When I was a young lass in Nineteen Never Mind, I used to spend Christmas Day with my mom and the week after Christmas with my dad. He would come for my sister and me in Tuscaloosa, Alabama and drive us all the way to Ft. Worth, Texas for another week of holiday overeating and unwrapping.

It was about a 12-hour drive, door to door, but we tried to make the best of it. My sister, stepbrother and I would clamber into the “way back” with a cooler full of Cokes,bags brimming with healthy snacks like Pop Rocks, potato chips and Slim Jim’s, nestled securely next to my Dad’s Coors that he snuck over state lines, Smokey & the Bandit-style. There, we’ll loll about (with no seatbelts), stuffing our faces (not dying from the Pop Rock/Coke combo) and alternate singing, sleeping and snarking at one another for the entirety of the 12-hour trip.

At some point, we would inevitably get on my Dad’s nerves. There would be over-the-seat, disjointed swats, strong language and finally a threat to “TURN THIS DAMN CAR AROUND AND TAKE EVERYONE HOME.”

We kids thought that was super funny. 

What wasn’t hilarious, however, was 2016 - an epically craptastic annum bad in so many ways that it even made Mariah Carey’s New Year’s Rockin’ Eve performance look apropos.

So, while 2017 is still barely warm, I thought I’d give it a little, tiny warning.

If y’all pull the same stunts this year that you did last year, I’ll turn this year around and take us all home. At the very least, I’ll figure out how to off everyone using nothing but Pop Rocks and warm Coors. You get me?

What am I talking about specifically? Well, here are some of my key investment industry pet peeves from 2016:

Looking in the same tired places for returns, and then pretending shock when they don’t measure up – Investors from Kentucky to New York and a few states in-between reduced or redeemed their hedge fund portfolios in 2016, based in large part on lackluster “average” returns. While many point to “average returns” in the neighborhood of just under 5% though November, perhaps it’s best to look at how the best (and worst) performers are faring. Articles have shown top performing hedge funds gained 20% or more through November 2016. And over the four quarters ending 3Q2016, top HFRI decile funds gained 29.54%. The bottom decile funds lost 15.57%. So there are funds that have performed strongly over the last 12 months IF an investor was willing to look for them and perhaps take risks on lesser known, newer, nicher or funds otherwise “off the beaten path.” It kind of reminds me of the old joke “Doctor, doctor, it hurts when I do this…” How ‘bout in 2017, we stop doing that, lest it continue to hurt.

Using “averages” to talk about investment funds, particularly alternative investment funds – Speaking of, with the kind of return dispersion above, why don’t we stop talking about “average returns” full stop. Even when it comes to white-bread mutual funds, getting fixated on “average” returns doesn’t really help. How do I know? One of the top, non-indexed US mutual funds returned 30% in 2016. Yeah, I said 30-freakin’-percent, more than twice the return of the S&P 500. But by fixating on “average return,” no matter what the asset class, investors may in danger of writing off entire investment strategies based on normalized returns that don’t accurately represent reality. In 2017, let’s focus more on the opportunities unveiled by return dispersion and less on pesky averages, shall we? Oh, and the same thing goes for fees discussions, too.

Saying you want to hire diverse talent, but complaining that you “just can’t find any” – So I’ve heard (or read about) more than one asset management firm complain about how they’d “love to hire women and minorities” but they “just can’t find qualified applicants”, and they’re not willing to lower their standards. Come. On.

Women comprise 50.8% of the U.S. population according to the Census Bureau. Minorities make up nearly 23% of the U.S. population. Do some simple math on the number of women and minorities in a population of 323,127,513 and it boggles the mind that there are ZERO qualified diverse applicants.

Indeed, when I read or hear this, one of a few questions generally comes to mind:

  1. How homogenized is this person’s personal network and how might that impact other investment research and decisions?
  2. How much effort does this person put into finding diverse candidates? Do they contact recruiters who specialize in the area? Do they go to conferences put on by 100 Women in Hedge Funds, NASP, the NAIC, and others?
  3. If there is a pipeline problem in this person’s line of work and they genuinely want to fix it, what are THEY doing to fix this issue in the long-term? Do they bring in diverse interns? Diverse entry-level positions? Do they promote these individuals?

