Private Equity is thriving – But firms’ brands are undifferentiated – Messaging and content is inward-looking and unengaging - Presents opportunities for firms willing to invest in their brand – Arthur offer free brand consultation
The global Private Equity industry is the real deal. Values, volumes and fundraising have hit record levels. Investor demand is continuing to rise this year, particularly from institutions.
Add to that the sustainability story. Less than a third of global emissions come from publicly-listed assets. P.E. investments are seen as a powerful way to make a positive difference to climate change, as they can create change, quickly.
But with increased demand becomes increased competition – for investors, for companies to invest, and for the talent that will win the right deals and secure funds.
The strength of your brand is key. Supported by a clear positioning and a compelling value proposition. And brought to life by impactful creative, a distinctive tone of voice and engaging messages.
We recently carried out a brand audit for the P.E. sector. Our discoveries raised issues, but also some real and substantial opportunities.
We found that:
So there’s plenty to fix. But there’s also an undeniable opportunity for P.E. firms willing to invest in their brand. Because the benefits are compelling:
At Arthur, we build powerfully simple brands, with a clear point of difference in their sector and a single-minded narrative firmly evidenced across all touchpoints.
We’re offering Private Equity firms a free 30-minute debrief on the health of their brand, including a brand audit, competitor analysis and a bespoke presentation. No fee, no commitment.
To find out more, email our managing partner, Darren Lassiter at
darrenlassiter@arthurlondon.com
Remember COP26 and the Glasgow Climate Pact? Or even Earth Day last Friday? Such is the pace and sheer volume of news we're bombarded with from every corner of the globe, you'd be forgiven for forgetting the finer details of last year's climate change shebang. Or this year’s Earth Day theme (Invest in Our Planet).
Asset management brands certainly won’t let us forget how they’re planning on saving the world. Let’s create a sustainable future now. Responsibility works. Now is the time to power change. Zero-hour. If you believe the advertising (as an ad agency, we’d never suggest otherwise), we’re going to get a cleaner planet faster than you can say ‘triple bottom line’.
But sustainability is serious. Something that will affect the lives of billions of people and not everyone equally. Something that will take decades to achieve. Yet something that’s being delivered (for now) with more words than actions.
For investors, it matters. Adverse climate change could have a devastating effect on the global economy. We know there’s a huge appetite for funds that have sustainability (sometimes literally) written all over them. But the proliferation of ESG rating formulae and a history of investment greenwashing have left clients confused as to what the new and improved, whiter-than-white investment landscape means for their money and their long-term futures.
Rising energy prices have brought the problem into sharp focus. Apart from being told by energy companies to conserve heat by hugging a pet and performing star jumps, investors are being informed that many companies are thinking of rowing back on their clean energy commitments. Sustainability, for some, is proving too expensive.
Added to that is the lingering suspicion that investing responsibly means compromising on performance. It’s no wonder that polluting (but profitable) investments are often held privately.
So, what’s the solution? We believe asset managers need to remember their purpose (by that we mean their true reason for existing and why they matter to people). Not their press-friendly purpose of being the sustainable superheroes that will sort the environment at the flick of a switch. But their true purpose of investing (securing and, hopefully increasing) their clients’ money in an expert, considered and responsible manner. And, more often than not, that will mean investing in solid business models that recognise that sustainability is the only way forward. Profits and planet hand-in-hand.
The EU is trying to help with a new labelling system that identifies industries and services it deems environmentally sustainable. The hope is that asset managers will use it to tell investors, in a consistent way, how much of their investments can be considered green.
What’s interesting is that this isn’t greenwashing. The EU’s system aims to be pragmatic, recognising the longer-term potential of sectors such as nuclear energy to help reduce carbon emissions, as well as transition fuels such as natural gas. But could it go further?
Arguably, getting polluting companies to change their dirty habits is as important to net zero as investing sustainably. And that’s where asset managers can have real influence. It’s also one of the principles of successful investing – owning unfashionable companies, sparking positive change and making them popular again.
So, we say to asset manager brands: remember where your loyalty lies; don’t forget the investment story; be clear and true to your intentions; and recognise that you are an enabler, not the answer, to delivering a better future for everyone.
Post-pandemic, there will be a golden opportunity for active asset managers to assume the role of guardians of the ‘stakeholder capitalist’ economy. But to do this they need to move the conversation away from products, price and performance and engage their audience on a different level.
