Hedge Fund Advertising Off to a Slow Start, Survey Finds

Hedge funds have not exactly rushed to take advantage of their new ability to advertise.

Far from it. Only a fraction of hedge funds and private equity firms have even registered under a new statute that gives them the ability to broadly solicit capital, according to a survey to be released on Monday by the data provider Preqin.

The survey found that 4 percent of hedge fund managers and 5 percent of private equity fund managers have registered to advertise under the JOBS Act, the law passed in 2012 that lifted a ban on “general solicitation.”

What is more, 55 percent of hedge fund managers and 63 percent of private equity fund managers said that they did not plan to advertise at the present time, while 8 percent of hedge fund managers and 14 percent of private equity managers said that they would never engage in advertising, the survey found.

The survey included more than 150 fund managers that are either based in the United States or have significant operations in this country.

Some firms are testing the waters. Balyasny Asset Management, a $4.3 billion hedge fund, recently used an image of snowboarders standing on a mountain to highlight its investing abilities.

But others see a stigma in using ads. According to Preqin, 20 percent of private equity managers cited a negative perception of marketing as the largest obstacle preventing them from taking the plunge.

Nearly a fourth of private equity managers cited additional costs as the largest obstacle, while 42 percent of hedge fund managers pointed to costs. About a fifth of private equity and hedge fund managers were concerned about increased scrutiny from the Securities and Exchange Commission.

Some simply wanted to let others go first. The survey found that 15 percent of private equity managers and 21 percent of hedge fund managers did not want to be the first to advertise.

That suggests that the current sluggish pace may pick up at some point.

“With the first adverts already printed, we could see a shift in attitude in the future, as alternative asset funds â€" in particular hedge funds â€" begin to think of new ways to attract a different audience to their vehicle,” Amy Bensted, the head of hedge fund products at Preqin, said in a statement.