The historical reticence of hedge fund managers was, in large part, a function of the very statutes and regulations that made the precipitous growth of the hedge fund industry possible. The safe harbor that allowed hedge funds to avoid the public offering rules also prohibited managers from generally soliciting or advertising. The rule that exempted hedge fund managers from investment adviser registration also prohibited managers from holding themselves out to the public as advisers. And the laws that permitted hedge funds to avoid registering as investment companies prohibited the same hedge funds from engaging in a public offering. But law and regulation were not the only factors that historically kept managers quiet. In addition, in many periods before the credit crisis, the capital raising advantage was generally on the side of managers, at least the decent performing ones. Hedge funds retained an air of exclusivity and manager reticence enhanced that aura. Much has changed since the crisis, of course. On the regulatory side, most hedge fund managers now have to register, and doing so allows – in effect, requires – a manager to hold itself out to the public as such. And the Jumpstart Our Business Startups (JOBS) Act has effectively eliminated the ban on general solicitation. For a deeper discussion of the contours and consequences of the proposed JOBS Act rules, see “JOBS Act: Proposed SEC Rules Would Dramatically Change Marketing Landscape for Hedge Funds
,” Hedge Fund Law Report, Vol. 5, No. 34 (Sep. 6, 2012). On the business side, the post-crisis capital raising advantage has generally tipped towards institutional (and, increasingly, retail
) investors. As a result, managers have been able, as a legal matter, and have been required, as a business matter, to make their cases and pitch their products. Most such efforts at persuasion have been undertaken in one-on-one meetings or at small events. But to an increasing degree, hedge fund managers are talking to the financial and general press, appearing on television and otherwise interacting with mass media. Doing so in a structured, thoughtful and well-advised way offers numerous benefits to managers. But various legal and business risks continue to loom large. This article is the first in a two-part series weighing the benefits and burdens to hedge fund managers of speaking to the press, and outlining best practices and compliance recommendations for interactions between managers and the media. In particular, this article discusses the historical reluctance on the part of managers to speak to the press; how the JOBS Act and other legal and regulatory changes have relaxed that reluctance; and six discrete benefits to hedge fund managers of speaking with the press. The second installment in the series will discuss the risks to managers of speaking with the press; situations where managers should avoid speaking to the press; and best practices and compliance recommendations for communications between principals and employees of hedge fund managers and the media.