Why Your Ass(ets) Is Still Single (Digits)

A few weeks ago, I put out the call on Twitter that I wanted to write an investment manager agony column. Of course, in the deluge of Mad King tweets that seem govern both foreign and domestic affairs of late, that call went largely unnoticed. I was beginning to agonize over the general lack of agony when I heard a primal scream from the darkness - otherwise known as a Twitter DM.

“WHY CAN’T I RAISE ANY ASSETS????”

This, of course, is one of the most pervasive forms of investment manager agony, so I decided to tackle the question, using my own misery as my guide. You see, as a single woman in my 40s, I know all too well the frustration that comes from looking tirelessly for something that proves to be incredibly elusive. In my case, I’ve turned to the modern-day Wizard of Oz, otherwise known as the Internet, to try to solve my dating dilemma. I mean, we’ve all heard stories of our friend’s cousin’s sister Becky who is happily married with two kids to a guy she met on Tinder, right?

After a few months of my recent Internet experience, I remain convinced that there are good matches out there, although perhaps not in Nashville, which seems to be the dead fish picture capital of the world. I mean, one of my governing theories about dating and fund raising is that there is, in fact, a lid for every pot, so I refuse to admit defeat.

BUT I remain even more convinced that there are some super obvious giveaways that maybe this one ain’t “the one.”

So, Dear Random Twitter Fund Manager, I propose to you that perhaps you’re quite the investment catch, and you just haven’t met the right investor who can make all your dreams come true.

Or you may be like one of these folks that pop up in my dating feed from time to time, in which case buckle up, Buttercup - you’re probably in for a bumpy ride.

Look, if you’re newly separated from your prior firm and you don’t have a great, audited and portable track record to vouch for you, many investors are going to have trouble getting involved. I mean, you could prove pretty unstable, you know?

I don’t want to insult the vertically challenged, but I have a hard and fast rule that I won’t date anyone shorter than me. I mean, I’m 5’3” for Pete’s sake. It shouldn’t be that hard for an adult male to be taller than that. I just have this horrible mental image of my (potential) boyfriend’s jeans being smaller than mine that I can’t get over. And it is not hot.

Like me, many investors have trouble getting past a fund that is just too small. It may be that they have an investment policy statement that says they can’t be more than 10% or 15% of your assets, which makes the allocation (and the time for due diligence) just not worth it. It may be that they worry about the business risk or how you’ll support the firm when performance isn’t great. Whatever it is, move on. There ARE folks that will find your size appealing, from seeders to Managers of Managers. Swipe right on them instead.

It has taken me a while, but I’ve finally learned that people who put NO DRAMA in all caps ALWAYS bring the drama. Always. And if you’re bringing the drama to investors in the form of volatility, crazy headlines, drawdowns or worse, they’re going to figure that out, too, and run in the opposite direction.

I hesitated to use a picture from my own “dating” experience, but given the anonymity factor in this photo, I figured I was safe. Seriously, y’all, this guy popped up for both me and a friend recently, leaving both of us to wonder “Is this a joke?!”

Maybe your fund marketing efforts don’t involve a Santa hat, but all the same, maybe you’re still not taking your marketing seriously. Do you have a high quality marketer on board? If you are doing your own marketing, have you reviewed your successes and failures to figure out what to do differently? Do you have a compelling pitch book? Do you go to enough conferences without going to ALL the conferences? If you don’t take marketing seriously, and by that I mean treat it as if it were a legitimate part of your business, how do you expect money to flow in?

I actually had to look this up the first time I saw it. Evidently, there’s a whole crop of folks out there who think that if their significant other knows they’re being cheated on, it’s all good. Sorry, folks, but that’s just creepy. And weird. And off-putting. And perhaps your firm is perfectly happy calling an investor your one and only, but there may be something else slightly creepy and weird about your firm that is off-putting in its own way. Is your spouse or child a major player in the firm? That’s not a deal breaker for some folks, but it does raise the issue of controls. Do you have a third, fourth or fifth-tier auditor? Maybe you’re saving money, or maybe you’re hiding something (hello Bernie Madoff!). Have you had a lot of staff turnover in the life of the fund? Could be growing pains, or it could be you are hell to work with. Look at EVERYTHING in your fund the way an outsider would and ask yourself “Is this an easy tick box or does it raise some significant questions?” At the very least, be prepared to do some explaining in a meeting/due diligence process. At best, consider what you can do to mitigate the creepy factor soonest.

On the one hand, I have to admire this guy’s confidence. On the other much larger hand: euuuuwwwwww.

