Although there are far more retail investors than institutional investors, institutional investors—to put it mildly—manage quite a bit more money. They are the big fish, representing pensions, mutual funds, endowments, hedge funds, private equity, investment banks, and private equity. Accounting for roughly three quarters of all trades on the New York Stock Exchange, it’s safe to say this group of investors exercises enormous influence over the markets. With this in mind, it should come as little surprise that institutional interest can quite literally make the difference between success and failure for an ETF.
But how can ETF issuers reach this coveted demographic? It’s unlikely that they’re going to be interested in your latest sales pitch, and many of the marketing rules that hold true for retail investors (keep things simple, define all your terms, use lots of pictures) goes out the window. Read on for some keys to reaching institutional investors.
Nuanced, Thoroughly Researched, High-Level Content and Thought Leadership
Institutional investors are helmed by investing experts with years, sometimes decades, of experience in the field of finance. The sales and educational content that clicks with retail investors will strike many institutional investors as too “retail-y,” too generalized, too “big picture.” Institutional investors conduct rigorous analysis, picking apart an investment methodology to see how it works before making any decision on whether to invest. Institutional investors have a lot of responsibility, as they’re often managing other people’s money, so they are careful, methodical, and take their time. When creating materials for institutional investors, you should too.
This can often translate into a significant amount of analysis, research, and drafting. Often, this takes the form of a white paper, or even an article in an academic journal or two. Your goal here is to make the rigorous, mathematically- or statistically-backed case for why your particular investment thesis (which should coincide with your ETF’s) is particularly compelling. Even if it isn’t submitted to academic journals, it should be backed by academic, rigor: thoroughly sourced, with facts and figures to back up your claims.
Your thought leadership pieces should presume a very high level of sophistication, jumping right into the arcana of relevant question in the investment world. If possible, you should speak to the issues facing institutional money managers today: how to do right by their clients, how to help them maximize risk-adjusted returns, how various sophisticated hedging strategies may pan out over the long term.
Go Where the Audience Is
Institutional investors do not read the same publications as retail investors. They read magazines such as Pensions and Investments, Insurance Asset Risk, or (appropriately enough) Institutional Investor. While the cost may be substantial, it may be worth your time and effort to get your investment thesis in front of this audience through publications such as these, whether through public relations (PR) outreach, or through paid advertisements or advertorials. Another way to “go where the audience is” is to go to conferences that institutional money managers attend and build in-person relationships there.
At the end of the day…
While there are no guarantees that any of these efforts will immediately lead to institutional money flooding into your ETF, over time, when carefully applied, these tactics can position your firm for success with institutional investors.