The domination of passive funds over active in recent years is undeniable. Figures from Calastone indicate that passive funds have seen inflows of £19.7 billion in the last three years, while active funds have seen outflows of over £2 billion[i]. Cost appears to be the leading factor in this changeover. Active funds simply can’t compete on price. This has led investors to move their money.
But we may be at a turning point. December 2020 saw £1.7 billion flow into active funds, representing the best month since July 2017. This sets the stage for a resurgence in 2021, when there is the opportunity for active asset managers to win clients by changing the conversation from cost and engaging their audiences on a different level.
Profit but not profiteering
Trends, such as online shopping and working remotely, have accelerated during the pandemic. The same is true of consumer and investor expectations of the companies they buy from and invest in.
Now, more than ever, customers expect businesses to act ethically and responsibly and put people before profit, with a growing backlash against companies seen as profiteering from the pandemic.
Similarly, investors are increasingly adopting an investment approach based on their values,
despite this often carrying a higher fee. This is shown by the inflows into ESG funds. There’s a growing consensus that companies that act responsibly have a greater likelihood of future success, while those that do not act in the best interests of society and the environment will ultimately fail.
The new style economy
It’s widely acknowledged that society and the economy will look very different post-pandemic. One concept that is driving much discussion is ‘stakeholder capitalism’; the idea that businesses are obligated to act in the best interests of all stakeholders – including consumers, employees, and society – not just shareholders. For asset management, the thinking is that, for the economy to recover and thrive, investment should be focused where it will do the greatest good (and least harm) to the workforce, the community, and the environment.
For this to happen, there must be guardians we trust to make this assessment and direct capital accordingly. This is a role that active asset managers were built to fulfil.
Let’s change the conversation
When companies are judged not only on the hard metrics of their profitability but also on metrics around employee welfare and environmental impact, the strengths of active asset managers come to the fore. This task cannot be completed by algorithms alone; it needs human insight and skills that active managers have spent decades perfecting.
This is an opportunity to change the conversation. Discussions around the cheapest fund are far less relevant. The narrative that matters is the crucial role that active managers play in society, and the influence they have in creating the world we want.
This doesn’t require an operational change for active managers, which already function as guardians of client capital. For many firms, this is detailed at length in the marketing touchpoints that explain investment philosophy and process. But it’s a narrative that just isn’t resonating with investors in a simple, powerful way.
Building your brand on guardianship
Investors who allocate their capital away from passive funds and into active ones are not just choosing a different product but a different perspective. They believe their money can achieve a return and a build a better world.
This is a far greater responsibility to place in a fund manager’s hands. The message that the chosen active manager warrants the role of trusted guardian cannot be communicated just through investment products. It must be conveyed through what you want your brand to stand for in the eyes of your audiences.
Outside of the asset management sector, it’s easy to name companies that connect with their audience through what they stand for rather than just their products, from Patagonia to Ben & Jerry’s. The same thinking must now be applied to inspire investors and drive the resurgence of active management.
The power of your truth
It’s time for active asset managers to look beyond products and performance to find their brand truth: what they stand for and how that reflects the values of investors. Moving from the rational to engage emotions and connect with their audience in a powerfully simple way.
Powerfully simple is what we do at Arthur London. We’d love to help.
[i] https://www.calastone.com/vaccine-optimism-sees-equity-fund-inflows-surge-to-5-year-high-in-q4/
It has been said that brand is often the most powerful asset that asset managers fail to manage.
How you communicate your brand story to customers is absolutely central to driving a market-leading business. So why does it remain such an undervalued part of the sales funnel throughout the sector?
Historically, the asset management sector has been sales-led and product-oriented. Sales is unarguably important, but there has to be more than just a product spec to create a desire to buy. In a heavily regulated sector product quickly becomes commoditised; a disaster for differentiation. And there is now growing evidence that the winners in the asset management sector are those that are fully embracing the power of their brand.
It’s important to dispel the idea that marketing is the colouring-in department, concerned only with pantone colours and typefaces. Certainly, marketing puts out the ads and leads brand design, but it has a more fundamental role in creating a core, compelling brand idea that permeates every aspect of the business.
For all the commoditisation of products, almost all asset managers have a story to tell – if you know where to look. It’s those brand stories that customers want. The organisation that weaves a compelling story through every aspect of their business creates a real point of difference. The brand is so much more than ‘just an ad’ – it should live in everything from PR and digital content to sales collateral, event marketing, thought leadership – and even new product development.