Likewise, confidence in investing is a good thing. But thinking you’re all that and perhaps talking in overly technical terms, charging fees that aren’t justified by your track record or strategy or acting like you’ll never have a loss is incredibly off-putting. And to be honest, this is often the subject of investor post cocktail banter at conferences.

So, Dear Random Twitter Fund Manager, I hope this helps to explain your marketing conundrum. And may the coming months bring you the satisfying relationship that I deserve.

In the meantime, if you have an investment manager (or investor) agony question I can “help” with, please don’t hesitate to reach out.

Your Fund Is Grossing Me Out!

I was roughly 13 years old when I fell for Nicolas Cage in Valley Girl. Between the Modern English montage of soda sharing and late-night phone calls (on corded phones and pay phones!) and the bitchin’ clothes and slang, my tweenage heart sang just a little for Hollywood punk Randy.  In fact, if not for that movie, I doubt the phrases “Tubular!” and “Gag me with a spoon” would have ever made an appearance in my semi-rural Alabama hometown, even if the latter is what Northerners often think out loud when trying grits for the first time.

Although American slang has come a long way since 1983, I do still find myself using the phrase “gross me out!” on occasion. Weirdly, I almost never say it in reference to Martha Coolidge’s marvelous flick, but it does pop up in conversations with asset managers from time to time.

That’s right, if you’re a fund manager who has marketed your separate account, hedge fund or other offering, there’s a reasonable chance your pitch book might have barfed me out. Why? Gross returns, y’all. And I’m not talking about actual performance losses.

So many fund managers continue to show gross returns in their pitch books, and it makes me want to yell “Grody to the max!” during many a manager’s pitch. 

Per GIPS standards gross-of-fees returns are “the returns on investments reduced by any trading expenses, including transaction expenses for real estate and private equity incurred during the period” while net-of-fees returns are defined as “the gross-of-fees returns reduced by investment management fees (including performance-based fees and carried interest).” GIPS goes on to say in another memo that “because fees are sometimes negotiable, presenting gross-of-fees returns shows the firm’s expertise in managing assets without the impact of the firm’s or client’s negotiating skills. Accordingly, firms are recommended to present gross-of-fees returns.”

Bag. Your. Face.

Look, I know I’m no one and GIPS is, well, GIPS. But seriously? It seems to me that showing net returns is the best measure of investment prowess since it proves you can (or can’t) both execute your investment strategy AND I dunno, put food on the table and pay your office rent, too. 

Also, gross returns aren’t what an investor can actually attain in your fund since, and I’m just spitballing here, you probably aren’t going to start managing money for free. So, to be honest, gross returns are kind of like showing an investor something totally rad and then yelling “psych!” 

Believe me, I do understand why managers may want to show the gross returns. Because they are net of fees they are, by definition, higher than net returns. They make you look so much more, like, gnarly (in the good way). But because the Securities and Exchange Commission generally asserts managers should show performance results net of fees (except in certain limited instances as defined by the Clover letter, for example) I find many fund managers succumb to both GIPS and the SEC guidance by showing investors gross AND net returns. Which, to me, is the worst of all possible worlds. 

I mean, what better way to show an investor why cheaper is better, why they should negotiate their buns off for the lowest fee level possible or, I dunno, even just say screw it and go all passive or smart beta on you? Like, “here’s what you could have gotten if I wasn’t making money off you, Investor. But neener neener neener.” 

And since, again per GIPS, “…firms are not specifically required to present gross-of-fees or net-of-fees performance but are allowed to present either, or both with equal prominence, as long as the returns are clearly labeled and accompanied by the required disclosures to help the prospective client understand how the measure(s) have been prepared” MAYBE, just maybe, you should consider showing the returns that offers the best proof of your worth and value as an active manager. I mean, wouldn’t that be totally radical, y’all? 

I did get over my Nicolas Cage crush, by the way, and well before the disastrous mullet/wife beater combo of 1997’s Con Air, but I for sure continue to have just a tiny bit of Valley Girl in my redneck roots. And I’m begging you all: Stop grossing me out!

The Fact(or)s of the Matter

Like many folks these days, I rely on the interwebs to discover how to do certain things. Change the battery in my home alarm system? YouTube. Learn how to create a smokey eye? Instagram. Grill a turkey for Thanksgiving dinner? Jimmy-D’s Thanksgiving Turkey BBQ 2010. 

Of course, these efforts are met with varying degrees of success. My recent foray into alarm-battery changing resulted in an unplanned visit by Nashville’s finest. All attempts at a smokey eye were followed by offers of domestic abuse support and/or temporary blindness. In fact, only the turkey grilling turned out the way I’d hoped, since the meal was both edible and guests remained salmonella-free. 

