Communicating with investors in a volatile market

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In case you hadn’t noticed, stocks have spent a lot of time in the red this year. In total, the Dow Jones Industrial Average has fallen over 1,300 points since the beginning of 2016.

Some common reactions: hide smartphone under table and plug ears at any mention of market declines, cry self to sleep, panic and sell – sell, sell!

You can do all this when you’re casually investing your own savings. Avoiding the issue isn’t a realistic option, though, when you’re managing other people’s money, and losing your cool won’t win you points with anxious investors.

So how should you react? Backstop’s Chris DeNigris joined HFM Week for a panel discussion; here’s what he and the full team of experts had to say:

Have a plan and execute with confidence. Markets are always going to fluctuate, so don’t wait for a downturn to prepare messaging or to coach your staff on handling tough questions. Eliminate the possibility of surprise by planning for every possible outcome. Take a clear stance on the market downturn and what it means for your fund, and let the investor know you have things under control.

Be proactive and transparent. Managers like to check in when things are going well, but it’s the rainy days when investors really need you to communicate. Eliminate fear by reaching out to your clients before they call you, and be transparent. If it’s going to be a rough day, let them know so, without suggesting any doubt in your strategy.

Consistency is key. Some investors want to communicate every week, and if that’s the case, engage with them. For the most part, however, a monthly - or even quarterly - communication will suffice. If you do send an additional communication, be sure to let your investors know it’s a one-off, so they don’t expect to see it again. The worst thing you can do is miss a regular report when the fund isn’t doing well.

Take advantage. Communications is part of the investor experience. See the downturn as an opportunity to connect with your investors, or position your firm as a thought leader by issuing a white paper or video. You can also include a FAQ in your next investor report if you notice a trend or expect there are questions investors aren’t asking.