Few asset managers lack the ambition to be recognized as a thought leader. Many publish white papers and studies on a regular basis. Some unequivocally stamp sections of their websites with the ‘thought leadership’ label just to dispel any remaining ambiguity of purpose. What is less clear, however, is WHY they do it. It’s useful to look at the purpose thought leadership serves.
I had the good fortune of speaking with the head of an investment team who addressed the question in a recent client meeting. (All names have been withheld to protect the innocent). The actual question was “so why do you do thought leadership activities?” I find the answer incredibly instructive.
There are many reasons for asset managers to conduct thought leadership, namely:
Thought leadership helps provide structure and promotes rigorous thinking.
In the context of ever-evolving markets, investment and research teams tackle interesting and important questions every day. Rendering that output in an accessible, external form forces you to construct a compelling narrative that leads the audience from the introduction all the way to the conclusion. It sounds simple. Logical missteps or unanswered questions are not permitted. The benefit here largely goes to the team undertaking the activity, in that it raises the quality of analysis and communication.
Thought leadership fosters innovation and product development.
If you have a new client request or regulatory change, you have an impetus for identifying a solution. The path you take to tease out the right approach and the client’s decision (e.g. change strategy, shift assets, adopt a new framework), along with the final outcome–the client’s success–form the crux of a case study. Investors (whether they admit it or not) often exhibit a herd mentality. This is not a criticism. There are several reasons investors should care a great deal about what others are doing–not least because whole groups of investors share similar concerns. For asset managers, sharing that knowledge and client ‘win’ with the outside world makes good business sense, because it can bring the ‘lessons learned’ to a broader audience for whom it can be quite relevant.
Thought leadership allows managers to differentiate and deliver more than ‘just’ financial performance.
Lots of players on (often) clearly demarcated fields mean it’s rather difficult to stand apart from the herd among, for example, first quartile US large cap strategies. Investment management is tricky, in that while delivering strong performance trumps all else, there’s still the ‘else.’ Investors value clear, timely and insightful communication. Anything you can deliver that lights up their ‘priorities radar’ — be it a market or regulatory outlook, new portfolio construction techniques, or investment committee best practices — can strengthen the manager-investor relationship.
Thought leadership creates awareness.
Clients of professional services firms often prove willing to lend their attention to insights, new solutions or trends–especially when it’s about ‘them’ and their area of activity. Thought leadership content with real substance stands out from what Jack Bogle dismisses as ‘financial pornography.’ All other things being equal, a thought leadership piece will garner substantially more client engagement than a product launch press release. Journalists give greater consideration to the former. It’s not hard to understand why. Thought leadership materials create an opportunity to engage with journalists in a more meaningful way–the clear advantage being that discussions with journalists translate into press coverage, boosting brand awareness and credibility, as any PR manager will tell you.
What’s more, for asset managers that have adopted ‘cause marketing’ either bolted-on (more common) or as a founding principle (think Generation IM)–a broad category that could span activist hedge funds, green investing boutiques, long-only managers with a focus on corporate governance, or more ‘plain vanilla’ shops with a specific corporate social responsibility focus (i.e. workplace diversity, a low-carbon future, etc.)–raising awareness on a particular topic counts itself as a win.
A win for all
While this list of reasons why asset managers do thought leadership may not be comprehensive, it certainly puts forward a number of valid purposes that can serve to inform an asset managers’ thought leadership activities. Coupled with the ways that thought leadership can add value for investors, it provides key elements for making thought leadership a mutually-beneficial proposition for asset managers and investors alike.