It’s not just me. Lots of people think that mimicry is pretty easy. In fact, there are whole websites and videos devoted to cake disasters (can you even tell that’s supposed to be a Mallard Duck Birthday Cake I baked for a hunting friend of mine???) and other sites where people can post DIY fails for your enjoyment and moment of daily schadenfreude. 

And of course, the investment industry can’t be immune to these sorts of shenanigans - we just aren’t that special. But in the case of investing, we usually refer to our attempts at mimicry as factors, and although we label these “smart beta,” in fact success rates can be just as varied. 

Indeed, factor investing has become incredibly commonplace during my tenure in the investment industry. These days, I think I hear the words “well, couldn’t you just use the [value, quality, momentum, size, low vol, or any number of the other 300-plus] factor instead and do it for [5, 10, 20…] basis points?” in my sleep. The word “factor” has even started reverberating through my head sometimes like a Jan Brady “Marcia, Marcia, Marcia” redux. 

Call me contrary, but any time an investment theory (or really any trend) is thrown around with this much impunity, it makes my Spidey senses tingle. Is it really possible that all investing can be boiled down to choosing the “right” factors and that generating returns can be so simple and cheap?

It turns out, maybe not. I read an interesting paper the other day, “Alice’s Adventures in Factorland: Three Blunders That Plague Factor Investing” (Arnott, Harvey, Kalesnik and Linnainmaa, 2019) that theorized that factor investing may actually underwhelm due to problems with data mining, crowding, trading costs, diversification and other issues that make it less than the “perfect” return generator it’s often mistaken for. 

What’s more, because most factors are backtested over a long period of time (standard investment industry protocol, right?) there is a bit of smoothing that may be evidenced by the final factor-based product. In the paper, the authors highlight the performance of 14 popular factors from July 1963 to June 2018. During that period, the value factor exhibits negative correlation to the markets. So, one might believe that value is a diversifying factor in a portfolio. And it may be. Until it ain’t. “The value factor, for example, typically correlates negatively with the market. The paper actually concludes that “[d]uring the global financial crisis, however, the value factor correlated positively and significantly with the market, performing poorly as the markets tumbled and soaring as the stock markets rebounded.” 

Huh. Whoda seen that coming?

I already had my suspicions about this prior to reading this paper, however, although they were admittedly less academically rigorous. These misgivings began to take root when factors became the quick answer for everything. Like a manager’s strategy? Let’s figure out the factors and do it cheaper! It’s esoteric? There’s still gotta be a factor we can use. Oooh…here’s some correlation in a single market environment – that will be perfect! 

Look, I know that active management has taken it on the chin during this 150-plus month bull market. I understand that investors are increasingly price sensitive and replicating strategies on the cheap has great appeal. I even get that, at this moment in time, when a strategy may be highly correlated with a particular factor (perhaps because both are trending up), that factor investing may look too good to pass up. 

But I do wonder, when the markets get tested and everything turns ass over elbows, whether we’ll be eating the perfectly grilled turkey I learned from Jimmy-D or that sad, parrot-looking mallard cake, complete with (no joke!) red velvet sponge. If you’re not at least wondering a teeny tiny bit the same thing, perhaps I need to ask Jimmy-D to host a video blog for us on the topic. 

Marketing, Millionaires and Girls That Go “Woo!”

A few weeks ago, an industry friend came to Nashville for a meeting of the Mid-South Alternative Investment Association (MSAIA). When he told his (New York-based) work colleagues that he was attending the meeting to network with investors, he was met with laughter, derision and accusations that he was only gracing my fair city to meet chicks. After all, Nashville is the bachelorette capital of the country.We’re now known for having a surplus of both hot chicken and girls that go “Woooooooo!”

Despite the skepticism of his colleagues, my friend did attend the MSAIA meeting, where there were 51 attendees (larger than some conferences I’ve attended) including family offices, endowments and pension representatives. In fact, even though it’s not New York, the society as a whole boasts 700 members (including more than 200 allocators) from a number of cities around the Mid-South. Sure, we’re more likely to have our meetings at Maggiano’s than at Cipriani’s, but despite the mass market meatballs, there IS investor flesh to press and nobbing to hob. 

Yet it seems that many (most?) people in the investment industry seem to believe there is no financial world outside of New York/Connecticut, Boston, Dallas, Chicago, Miami, Los Angeles, San Francisco and Washington, DC. And while it’s true you’re likely to find a larger absolute number of millionaires and more institutional investors in those locales, it doesn’t mean that other areas of the country are complete bereft. 

