Author: Mike McLaughlin

Pitch Book Length is Not Just About Pages

Posted by Mike McLaughlin on Nov 03, 2010, in Thoughts , tagged with ,

It’s become widely accepted that a hedge fund pitch book shouldn’t exceed 20 pages.  It’s a good goal, but it leaves out half the story.

While managers often succeed in keeping pitch books short in terms of slides, they just as often fail to keep them short in terms of words.  I’d argue word count matters more than slide count.

The average adult reads about 250 words per minute.  But reading rate doesn’t really matter when it comes to pitch books.  Near-constant use of the Web has changed the way people consume information, and there’s a lot more scanning than reading these days.  And that most definitely includes PowerPoint.

Consider two startling conclusions from a Jakob Nielsen study:

  • Users read about 20% of the words on an average Web page
  • Users read 50% of the words when there are ~100 words or less

Our experience with pitch books is similar.  Prospective investors just aren’t going to read your pitch book word for word.  And if it’s a live presentation, they’ll read even less (assuming they’re paying attention to what’s being said.)

A good rule of thumb is to avoid going over 125 words on a slide.  Beyond that most pitch books end up with an overly-dense layout or too-small fonts.

Hedge funds should embrace the paradox:  say less to be heard more.

J. P. Morgan Funds and Stealth Price Marketing

Posted by Mike McLaughlin on Oct 25, 2010, in Thoughts , tagged with , ,

We said three posts but couldn’t resist a quick fourth on price competition.  Click to read Part 1, Part 2, and Part 3.

To close off the series of posts on price competition, an interesting tidbit.  Check out the sponsored links in the Google results for “low cost mutual funds”.*

At the top you’ll see Vanguard, T. Rowe Price, and Fidelity.  No surprises there.   Now look on the right side.  The name that jumps out to me:  J.P. Morgan Funds.  The firm has many competitively-priced offerings, but never before have I seen them overtly market themselves as a low-cost provider.  The sponsored link caught me off-guard.

Looking further, the firm makes no mention of pricing or fees anywhere in the content about the firm on its Web site.  This makes me suspect that J. P. Morgan is doing some “test and learn” when it comes to sponsored links.

However, there’s the possibility that this represents a little stealth, price-centric marketing by J.P. Morgan.  If so, it’s another interesting way to inject price into marketing strategies.

* I repeated the same search 20 times on 10/25/10 and J. P. Morgan Funds appeared in the sponsored links 19 times.  The sponsored results will change over time.



Marketing on Price the American Funds Way

Posted by Mike McLaughlin on Oct 25, 2010, in Thoughts , tagged with , ,

Part 3 in a series of three posts regarding price competition.  Read Part 1 here and Part 2 here.

Last week I argued that there’s an ocean of opportunity for asset managers to integrate price into their marketing efforts.  For a straightforward example of how this can be done effectively, look no further than American Funds, which does three things very nicely:

A simple graph on fees with a strong competitive message.

But we’re not American Funds.  That’s the easy objection.  And true.  But the principles of the approach can be adopted in specific ways that suit each firm.  For most every firm, one of the following is going to be true:

  • Fees or other costs have been reduced, in some cases dramatically, over the past few years.
  • Specific products are relatively inexpensive compared to peers.
  • Specific products have significantly outperformed competitively-priced peers.

Some are always going to be more capable in keeping prices low on a broad scale.  But all firms care about operating efficiently and should have evidence in hand to demonstrate that.  In other words, every firm can make price a part of their value proposition.  It’s up to marketers to identify the best way to do so.

Ignoring Price Means Firms Have to Play Defense

Posted by Mike McLaughlin on Oct 22, 2010, in Thoughts , tagged with , , , , , , , ,

Part 2 in a series of posts regarding price competition.  Read Part 1 here.

In yesterday’s post, I suggested that price is an underutilized tool in mutual fund marketing. That the industry, while very price competitive, rarely makes that competition publicly explicit.  In light of the traditional 4P marketing mix, which Anu used to discuss PIMCO, this is like leaving 25% of the tools in the toolbox.

Of course, at one end of the spectrum you have a firm like Vanguard, where:

  • “Exceptional value”, which includes performance, service, and costs, is highlighted as a core reason to invest with the firm.

  • The words “low cost” appear consistently in marketing messages, including on the homepage of the advisor Web site.

Most every other mutual fund provider sits at the opposite end of the price-marketing spectrum.  In defining who they are, firms like Columbia, Invesco, DWS, Oppenheimer, and myriad others make no mention of fees/pricing/efficiency as part of their overall value proposition.

The danger in passive strategies toward price discussions is that they can eventually force firms to play defense.  Consider the responses of BlackRock and State Street to the recent fee reductions on Vanguard’s ETFs.  The answers are fine, but the discussion has those firms having to defend existing policies.  Without exceptional performance, “why do you charge X when another firm charges Y?” is a question nobody wants.

Introducing price more proactively is a chance for some firms to gain higher ground in marketing against the competition.  And there are subtle ways to do this.  Some tactical ideas to come next week…

The Strange Issue of Price Competition in Asset Management

Posted by Mike McLaughlin on Oct 21, 2010, in Thoughts , tagged with , , , ,

Part 1 in a series of posts regarding price competition.

Two articles from last week caught my attention.  Both centered on product pricing.  One suggested a looming price war among ETF providers, which BlackRock downplayed (FT.com, free registration required) just this morning; another reviewed the implications of Vanguard’s lower investment minimums (WSJ, registration required) for its Admiral shares.

Over the years it seems that 99.9% of all articles on fees in the asset management industry revolve around Vanguard.  But maybe my memory is selective; my experience tells me that price competition is very real across the board.

To illustrate, I spent a few minutes reviewing the mutual fund products offered to me by Merrill Lynch.  A review of available equity funds shows:

  • 1,454 have annual expense ratios lower than 1%
  • 253 have annual expense ratios below 0.25%

The 253 funds with the lowest expense ratios are offered by 31 different providers, 24 of whom have more than one fund among the group.  This is not comprehensive scientific research, but confirms what we all know.  Price is an important competitive ingredient in the industry.

So what is the “strange issue” teased in the title of this post?  It’s the fact that price, a critical competitive variable, is almost completely absent from firm and product marketing. Fees are disclosed, but there’s very little overt discussion and proactive use of pricing in marketing strategies.

Isn’t this a big missed opportunity for fund marketers?  More to come…