Let’s take Pictet, for example. Their brand is centred around no less lofty an idea than a better future for all. One of their products is the Water Preservation Fund. It’s interesting to customers because it’s current and an issue that won’t go away.
But, behind that compelling idea is a brilliant content hub, talking about the mega trends that are shaping our world as well as the impact they will have on investments. So, the intermediary now has a relevant and topical fund to talk about and, just as importantly, a source of information that gives the fund context – and makes it even more appealing.
Another example comes from Sycomore, which talks about the power of human capital. Having created the ‘Happy at Work’ fund, they invest in companies that put human capital at the heart of what they do. Here again, they give the fund even greater appeal by putting it in the context of a wider social trend through storytelling. The talkability of that product ultimately makes it easier to sell.
Not every asset manager needs to have a water or happiness fund. There are points of differentiation and stories all over the place. But, to tell the stories, the industry as a whole needs to value the contribution of those essential brand stewards - the marketers.
Perhaps the solution lies in adopting the empirical, data-driven measurement of brand value commonly used by large consumer brands. Clearer articulation of objectives and more consistent results tracking would help the wider business understand the contribution of marketing, prove its cost/benefit ratio and reinforce the value of brand as a whole.
Brand moves the conversation away from the rational and towards the emotional component of the sales process. No-one sells Coca-Cola on the basis of caramel colour and a bit of fizz. Coke sells happiness and Christmas. It’s time asset management bought into a bit of that sparkle.
When it comes to explaining the benefits of its products, asset management can learn a lot from other industries. This is particularly true for ESG investing. There is rising demand for responsible investments, but many asset managers’ ESG marketing has been little more than ‘green washing’;
vague and unsubstantiated claims that have led to a lack of understanding and trust. Fortunately, there is an industry close at hand that does things much better – veganism. In this article, we highlight its rising popularity and explore three potential lessons for the marketing of ESG investments.
Supermarkets, restaurants and fast food chains are all looking for a slice of the vegan pie. This could be dismissed as ‘just another food trend’ but doing so would arguably ignore the reasons for its rising popularity, such as dietary requirements, nutritional and health benefits, and ethical and environmental impact. It is the concept of sustainable living and understanding how the things we eat affect our environment that makes veganism bigger than just a food fad.
Veganism is part of a growing movement where consumers look for products and services that don’t just meet personal needs, they have a positive impact on the world. You can see the rising interest in this area from twitter conversations, google searches and retail sales.
The increasing popularity of a vegan lifestyle has undoubtedly been helped by the way it is marketed. We think there are three key lessons for asset management firms:
1. Counter negative myths with positive facts
Negative stories have suggested that vegan food lacks the necessary protein for a healthy diet. To counteract these messages, there has been lots of content from experts and health gurus, vegan recipes and messages on vegan-food packaging all highlighting that it is high in protein.
Asset managers can use this holistic and always-on approach to marketing to counter any ‘green washing’ perceptions. They can do this by creating a range of communications that engage investors across channels and at every stage of the investor journey. These can show the importance of integrating ESG criteria into an asset manager’s investment process to manage risk more effectively and achieve sustainable returns for their clients.
2. Make people feel like they are having a positive difference
Vegan food hasn’t just gained traction from making people feel happier about eating healthier. It also makes them feel good about the positive impact they are having on the planet.
Asset managers can make investors feel good about ESG investing by focusing on the positive impact their investments have had on the environment and society. They could use case studies to show how asset managers work with companies to make them more sustainable or highlight positive impact reports that quantify how much carbon emissions have been reduced by investor money.
3. Positive messages don’t just come from companies
People trust people more than companies. Influencers have helped to spread the positive message of a vegan diet, which in turn drives demand for vegan food.
Asset managers can use social listening tools to identify influencers and then provide them with investment stories around the positive impact that ESG investing has on communities, the environment and the world we live in, such as plastic reduction or protecting endangered species from palm oil production.
To conclude, there is one broader point that the asset management industry can take from the rise of veganism. Investors clearly care about sustainability and they could have a stronger affinity with companies that integrate it into their brand and product story.
The growth of PropTech is changing real estate investing. Are you prepared for the shift in fund management brand positioning?
Experts have predicted that the global investable real estate universe in 2020 will have grown by 55% compared to 2012. (Source: PWC Real Estate 2020)
With a flood of capital into the sector, and a sea of new competitors, differentiation is crucial for fund managers to maintain a competitive edge.
