follow-up to a similar publication it produced in 2006.
It is a fine publication, instructing hedge fund managers on various matters, such as ‘avoid being a fair weather friend’ to journalists – that is, only talking when there’s good news – and how to handle broadcast journalists who ‘pride themselves on their aggressive questioning'.
“Hedge fund managers should have a media strategy, but don’t have to appear on television shouting their mouths off,” said one local hedge fund CEO. “However, my CIO would rather pay them all Danegeld to stay away.”
(Of course, if you pay Danegeld, the Vikings usually keep coming back for more.)
Numerous hedge fund managers demand to remain secretive, and some can get quite aggressive about maintaining aloofness. That reluctance leaves them open to broader criticism for simply being rich and mysterious (something to hide?), and as such they risk becoming political targets because they are reluctant to defend themselves, even if they have never taken a penny in public bailout funds.
That is a pity, because hedge fund managers are articulate and are the best qualified people to defend their own industry to politicians and regulators.
“The biggest issue facing hedge funds globally is the wilful ignorance of the regulators,” says Paul Smith of hedge fund seeder Triple A Partners in Hong Kong. "The press can help educate regulators on the role hedge funds play in achieving accurate price discovery by providing liquidity on both the long and the short side.
“Regulators seek to deflect criticism from their own sins of omission by demonising hedge funds, which are a key component of the efficient functioning of capital markets," he adds. "The press is a vital source of educated, independent commentary on the true source of our current financial woes.”
Perhaps hedge fund managers have been indoctrinated by former jobs on Wall Street, which has drummed into them a lack of confidence in their ability to talk to the press, without accidentally telling the truth.
But is press coverage reasonable, or are we just looking for cheap thrills?
“The problem with the media’s coverage of hedge funds is that it’s sensationalist,” says Steve Diggle of Vulpes Investments. "Either it’s a ‘lifestyles of the rich and famous’ piece about the money the successful ones earn or about who’s just blown up or heading for prison. If you followed the press you’d think it was all Penthouse or Pentonville.
"The dull reality of coming to work every day and trying to make money in the capital markets is just too prosaic," adds Diggle. "‘Hard working hedge fund manger makes decent living by giving respectable risk-adjusted returns on medium-sized fund’ is never going to be a ‘most read’ story.”
But not all agree that individual funds should cultivate journalists.
‘No single hedge fund needs broad coverage. Most media coverage is counterproductive unless targeted to specific stakeholder,” says Peter Douglas of GFIA. “Similarly, investors want to invest with excellent investors, not excellent marketers, and understand that alpha is not scaleable. A hedge fund that held a press conference for the broad media would not be taken seriously by professional investors. However, vice versa? Absolutely. A hedge fund consists of the minimum infrastructure need to connect excellent money managers with intelligent investors. Both of those groups should be of huge interest to the media, being composed of people with an economic stake in understanding how the world really is, and the intelligence to support that.”
Do the media then truly need hedge funds?
Yes. For better or worse, what hedge funds do has become part of Joe Public's life.
To illustrate: after any catastrophe, the news transports us swiftly from the scene, over to the markets to gauge reaction, in order to determine if our stocks are 'resilient' (even if we don't own any). What goes on in the markets has now become everyone’s business.