Our thinking Quick reads The most overused word in alternatives marketing: Proprietary
Fundraising, investor relations and marketing
November 2021
3 min read

The most overused word in alternatives marketing: Proprietary

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proprietary \ prə-ˈprī-ə-ˌter-ē \

something that is used, produced, or marketed under exclusive legal right of the inventor or maker
Merriam-Webster Dictionary

If there was ever a word that the alternatives industry loves to hide behind when marketing, it’s “proprietary.” We talk about proprietary research, proprietary processes, proprietary relationships, proprietary algorithms, proprietary systems…the word is as broadly abused as the word, “experience.”

My issue isn’t whether a manager has some sort of methodology that underpins how they make money and is exclusive to them. They very likely do. Why pay 2 and 20 otherwise? It’s just that far less of what managers do is as truly unique as they want the industry to believe – and definitely doesn’t deserve the mystery that it gets shrouded in.

I’m not advocating for real-time, position level transparency, or anything, where it’s not warranted. And I’m also not suggesting you plaster your secret sauce all over the internet. But it’s time to start asking the question – is what I do really so proprietary that I risk mass strategy replication by selectively sharing elements of it with investors?

Or more likely, is this just default vernacular used by the industry simply because many managers don’t know how to properly articulate their differentiation?

I’m guessing it’s the latter. I understand the paranoia around sharing too much, but the idea that sophisticated investors are looking to pick you off is misplaced. Most have far better things to do with their time. But even if they wanted to, how much good would it do them – particularly with limited information?

For sake of analogy, take your favorite celebrity chefs presenting a favorite dish. They’ll give you the ingredients; they’ll give you the recipe; they will even show you exactly how to prepare it. Do you think you’re going to replicate the taste and presentation on your own?

So, how do you talk about those nebulous aspects of your value proposition without defaulting to “proprietary” (and hoping that is good enough for investors)? You dissect those elements of your process exactly the same way you would any opportunity – just from a messaging and positioning perspective. So, if your edge is your “proprietary relationships,” then ask those relationships for their perspective on what makes you their first call. If your edge is in your process, then critically evaluate your process. Better yet, evaluate your evaluation process. The secret to why you keep coming up with good ideas lies in something more tangible than, “I know it when I see it.”

The point is – investors don’t only require more transparency today than they did yesterday, they deserve it.

They are your partners. If what you do is truly “proprietary,” then there is probably something really interesting to say about it – and say in a way that others aren’t able to backward engineer – particularly with limited information.

If they could, then maybe the strategy isn’t worth the fees that you are charging.

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