In fact, if you really want to get down to the investor lick log, there are certainly states that have higher concentrations of wealth outside of the traditional marketing stomping grounds. Hawaii, for example, boasts 43.1 millionaires per 1,000 residents. Delaware has 34.7, more than New York or Florida, thank you very much, and Rhode Island, Utah and Ohio all outpace Texas in millionaires per capita, believe it or not.

 It’s funny, but in investing it almost always pays to go off the beaten path. Whether you’re looking to grab a new private equity or venture capital portfolio company, where less competition means a lower multiple, or if you’re just bargain hunting in public equities or fixed income, finding unique opportunities (or at least finding them first) is generally perceived as a good thing. 

However, when it comes to fund raising, despite how hard it is for so many fund managers (read: all but the largest of the large), taking a road less traveled isn’t looked upon as a sound investment. In point of fact, however, while there may be fewer meetings to be had away from major financial centers, but it can be easier to get meetings as neglected investors are often happy to see folks in their own offices, rather than traveling (yet again) to meet them in theirs. 

To be clear, I’m certainly not advocating you spend all your time flying to flyover states, but if you can find a few good events (local investor meetings like MSAIA, Southeastern Hedge Fund Association, Texas Hedge Fund Association, larger CFA events and the like) and add on a meeting or two, it might just be worth the time, effort and almost inevitable chain restaurant food. Even a single investment from a jaunt like that more than pays for the trip, and that should be enough to make even the most jaded investment professional yell “Wooooooo!” 

Valentine's Day Cards For Fund Managers And Investors

I know I'm a little late. Perhaps you're still nursing a love hangover from last week, but just in case you still feel like spreading a little tenderness and affection throughout the fund management industry, I've created some handy dandy cut out cards to help you express your feelings. Because nothing says "show me the money" like some old school, cut out cards with your name scribbled on the back, right? So share the love y'all!

LP on a Shelf

A new holiday fad for fund managers of all ages and denominations! LP On A Shelf (or ELP on a Shelf, as I call him) knows when you've been spending too much time at conferences, when you're creating pitch books that are too long, or when you're not hiring critical personnel (or skill sets) and will tell Santa not to offer you an allocation in the New Year.

Asset Raising While Diverse

Many of the fund managers I speak to remain conflicted about how best to position their diverse asset management firm. While I don’t have all the answers, perhaps I can help shed a little light on the topic for folks. Read this while you’re thinking about your capital raising battle plans for 2019. And may it help you separate who’s been naughty and nice, whose chimney you should visit and whose you should skip in the New Year.

You Can't Always Get What You Want

Last night, I flew home from San Fran on the redeye after attending not one, but two, conferences in San Fran. Normally, I’m a champion sleeper on planes (as any of you who have ever seen me pre-pushback, comatose, mouth agape, and a tiny glistening pearl of drool perched majestically upon my lips) are well aware, at least based on the post flight mocking I get.

But on this particular flight, I was awake. I couldn’t get comfortable in my (there is a Jesus!) upgraded seat. I moved to the back of the plane and claimed a whole row to myself, but was likewise unable to sleep there after my left hip lost all feeling due to the firmness (I met floors in college with more give) of the seats.

After limping my way Sanford and Son style back to my original seat, I finally accepted my insomniac fate and settled with my ancient iPhone to listen to some tunes. Ironically, the Rolling Stones “You Can’t Always Get What You Want” was one of the first songs to play. I did not, however, appreciate said irony at the time.

Once I was able to grab a little disco nap this morning, it put things into a slightly better perspective. Sure, I couldn’t get what I wanted (a nice, long, mouth-breathing sleep in a tube of recirculated air), but maybe I needed those moments of introspection. I mean, otherwise, I wouldn’t have today’s blog post, right?

Likewise, I meet a ton of managers that are frustrated that they can’t always get what they want, usually $1 BIIILLLION Dollars from institutional investors in six months or less, but maybe, if they noodle on it in the dark of night under a (probably) ebola-encrusted airplane blanket, they may figure out how to get what they need.

To help investment managers on this journey, I put together a handy dandy decision tree to help determine whether now is the right time to market to endowments, foundations and pensions, or whether they should take other steps to get the AUM they require.

Should You Be Marketing To Institutional Investors?

(c) 2018 MJ Alternative Investment Research

But investment managers, take heart, preferably before you start creating a voodoo doll with my face on it. There are plenty of things you can do to still get your Mick Jagger on and try spending some time to get what you need.

• Try a different demographic - some of the items above are more specific to institutional investor clients and may not apply to high net worth individuals, family offices and even friends and family.

