I recently started training to become a roller derby referee.
You read that right. In my spare time, I plan to sport a really loud whistle and to wear a black and white striped shirt with my chosen roller derby moniker emblazoned on the back. Bonus points for the loyal reader who guesses what that might be.
You see, I’ve been a fan of roller derby for years. I loved the movie “Whip It” and, shortly after seeing it for the first time, discovered that Nashville has its own Rollergirls team. I’ve been going to bouts ever since. Mock me if you will, but I would argue that there are few better evenings of sports entertainment to be had. It’s cheap. There are nachos and beers bigger than my head. In addition, roller derby names bring in a hefty dose of humor - one opposing team actually had a player named, I kid you not, “The Other White Meat.” Basically, it’s all around good, clean fun, with just a hint of sex and violence. How can you lose?
On my first night of official practice, I realized that all of my beer-fueled nights of watching roller derby had ill prepared me for actual officiating. While I was familiar with the basic rules, there were dozens of arcane guidelines that one would never notice from the stands. For example, a player sitting or standing in the penalty box can remove their mouthguard, but if they skate towards the track with it out, that’s a penalty. Skaters choose their own one- to four-digit player number, which are always said as individual digits (Player 1-3-3-7 versus Player 13-37). Luckily, breaking that rule won’t earn you a penalty, but it may merit a dirty look from a player named Winona Thud.
Some of the rules, particularly ones I kept screwing up, seemed a little silly to me, and, being the Type A jerk I can sometimes be, I felt compelled to question a few. That earned me a few additional dirty looks. At one point the head official said, “yeah, it’s kind of peculiar, but that’s just the way it is.”
After I got home that night, I started thinking about the arbitrary rules in other parts of my life. Investing obviously has A LOT of very specific rules and regulations, most of which have been handed down by various regulatory bodies. Some of them make perfect sense to me (providing net versus gross performance to current and potential investors, for example), while some seem designed merely to make me crazy and to create and sustain compliance jobs.
But in addition to the codified (and omnipresent) regulations in investing, there are a host of informal norms and mores, as well as some basic unspoken tenets. And, at the end of the day, understanding the entire greasy burrito of investing lore is critical to navigating investment terrain without losing your sanity.
For example, even though there’s no rule (or glaring Rollergirl named “Lil Red Right Hook”) to dissuade them, most managers know by now NOT to make their pitch book too long, but what about color schemes? Did you know you generally shouldn’t have a red logo or typeface (red connotes losses)? And make sure you get in front of investors, but realize that you’re probably going to be judged if you’re out and about at conferences and events too often (who’s minding the portfolio?). Follow up but don’t be pushy, oh and, by the way that fine line may vary from investor to investor. Don’t let an investor read bad news in the press. And so on. And so forth.
Most of us that have been in the industry for long enough have digested these kinds of particulars and therefore navigate the industry fairly seamlessly. But I still often see one great divide between investors and managers when it comes to the accepted rules of play, and it has to do with the starting line.
Many investors approach investing from a place of “no,” while many, if not all, fund managers, approach investors from a place of “why the hell not?”
A fund manager may think: Why wouldn’t an investor want to talk about my fund with me? Why wouldn’t an investor trust me with their capital? Why wouldn’t I deliver satisfactory results? Why wouldn’t this strategy make sense right now? Why wouldn’t an investor want to buy on a drawdown – buy low, sell high, right? Why wouldn’t an investor have liquid funds to allocate to me now? If I just keep up the conversation, I know they’ll eventually come around. I know there are a lot of funds out there, but this is just one more, right?
An investor may think: This is the 20th long-short equity (core fixed income, SMID-cap) fund that’s contacted us this month. That manager lost a lot of capital at a prior fund. That fund doesn’t have the right infrastructure. That fund is too small to safely absorb our investment. That fund has too little capacity for us to scale up appropriately. That manager has been underperforming of late – there’s headline risk and career risk, and what if it’s not a buying opportunity but a sign that the manager isn’t talented? That’s a strategy we’re not interested in/over-allocated to right now. We’re using mostly passive investments for that part of the portfolio. We don’t have liquidity to make new investments without redeeming from existing investments. I don’t know how many more times I can tell this fund no. There are thousands of funds out there, and this is just one more.
Even though it’s frustrating, even though the response you get may not be the one you think you deserve (or what you think you’d do in the other person’s shoes), even if you don’t like it, that’s just the reality of the investing world. And it’s really important to have a little empathy about the realities on the other side of the fence. It can save you time, energy and perhaps even a little time in the penalty box.