In Europe, as elsewhere in the world, institutions like when possible either to deal with specialist boutique operations or with operations the same size (or at least with the same standing in their particular industry) as themselves. Thus a middle-sized fund group with, say US$ 10m or US$ 25m under management is going to find itself with a very hard sell indeed. In these circumstances it is important, from a marketing standpoint, to quote all the capital/corporate size available. Thus if the middle-sized fund group is a subsidiary of a larger brokerage or banking operation, the capital worth of the parent should be brought into play.

If no parent company exists, attention should be focused on the specialist characteristics of the fund group and its investment programmes (words like flexibility and innovative are useful here) in an attempt to portray the fund group as a niche business. (This technique is often used by consultancy groups seeking to act for investment management groups.)

Technical Expertise

As above, anything which can distinguish a fund and its programmes is desirable. This applies to high academic standing among the personnel (the ‘rocket scientists’) as much as it does to the claims of rigorous testing of a technical system. Sellers of funds based upon technical systems should remember that the institution is still, to a great extent, buying the people representing the system rather than, straightforwardly, access to the ‘black box’. Equally sellers of funds based on fundamental trading systems should remember and have an answer to institutional concerns about the star trader being run over by a bus, for example.

In both cases, substantiated claims of testing the investment programme in every conceivable market condition are valuable.

Performance Aspirations

The expected returns on a fund, as quoted, are, of course, largely a function of the quoted track record. In that context it is worth restating that European institutions are made nervous by apparently exorbitant potential performance. A number of institutions have been quoted in the press as saying that they are disappointed that the performance expectations are always a number of percentage points higher than the real figures (often because of the imposition of a more substantial fee structure than originally envisaged).

Furthermore, potential performance need not simply be quoted as straightforward capital growth. Increasingly, successful fund groups are quoted figures in terms of percentages above a particular benchmark or index. More specifically, certain managed derivatives programmes are sold on the basis of improving overall portfolio performance by a few percentage points. Nor need performance always be considered simply from a growth standpoint. Certain new funds, particularly those partially aimed at tax exempt institutions (such as pension funds in certain countries), offer a combination of income and performance, perhaps even guaranteeing the income levels.

If the fund being offered already has an established track record then it may prove useful to quote figures or provide graphs showing the fit between real performance and programme expectations.

So-called Guaranteed Futures Funds also have their place in this equation although these are usually much more enthusiastically received at the retail end of the market.

Explanatory Materials

Conventionally, funds are promoted in Europe through a prospectus, some form of explanatory memorandum or summary and, often, a sheaf of figures to substantiate the various financial claims. (Reprinted press cuttings may also be included in the pack.)

Prospectus

US and European prospectuses tend to differ not only in content (forced on the writers by different regulatory jurisdictions) but also in lay-out and style. Whereas in the USA, prospectuses are normally economically printed in one colour only, European prospectuses which are often significantly shorter may also double as sales support documents and may thus be produced more artistically to include performance graphs and other coloured charts. European prospectuses also often have separate (card) front covers.

Whether this distinction remains is open to question. Certain fund groups selling in Europe are beginning, for reasons of cost, to adopt the US look for prospectuses and, furthermore, are beginning to include US style information. For example, until very recently, it was uncommon for European prospectuses to include calculations of the likely number of trades per $1 million per year for a fund. Without such information it is clearly impossible to make any real judgment of brokerage commission flows—information that institutions increasingly require.

Whatever the form of the prospectus, the summary document remains the most important single sales tool. Quality of design and, hopefully, a novel approach to graphics and images within the document (in other words, no traders on telephones) reflect at an important subliminal level, the care and attention spent on preparing the fund.

Furthermore, while (subject to European regulations) a prospectus may simply be printed in English, it is unsatisfactory from a diplomatic point of view (no matter how well the representatives of the European institutions speak English) not to have the summary translated.

Summary content is largely a matter of personal choice but should certainly include all the main fund points—the style of trading, the performance history of the fund group or (if new) at least the history of the traders/investme_nt managers, performance aspirations and the technical/financial details of the fund including the fees to be levied upon it. It is not sensible to produce a summary that concentrates entirely on promoting the bull points of a fund

leaving the buyer to wade through the prospectus in an attempt to discover the implicit costs.

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