In the Shadow of September 30th: Building Investor Relationships

By Bob Goldbaum, SVP 

With September 30th just around the corner, you may be feeling stressed as a fund manager. Will investors give you redemption notices for year’s end? If so, how many? How will the withdrawals affect your fund? What can you do to encourage investors to stay or even increase their allocation to your firm– in particular those who may be on the fence?

September 30th is a particularly crucial date since it is 90 days before the end of the year, and investors often choose to make changes to their investment strategies at the beginning of a new year. But September 30th isn’t the only day on the calendar that can cause stress. Depending on the fund’s terms, investors may be able to give notice to redeem their funds at any time. So, the real question is: how do you consistently encourage investors to stay with your fund? It’s not what you do the few weeks leading up to September 30th that makes a difference to investors – it’s what you do every day of the year … all 365 of them.

The answer to the question is, at its core, very simple: to build loyalty among your investors, develop a good relationship with them and continually remind them of the quality of your operation. In practice, this is a bit more complicated, since it means you have to:

  • Engage in regular, proactive communication. If your clients are initiating most of your interactions, you likely have a problem. You need to be reaching out to them on a consistent basis, regardless of your returns since relationships, by definition, require both parties to take action. However, don’t trust your memory to maintain consistent communications … time has a habit of slipping away while we’re not watching. Set up your investor relationship management system to inform you when to check in with your clients (and prospects). 
  • Listen rather than sell. Do you understand where your investors’ interests lie and what strategies they are hot on? Or do you simply push your own products and sell, sell, sell? That gets old very fast. When you are in a discussion with a client, listen – and listen carefully. Tag data to their investor profile to remind you of where their overall allocation strategy may be headed and keep these tags over time so you can see trends in their thinking. This will allow you to position your strategy in a better light or even make introductions to other managers in your network. Even if a redemption is unavoidable, a tight relationship will at least increase the likelihood of getting a heads-up so that you aren’t caught by surprise when the notice comes. This strategy will also pay off in the long-run, because it will increase your chances of their capital returning to your fund when they inevitably shift back to your strategy in the future. 
  • Get a clear picture of client liquidity. Since 2008, there has been an increase in the complexity of how to calculate investors’ potential liquidity. This can make it challenging to know how likely investors are to redeem their money at any given point in time. However, it is essential that you have a crystal clear picture of each client’s liquidity options, since this could impact how and when you contact them and what messages you want to communicate. The right message at the right time will strengthen client loyalty. The wrong message (or no interactions) might drive an investor out the door. 
  • Don’t avoid discussions about underperformance. When a fund is riding high, it’s easy – and even fun – to communicate with investors. Sharing good news is awesome. And while that is a vital part of any communication plan, it is even more critical to communicate with investors when a fund is under You need to position your message carefully at these junctures so that you are honest and yet positive about the fund and its prospects. (Remember, people in our industry tend to know when they are being told “alternative facts”.) This is the moment when loyalty matters the most, since a good relationship, trust, and a well-run operation can help offset mediocre financial performance in an investor’s decision-making process.
September 30th will soon be here and gone. But the next notice period is right around the corner. If you want to reduce your future stress, take the steps you need today to build loyalty you can bank on tomorrow.



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