Real estate fund managers tend to focus their brand positioning on two numbers: their size, and their years of experience. But for real estate investors who have more options than ever, this might not be a strong enough message.
Today’s investors are looking for fund managers at the forefront of real estate technology, or PropTech. Leading the industry in this regard, and communicating this effectively, could be a key differentiation from competitors still focused on size and experience.
There are several areas of opportunity for real estate fund managers looking to incorporate this into their value proposition.
From smart meters to solar panels, there is an abundance of technological tools that can make properties more energy-efficient, time-efficient and cost-efficient. Not only can this improve value by keeping costs down, but for now, tenants are willing to pay a premium for these features.
Smart buildings and the data they can collect can help to improve tenant satisfaction (and therefore drive more value) by improving their experience in any number of ways – for example, to learn at what point wear and tear to the property might require repair and offering this pre-emptively. Data can also be used to identifying underused spaces in a property and drive more value from them.
With digital giants like Amazon and Google entering the real estate market, we can assume that this will be an important part of their offering. Asset managers will need to counter this by showcasing their experience in this area.
The real estate customer has transformed since becoming equipped with mobile technology, and real estate managers have been quick to adapt. If retail has moved online, less stores and more warehouses are required. With the digital disruption of hospitality, less restaurants and more delivery-only kitchens are needed.
But it would be blinkered to think that this approach is sufficient to anticipate the further changes that are inevitably going to come.
Today’s end customer doesn’t see real estate as a physical space. They see the experience a physical space can facilitate, whether that's community (housing), convenience (retail), flexibility (commercial), or personalisation (hospitality).
So investors too are needing to look beyond the asset itself, and are increasingly becoming involved in operations, where they can offer solutions for growing trends, like telecommuting or co-living.
Properties need to be more versatile, so they can adapt over time to the customer’s changing needs, like community, or to the adoption of new technologies, like autonomous vehicles. And as properties develop shifting functions, real estate managers will likely take on a broader scope of activities.
In terms of messaging, it’s important to convey the spectrum of activities a fund manager can offer its investors, and how experience in one niche can be applied more widely.
Big data is not just useful to drive value from properties, it has multiple applications within the business. Innovating in terms of ways of collecting and using data to drive investment decision will give real estate fund managers a competitive edge – and help them to stand out to potential investors.
We’re also seeing more real estate asset managers collaborating with technology partners - a notable example being Brookfield’s joint venture with Niido, part of Airbnb. Embracing potential competitors as partners is not just a way to adapt to the change they bring to the market, it’s a positive brand story that demonstrates PropTech prowess.
Another opportunity is with blockchain, which is increasingly seen as a credible solution for faster and cheaper transactions in the real estate industry. Fund managers who are looking to drive forward the use of blockchain can capitalise on this message in their branding.
It’s clear then that PropTech offers a dual opportunity to real estate fund managers. On one level, it offers opportunities to drive more value from real estate, understand and satisfy the customer, and streamline business operations. But on another, it’s a compelling brand story that can be leveraged for a competitive edge in a fiercely competitive space.
It’s time to move on from the current dominant messages in asset management branding – size and experience – and communicate the expertise that is more relevant to today’s clients.
To continue to grow, asset management firms must genuinely have the customer’s needs at heart, says Arthur’s Darren Lassiter.
Asset management needs a fresh approach. And with research from Casey Quirk suggesting that a quarter of all asset managers risk becoming unprofitable by 2028, it needs it soon.
The problem is that much of the sector is trying to address new challenges with old solutions. Cost cutting, investment quality and outperforming on benchmarks – these are the tactics the sector has traditionally relied on to boost profits.
But the same research that predicts the widespread drop-off in revenues also reveals that these tactics are becoming increasingly ineffective. In today’s market the customer wants more.
Even with this dire warning front and centre, too few asset managers are looking to the customer for answers. They should. There is concrete proof that those who actively build their offering around customer needs from the ground up deliver consistent and sustainable growth.
Certainly, there is no shortage of firms who use a liberal sprinkling of the word ‘customer’ across their communications. Customer care teams have also, no doubt, been drilled in the importance of a ‘customer-centric’ approach. But, in too many cases, the adoption of a customer-centric approach is all too superficial.
For companies to succeed beyond the predicted nine-year event horizon, they have to truly understand what customer-centricity means - and they need to understand how to make it work.