• Talk to institutional investors when you DON’T have a fund to raise - I know you’re probably saying, in the words of Dorothy Parker, “What fresh hell is this?”, but investors can often be more accommodating of meeting requests (and provide some darn fine feedback) when you’re NOT looking for an immediate wire transfer. Asking for a half hour of time with an up-front caveat that you’re not “selling” anything can be a beautiful way to start a client relationship.

• Get your ducks in a row - Figure out the nature of your game now so that when you do talk to institutions, you’re bulletproof. That takes time and effort as you perfect your elevator pitch, refine your deck, get the right service providers on board, train up IR staff, etc. Get it right on the front end and it will pay off on the back end.

I know it can be hard to wait to jump into the AUM chase, but if you follow at least some of this advice, I swear you’re likely to get a little more Satisfaction.

Principals, Agents and the Magic of Ari Gold

I miss Entourage. 

To this day, I’m not sure there was much better than watching Ari Gold lose his collective crappola and yell hysterical insults at people. Listening to Ari’s invective was like giving my id a voice. Sure, it was obscene, profane and probably actionable abuse in many cases, but that’s why it was so much better to watchsomeone else spewing that hilarious filth than to let my own inner Ari Goldout to play.

Vulgarity aside, I also enjoyed watching the agent-principal relationship that Ari had with Vincent Chase. Sure, Vinnie ultimately called the shots, but Ari brought moola and industry know-how to the table. It was, despite a brief firing at the end of Season 3 (and the entire “Medellin” disaster), an almost perfectly symbiotic relationship.

In many ways, you see that same principal-agent relationships play out in the investment world (minus the copious swearing). In fact, I content that all investors can be classified as either principals or agents, or as some hybrid blend of the two, and that it’s critical to know which one you’re dealing with at any given time. 

If you’re a money manager on the prowl for assets under management, knowing whether you’re interacting with a principal or agent can save you time, energy and headaches. If you’re an investor looking for a new role, understanding and explaining whether you’ll be a leading lady/man or Ari Gold can help manage expectations down the line.   

Investors who are principals usually have some traits in common: 

• They’re often quicker to invest – usually because there’s not layers upon layers of decision makers behind the scenes. There is no (or a limited) investment committee and there’s usually no consultant or operational due diligence outsourced resource. 
• “Principal” investors may choose more innovative or niche-y investment strategies, invest in new trends earlier and generally take more risks. 
• However, they are often able to do this because they are investing their own capital and may not have fiduciary duty to anyone other than themselves or a small group of constituents, which means they don’t have to make enormous allocations or worry about headline risk. 
• Think high net worth individuals, single family offices, small foundations. 

Investors who are agents also have traits in common:

• They usually take longer to invest due to multiple layers of sign-off and decision making. 
• You can be pretty sure that every nook and cranny of your fund, firm and investment strategy will be gone over with a fine-toothed comb, because these investors have more headline and client risk. If an agent investor recommends a fund that blows up or fails you’re almost certain to hear about it because they are investing large, either for themselves or on behalf of their external clients.  
• Because “agent” investors often move as a herd, you can rest assured that where one goes, there will likely be a sequel. Making it past the gate with one agent can pave the way for others.
• Think institutional investors (whose minutes and meetings are often matters of public record) and investment consultants. FOFs (who generally have to think about attracting clients to ensure their existence) can fall anywhere on the agent-principal spectrum, depending on the organization.

(c) MJ Alts

Obviously, there are benefits and drawbacks to working with both agents and principals when it comes to investing. The only real drama comes from not knowing with whom you are dealing and therefore not effectively managing expectations (and resources). 

For example, if you’ve got a truly niche-y and innovative strategy that perhaps is a bit untested, presenting it only to agents may pay off, but it will likely be a long slog and you may be stopped out entirely if your strategy can’t handle large allocations. Or if you have a strategy that is more of a new twist on an old tale, Aquaman 2for example, you may find that high net worth individuals aren’t sufficiently wowed by your offering. If you need to get to a quick close, or if you only have limited capacity left before your final close, landing a prime role with an agent may not be possible. But if you’re looking for a large anchor, or if you have enormous capacity and the time to run the agent gauntlet, these investors can provide the bulk of your capital.

And to make matters worse, some agents present as if they were principals, and principals can suddenly bring an agent to what you thought was your fund’s premier. It would be so much easier if there was just a script the industry could stick to, but unfortunately, you just have to try to learn everyone’s role and trust that if there’s some confusion, you can just hug it out in the end. 

I’m Out of Touch, And You’re Out of Your Head When I’m Not Around

It’s August. It’s slow. It’s what the Hitchhiker’s Guide to the Galaxy might have referred to as the “long dark teatime of the soul” when it comes to investment industry activity. The conference circuit is dead. Everyone is on vacation. There are practically tumbleweeds rolling through your office.

