Quarterly reporting season is wrapping up for many investment managers, or at least it should be.
Shortly, managers will begin receiving emails from a few specific databases informing them something to the effect of:
“Your database profile is only 60% complete. As a result, you missed out on 500 searches this quarter.”
Are these emails legitimately pointing to holes in your investment data strategy?
In fact, these emails are mostly nonsense. Let us explain…
A Screen is Not a Search
First of all, it is true that databases can track activity in their database. They can even segment that activity by any number of characteristics, including asset class.
But these are gross numbers that, like gross returns, do not take into account a whole host of mitigating factors (after all, if gross returns are 12%, and the manager charges a 5% management fee, that makes a difference. It’s why the new SEC Marketing Rule requires firms to disclose net returns alongside gross – it’s misleading otherwise).
What these “gross search statistics” do not (and cannot) account for is the why: why is a “search” being run? Is it
- A manager doing competitor research? This is not a search - it’s a screen.
- A consultant conducting basic market research? Screen.
- Initial due diligence for a client? Screen.
- A financial journalist conducting research for a story? Screen.
- An intermediary with a new placement? This is a search.
In each of the above 5 scenarios, only one constitutes an activity a manager cares about: placement of new money.
What is the intent of the activity on the database?
Why are the searches/screens being run? Who knows? Nobody, and certainly not the database.
A consultant is not calling a database to tell them about the nature of their activity - search activity is quite closely guarded.
And given that half the database subscribers are asset managers, it stands to reason that those managers account for at least half the activity. So what does an asset manager-initiated screen tell us about the quality of a manager’s data strategy?
Absolutely nothing - if your firm is “missing out” on screens by fellow asset managers, it does not affect you one iota. In fact - it’s a good thing in that they are not getting any competitive intelligence on your firm.
We hope our point is clear - Just because your profile is 60% complete does not mean that that you missed out on any searches for real assets that are being placed now.
60% can be better than 90%
Our decade-plus experience tells us that, depending on how that 60% of data is positioned, it can be a much stronger marketing asset than a profile that’s 90% complete. Why?
This is an industry that is still “sold” and not simply “bought.”
Nobody is finding managers on a database, reading their website blogs and research notes, and then committing millions of dollars to them, sight-unseen.
In other words, establishing and developing relationships still matter. Sales strategy still matters. We aren’t selling Oreos here.
When a profile is managed both professionally and strategically, it affords the luxury of leaving certain datasets ambiguous, which creates the right kinds of questions in the mind of the database subscriber. To obtain concrete answers to those questions, the consultant or intermediary must reach out to the manager directly.
These unsolicited inquiries form the basis for new business relationships for many, many of APX Stream’s clients.
A profile packed to the gills with data? It’s very courteous of you, but if the consultant has everything they need, there is no reason for them to reach out, giving your more strategic competitor a leg up in the relationship building stage of the process.
It’s the same reason why it is a bad idea to put too much information on an online dating app: too much information allows your audience to make assumptions that may not be entirely accurate in context.
By being discrete with your data strategy, it enables you to maintain control over your story.
In the end…
Subscriber activity in the databases is much more nuanced and ambiguous than some databases let on. Subscribers are not telling them the purpose or the intent of their activity.
Any assertion to the contrary is simply misleading.
So why do some databases push this nonsense? Marketing. They want more data. Databases with more data are in a stronger market position to attract new subscribers. But as we note above, more data is not necessarily a sound strategy for the manager.
That’s why even if your profile is 98.7% complete, you will still get those emails… just so you know.