Communicating complex matters of finance, investing, portfolio analysis and debt is an exercise in education: Everything hinges on the ability of an organization to convey all manner of issues within the securities industry – compliance, regulatory guidelines, initial public offerings, disclosure agreements and transparency in general – with maximum clarity. This concept of the fund-manager-as-teacher is a critical assignment, particularly concerning the way debt and equity capital influence everything from leveraged buyouts, recapitalization of loans, refinancing agreements, acquisitions and other expenditures.
To explain these things successfully, and to do so as a closed-end fund, requires constant communication. This dialogue with investors, analysts and journalists is essential because, with a portfolio diversified across some of the key industries for the nation's economic recovery, such as manufacturing, energy, business services, food and healthcare, everything hinges on the quantity and quality of a fund’s messaging.
And, by quality, I mean the ability to explain and justify the portfolio itself, the return on investment (ROI) and the fund's performance within its proper context: To judge things with an understanding, conveyed by the fund's managers, of both the how and why. As in, “How do we select the industries we choose to target, followed by making investments in companies that correspond to those industries, and why do we believe these investments will provide impressive results for our own investors?”
As the Founder and President of Pristine Advisers, in which I counsel a number of public companies and closed-end funds, I believe there are certain universal lessons – about business, leadership, respect (for yourself and your audience) and responsiveness – which go far beyond the corridors of Wall Street.
A good example of this point is a fund known as Prospect Capital, where the managers and executives engage in frequent communication with the public, as is their right and responsibility, and demystify an otherwise very esoteric (to most citizens) subject.
The Broader Lesson: Seize the Challenge and Do Not Succumb to Circumstances
An additional point worthy of consideration in this review of communications and engagement with investors or customers is quite basic: Deliver as much news – and all the news – necessary to educate your audience, without succumbing to challenging circumstances. In other words, in the midst of a difficult economy embrace the how and why, so your business can succeed and enjoy the moral credibility it deserves.
The latter is an earned commodity, and, in citing the example of Prospect Capital, which I choose to highlight because my standards for communications coincide with their actions, compared to other funds, which mistake opaqueness as a means to garner “prestige” — in underscoring this issue, I would like to remind business owners of the difference between seizing a challenge versus succumbing to circumstances.
The circumstances, for everyone, are obvious: The economy is, for tens of millions of Americans, a recovery-in-name-only, in which jobs are scarce and uncertainty – about sustainable growth, interest rates, banking policies and political decisions – abounds; the “New Normal” defines the financial landscape. This situation is a challenge, to be sure, but an effective executive – particularly one whose job depends on attracting investors and achieving good returns – will seize the moment and never succumb to circumstances.
This comment is a statement of fact for fund managers, which is why I admire Prospect Capital's actions throughout the course of this very imbalanced and precarious recovery, but it is also a summons – to all businesses – to transcend the limits of today for the rewards of tomorrow. Translation: Take control, communicate your goals — and lead!
Always Remembering the How and the Why: Educate and Explain
I conclude from whence I came, emphasizing the how and why of business communications. Put another way, in reviewing Prospect (Capital) I believe there is an overarching theme for prospecting among prospective clients. The theme: Educate those prospects about your work – never assume your actions are self-explanatory – and explain why your approach, product or service is the best.
Information governs this process, clarity defines it, transparency demands it and leadership commands it. At no time does an executive yield a controllable opportunity to chance by labeling it – the missed alliance, the lost sale, the mishandled marketing message or the squandered profit – uncontrollable. For, the one thing every fund manager, executive and business owner can – and must – control – is their communications strategy.
This strategy is a conversation, shaped by facts and professional integrity. From there, companies or investment vehicles can become great brands, a form of equity of invaluable importance in a highly competitive marketplace. These rules are, finally, relevant to every business and every industry. We all have an obligation to communicate our beliefs.