(c) 2018 MJ Alternative Investment Research - I spent my OOO time this year in Middle Earth.

Yep, it’s about this time of year when you believe that everyone but you sold in May and went away.

And you’ve got the Out of Office emails to prove it.

Sure, you’re still sitting in your office, or you’re on a nice beach trying to be productive while your family cavorts and relaxes, dutifully sending out email requests for meetings, performance updates, introductory information, requests for proposals, whatever. And all you’re getting back from Darryl, John, Hall and Oates is “I am currently traveling with no/limited/sporadic access to emails/phone. If you need immediate assistance, please eff off/contact this random person. I will respond to/continue ignoring your email upon my return.”

So what’s an investment professional to do?

If you’re getting the Out of Office (OOO) treatment these days, try these handy tips for coping:

1)    Assume the email you just sent is going into the virtual circular file. It ain’t never gonna be read, answered or otherwise acted upon. Even if the autoreply doesn’t go as far as this particular OOO did to spell things out for you, your chances of getting a timely response are pretty slim. So look at the date the out of office email expires and mark your calendar for one week after that date. On that day, send your email again. Do not forward, do not refer to your prior email. Send a virgin email, to be touched for the very first time, without the guilt and recrimination of a forward. Start fresh. Just like you hope the recipient is doing after a nice, relaxing holiday.

2)    In investing, time is money, but it isn’t life. We’re not carrying hearts around in beer coolers, y’all. Whatever you are emailing about, chances are it can probably wait a week (or two) for a response. Even if it doesn’t feel like it to you in a particular moment. If you get an out of office response, DO NOT attempt to hunt the person down like you’re the Terminator of the email world. On a recent vacation, I had more than one recipient of my OOO decide to text me since they couldn’t reach me via email. Needless to say, given the 17-hour time difference, I was none too happy to receive communication from those individuals in the wee hours of my morning respite from work and responsibility. So, before you go to extreme lengths to contact someone who is out of the office, ask yourself how you would feel if you reached them and they were, I don’t know, at a funeral. Would your call or text be worth disturbing that particular occasion? If the answer is “no” then put down your phone and back slowly away. Otherwise the only funeral you may be going to is yours.

3)    Try a little patience. Most people I know start going through their missed emails from the top down (most recent dates first), in the off chance something has resolved itself in the intervening days or moments and they can blissfully ignore all related messages. If you emailed early on in someone’s OOO timeline, give the person a few days to get back to you. See also, OOO tip one.

4)    For those composing an OOO, go ahead and say you’re not checking emails. Even if you are, there’s bound to be a few you can’t or won’t deal with. Telling people you’re checking emails sporadically or that there’s a “delayed response” gives those receiving your OOO false expectations, and gives them a little more leeway to harass you while you’re grabbing some R&R (or attending a conference, or staycationing…).

5)     Even if you don’t get an OOO response, if you don’t get response from someone after a week during this most humid time of the year, give folks the benefit of the doubt. There’s nothing worse than coming back to the office to find a bunch of pissy emails (“I tried you last week but didn’t hear back”) to make someone NOT want to prioritize you.

If you find you’re just too impatient to follow my Out of Office Etiquette, perhaps you need a little OOO time yourself. Economist Juliet Shor found that Americans take less vacation than the average medieval peasant, who worked around 150 days a year. So make a break from your feudal ways and chillax. You can always start stalking folks again after Labor Day.

Thank You Sir May I Have Another?!?

Thank You Sir May I Have Another?!?

The first time I ever saw Kevin Bacon in a movie was the infamous and hilarious flick “Animal House.” Although he didn’t yet have the appeal of, oh say, Ren McCormick (me-ow!), he did make an impression on me in his fraternity brother days. Perhaps it was his tight-assed, ROTC-inspired declaration of “All Is Well!” during the movie’s climax that got my attention. But, more likely, it was his tighty-whities in the infamous fraternity initiation paddling scene that caught my eye. I couldn’t imagine, even at the ripe old age of 8, that a grown man would allow another man to paddle him. IN HIS UNDERWEAR. And would cheerfully, though admittedly through gritted teeth, ask for another. And another. And another.

But then again, there are a lot of things I don’t understand, even today at the ripe old age of, well, not 8 years old. For example, I don’t understand why another study showing that smaller and younger funds outperform is necessary or the results touted as surprising.

Haven’t large funds been spanked with this data enough by now for us all to cheerfully conclude that smaller, younger funds outperform their older, larger peers? 