Customer-centricity starts with the product and what the consumer wants that product to be. The research found that profitable growth firms transformed their product management group into a development function that based product creation on buyer demand. As a result, these firms were open to changes in that demand. They had built a function based on data, personalisation, technology and predictive analytics to help them understand customer need and act rapidly to accommodate it.
These forward-thinking companies engage with technology, but don’t consider it as a solution in itself. They recognise it for what it is – a tool that allows them to move on new ideas quickly, deliver experience seamlessly and bring systems in line to support change and future innovation.
Critically, these new development groups are cross-functional. They break out of the sales or product management silos and bring on board all touchpoints across the business. As the single biggest customer advocate in this process, it is unsurprising that the Marketing function, is proving to be the vital element within these cross-functional teams.
For too long, many asset management firms have used customer-centricity as a buzzword rather than a true corporate goal. But within their Marketing functions they may already have the expertise to make their claims a reality.
Within Marketing, ‘customer first’ is an organisational state of mind. Their function is the hub of analytics, sales data, customer care, trends impact and even…or maybe particularly… of a new era in product development. Marketing recognises that the company’s existence, survival and growth depends entirely on being able to give customers what they want.
We know that an organisation can only continue to exist only as long as it continues to satisfy the needs of its customers. Now we must ensure that it has a structure that allows it to deliver this, and that Marketing is its driver.
Asset management brands need to take back ownership of the positive contribution the sector can make in building a safe, sustainable future society.
Investment has a massive potential to do good. In the right hands it is the cornerstone of responsible development, social infrastructure and sustainability. This is not necessarily how the asset management sector has been viewed in the past, but that all looks set to change.
In Asset Management 2020: A Brave New World, PWC outlines the role the sector will play as it becomes a pivotal mechanism for investment. With banks moving out of some areas, asset managers will fill the void, also tackling critical issues such as ageing and retirement and the need for capital to support urbanisation and cross-border trade.
This is behind the explosion in chatter about environmental, social and governance (ESG) across the asset management community. But organisations have found themselves facing two challenges. Firstly, there is the importance of approaching a sensitive topic well – the asset management sector doesn’t just have to do something, it has to do the right something. And secondly, individual asset management organisations need to communicate what they are doing in a way that is credible and differentiating.
Evidence suggests that, thus far, these two challenges are proving tougher than the sector first imagined. Having grasped the need for sustainable, responsible investment, the community has forged ahead by hitching its wagon to a range of lofty ideals. The danger is that these can often sound like big claims backed by little evidence, and in many cases they bear little relation to the investment story at the heart of the business.
There’s also a worrying tendency, common across many other business sectors, for marketers to garnish everything with a wind turbine and solar panel or two, just because – you know – it’s environmental, isn’t it?
In the asset management sector the result is that investors are confused and commenters sceptical. There is little agreement on what ESG actually represents and it’s unsurprising, therefore, that many claims have led to cries of ‘Greenwashing’.
But above all, the asset management community’s involvement in ESG issues still has to be a means to an end, notably positive impact and positive returns. Our research would suggest that this is not yet perceived as credible. A recent survey conducted by Arthur London amongst professional investors across Europe indicated that ‘good’ investments are not seen as giving good returns. This lack of clarity and credibility means that no-one is talking to the end investor. Confusion reigns and the demand for these ‘good’ products remains untapped.
This isn’t to say ESG is not an issue worth pursuing, indeed the trend will continue and very shortly it will become essential. Nor is it a charity case. There is the potential for return if it’s pursued as a strategic investment rather than a nod to a trend. But the approach overall absolutely has to change.
First of all, the industry has to stop apologising for the mistakes of over a decade ago. With governance and active management, the asset sector should be proud of its contribution. Responsible active managers have always done a brilliant job of holding companies to account – in the interests of their investors.
Asset managers should also remember their brand should be the filter through which they communicate ESG and the method by which they can differentiate their approach to the subject. Through a successful brand story they can put investor benefits at the heart of their ESG strategy – and ESG at the heart of their brand. It’s simply a matter of bringing the good stuff into the light.
Companies such as Candriam and Sycomore evidence their claims with investors through ideas such as interactive voting behaviour dashboards and tangible funds like the Happy at Work fund from Sycomore and the recently launched Oncology impact fund from Candriam
The industry needs more asset brands to be bolder, stick their heads above the parapet and own the good that we know the sector has the potential to deliver. Opening the inner workings to scrutiny is scary, but if the brand is truly living its values and not merely hiding under a veneer of respectability, there really should be nothing to hide – and everything to shout about.