I guess not, because just two weeks ago yet another entry in the small/young fund cannon made its appearance. On April 26th, Chao Gao and Chengdong Yin (Purdue University) and Tim Haight (Loyola Marymount University), used data from the Lipper TASS and the HFR databases to prove YET AGAIN that good returns come in small and new packages. 

Now, as someone who actively supports emerging and diverse (who are often also emerging) managers, I should be happy to see yet another entrant into the verifiable tsunami of studies proving that small and young funds outperform. But really, isn’t it a little bit embarrassing at this point? I mean, it’s not like we don’t have a metric crapton of research that shows small and young funds outperform already, right? But just in case there was ANY doubt left in anyone’s mind at this point, allow me to point you to the studies that may help you reach the well-documented conclusion that, when it comes to emerging managers, all is, in fact, well.

Small & Young Funds Are Killing It – A Non-Exhaustive, But Pretty Damn Complete List of Research

PerTrac studies on emerging managers, 2007-2011

eVestment studies on emerging managers 2012-2014

Mayer & Hoffman paper on emerging managers. May 2006. Also appears in the book “An Investor’s Guide to Hedge Funds” 

“An Examination of Fund Age and Size and Its Impact on Hedge Fund Performance” Derivatives, Use, Trading and Regulation, February 2007

 “An Examination of Fund Age and Size and Its Impact on Hedge Fund Performance,”Journal of Investing, vol. 18, no. 1, spring 2009.

“Emerging Managers: Good Buy or Good Bye?” Barclays Capital, 2011.

“Smaller Hedge Fund Managers Outperform: A Study of Nearly 3,000 Equity Long/Short Hedge Funds” AllAboutAlpha.com, February 18, 2013

“Are Investors Better Off with Small Hedge Funds in Times of Crisis?” City University London, July 14, 2015. 

“Emerging Hedge Funds Outperform Established Peers” Preqin, July 2017 (multiple other years of studies also available)

“Size, Age and The Performance Life Cycle of Hedge Funds” Gao, Yin, Haight, April 26, 2018. 

Want some long-only fund action? I got that, too. How about:

“Does Fund Size Erode Mutual Fund Performance? The Role of Liquidity and Organization” Chen, Hong, Huang, Kubik, December 2004

“Liquidity, Investment Style and the Relation Between Fund Size and Fund Performance” Yan, 2008.

“New Evidence on Mutual Fund Performance: A Comparison of Alternative Bootstrap Methods” Blake, Caufield, Ioannidis, Tonks, October 2015.

“On Size Effects in Separate Accounts” Evans, Rohleder, Tenesch, Wilkens, August 2017.

And how about some Private Equity findings? 

“Making the Case for First Time Funds” Preqin, November 2016

“Feels Like the First Time” PitchBook, 4Q2017

As I mentioned, this is a decent representative list of studies of small and new funds across the asset management spectrum. It is not exhaustive, mostly because I’m not sure it needs to be. I mean, you can’t really be standing there decked out in your undies asking me to hit you with even more data, right? So, let’s put the kibosh on proving something we should already know and just work to bring home the Bacon by investing in funds of all shapes, sizes, ages and types, not just tried and true established managers. 

On The Road Again...

Last week, I almost peed in my hotel room closet.

Yeah, you read that right.

It was the middle of the night. I’d been in different hotels (interspersed with brief sojourns at home) for part of every week since the beginning of the year. And for one brief and almost disastrous moment, I simply forgot where I was. Luckily, I came to my sleep-addled senses when I tripped over one of my own shoes, placed strategically outside the closet door. But still, it was a sobering moment.

Many of us that work in the asset management industry spend a tremendous portion of our lives on the road. Money managers must travel to drum up investments, to keep current investors happy and informed, present at investment committee meetings and otherwise support their assets under management. Investors trek for diligence visits, periodic onsites, and other gatherings (trustee meetings/retreats, investment committees, etc.). And of course, there’s the ever-expanding conference circuit to keep both groups, plus a hoard of service providers, racking up craploads of frequent flyer miles. Many of which we’ll never use because we’re pretty darn happy when we actually get to spend an extended period of time at home.

Over the past ten+ years of extensive travel, I’ve developed a few coping mechanisms to manage the rigors of being almost constantly on the go. And after sharing my closet story with a few folks last week who seemed to identify with my temporary travel amnesia a little too much, I came to realize that we could all use a few hacks to make it through 2018 as productively, and sanitarily, as possible. 

So here goes: Meredith’s Top Five Travel Hacks for the Investment Industry

1)   File business cards in your conference name badges. After a conference is complete, I always put the cards I’ve collected into the back of my used name badge. That way, I can remember where I met someone and/or pull contact information for a specific person or company quickly. 

2)   Carry a spare lanyard. If you work for, well, just about anyone, chances are you’ve at one point had a company-branded lanyard. Put it in your computer bag and take it on the road. That way, when you arrive at a lanyard-free conference, or, horror of horrors, at a conference where they expect you to use safety pins to secure your nametags, you’ll be able to spare your look and your clothes while still letting people know who you are. Don’t have a company-branded lanyard laying around? Choose a key service provider and proudly rock their lanyard.

3)   Put one of your business cards in the back of your namebadge while at the conference. So, lanyards are great (see above) but sometimes (nearly all the time if you’re me) those contrary contraptions spend more time making your nametag face your belly button than the person you’re talking to. To ensure that folks can always tell who you are and who you’re with, put one of your own business cards in the back of your nametag while you’re at the event. Frontward or backward, you’ll be good to go.

4)   Get a good business card with a white, non-slick back. Take out your business card right now and grab a pen. Not a good pen, but a crappy conference giveaway pen with a somewhat bajiggety rollerball. Write your name on the back of your card. Can you see it? Does it smear if you rub your thumb across it? Is there room to write your entire name? If you answered “no” to any of these questions, your business card is the bane of people’s existence. How do you expect us to write notes on the back of a card that doesn’t have ample real estate, is too dark, or where the ink rubs off on our clothes or hands? Make it easy for the people at an event to connect with you later with light colored cards on decent card stock.

5)   Know how to sneak in breaks. If you’re a money manager at a conference, you’re there to network. That means anything that says “break” on it in the conference program is showtime for you and your fund. If you’re an investor, your breaks are a little more sacred…if you can get out of the event for a few minutes unmolested. In other words, if you want to get a few minutes to yourself in either case, you’re going to have to plan for it. Money managers, scope out the sessions in advance and figure out one or two you can skip. Note: Do not skip sessions with anyone who has an investment in your fund, who works for your fund, or who could invest in your fund. Investors, you may have to make a break for the break a couple of minutes before a session ends to get to a “safe zone” (bathroom, hotel room, Starbucks). Obviously, you shouldn’t avoid breaks altogether (the best way to find talent is to meet talent!), but skipping out on one out of four in a day may help your sanity level a bit.

Of course, there’s always more where those came from, such as: 

• Don’t ever, ever touch your face during a conference or event…with all the hand shaking, that’s the single best way to get sick.
• When going to the airport or train station after a big event, don’t talk business on your phone or with friends until you know you’re not surrounded by conference goers that you don’t recognize because they are now attired in “real people clothes.”
• And of course, always put your shoes outside the closet door.

I’m sure you have a few tips and tricks of your own, so feel free to leave them in the comments below, but if you follow these simple guidelines, you’ll likely save yourself some headaches and may make even better use of your time on the road again.

Happy Traveling!

Stupid Human Tricks

You know what I miss? David Letterman’s old Top Ten Lists. Hands down, those were my favorite part of late night TV. I know that others have stepped in to try to fill the void. Bill Maher has his “New Rules” and Jimmy Kimmel has the often-entertaining “Mean Tweets” but, to me, David Letterman will always be the original king of the recurring hilarious late night bit.

I mean, who can forget the Top Ten Things That Sound Cool When Said By Snoop Dogg? And the Top Ten Reasons Homer Simpson Should Be President. Or my all-time personal fave: Top Ten California Names.

So in honor of Letterman and out of a wealth of nostalgia that popped up unexpectedly over the weekend, I hereby offer you my own top 10 list…

Top Ten Ways To Alienate A Potential Investor

10. Spend the first 35 minutes of a call or meeting talking about your bio.

9. “I assume you’ve reviewed our pitch book in advance of this call…”

8. Inability to make polite small talk in lieu of laser-like need to focus on your investment product.

7. Interrupting conversations at conferences and/or staring from two feet away until said investor is so uncomfortable they interrupt their own conversation to acknowledge you.

6. Literally not knowing anything about the investor before you approach them.

5. Two words: Wardrobe malfunction (true stories, but better told over adult beverages than in a blog).

4. Ignoring time zones/weekends/holidays when calling.

3. Mansplaining why an investor’s reasoned conclusion is wrong.

2. Lying, and yes, this includes “gilding the lily.”

1. Saying “I’m not going to go through each slide.” And then going through each slide.

Picture This...

(C) 2018 MJ Alts

(c) 2018 MJ Alts

(c) 2018 MJ Alts

(C) 2018 MJ Alternative Investment Research