Inappropriate benchmarks – Why, oh why, do we benchmark every damn thing to the S&P 500? It’s become so pervasive that I just caught myself doing it above (the top performing mutual fund invests in small caps, not S&P-level stocks) and I know better. Just because it’s well known, and just because it’s been crammed down our throats by everyone from consultants to financial advisors, doesn’t mean it always fits. Small cap fund? Ixnay on the S&P-ay. Hedge funds? Can’t be expected to outperform in bull markets because they are HEDGED. Private equity & venture capital – comparing illiquid investments to a liquid benchmark seems a bit silly, no? So in 2017, let’s either agree to benchmark appropriately so we can make a sober decision about whether an investment has performed well (or not) OR let’s just decide to sell everything and invest only in the S&P 500, since it’s where it’s at, obviously.

Communicating inappropriately – This may be just a “me” thing, but in 2016 I noted an increasing number of asset managers who text investors. What. The. Actual. Hell. Texting is informal. Texting is immediate and insinuates you deserve an instant response. Texting invites typos. Texting doesn’t allow for compliance review or disclaimers. Unless you are meeting someone that day and need to say you’ll be late, early, or identifiable by the rose in your lapel, or unless that investor has given you express permission to text, don’t. The investors I know who put their mobile numbers on their cards are coming to regret it. And if you lose that, you’ll only spend more time waiting on callbacks.

So cheers, all, to a happy, healthy, prosperous, properly benchmarked 2017. May we lose fewer of my 80s idols and more of our investing bad habits.







Photo credit:

Copyright: <a href='http://www.123rf.com/profile_artzzz'>artzzz / 123RF Stock Photo</a>

A few weeks ago, I attended an interesting and informative event on women and investing. One of the sessions was focused on how to increase gender parity within the investment industry. The discussion eventually coalesced around five key drivers of diversity in investments: Pipeline, Parenting, Presence, Pay and Promotion.

AuthorMeredith Jones

A tragic thing happened to me last week. I was (gasp!) ma’amed.

No, not maimed. Ma’amed.

While dealing with a very unfortunate chimney repair at my humble Nashville cottage, my two, rather incompetent, repair technicians called me ma’am. Not once. Not twice. But 37 times in one conversation.

It was like having a cold dose of mortality thrown in my face.

Even though I still have the sense of humor of a 12 year old, being ma’am bombed let me know that I have officially hit middle age, which coincidentally may also explain why my “give-a-damn” broke about two years ago as well. They do say, after all, that only little kids and old people tell the truth.

But my brush with ma’am-dom did make me start to think about how the investment industry may change going forward, what with a heaping helping of Millennials headed our way. After all, according to a 2014 Millennial survey by Deloitte, the next generation will comprise 75% of total workforce by 2025. Boomers and Gen X – gird your loins.

Changes That May Be A’Comin’

1)   Socially Responsible Investing Will Surge – Although percentages vary from survey to survey, and between income groups as well, one thing is very clear: Millennials are much more open to socially responsible investing than prior generations. In one study of high net worth investors’ attitudes towards socially responsible investing, nearly half of Millennials considered social responsibility when making investment decisions compared with a mere 27% of seniors. In a study of all investors, Morgan Stanley’s Institute for Sustainable Investing found Millennials to be more than 10 percentage points more likely to favor sustainable investing than their Boomer counterparts.

(C) 2016 MJ Alts. Data Source Morgan Stanley Institute for Sustainable Investing

(C) 2016 MJ Alts. Data Source Morgan Stanley Institute for Sustainable Investing

This attention to social factors is likely to boost both the number of products launched to pursue some form of socially responsible investing (ESG, Impact, Mission, Socially Responsible, etc.) and to simultaneously increase the demand for said products. As of year-end 2013, one out of every six dollars invested in the U.S. was already invested in SRI strategies (according to the US SIF Foundation), but it is safe to assume that the demographic shift will accelerate this trend.

The upshot? You might want to get ahead of this trend sooner rather than later.

2)   Our Historically Paper and PDF Industry Will Evolve – As luck would have it, I had not one, but two chances to feel old last week. I was speaking with a friend of mine who was extolling the virtues of Tinder. She loved the speed of the “dating” service and the ability to judge people quickly. I then lamented that I missed the days of a good old personal ad.

“You mean like Match.com?” she asked.

“Um, no,” I said. “ I mean like the ones that were in the paper and alternative news in Nashville. You know, Single White Female, blah blah blah…”

“Oh!” she exclaimed. “You mean like on Craigslist.”

“Noooooo,” I said. “I mean printed, paper singles ads. My favorite appeared in the back of the Nashville Scene one day and read ‘Single White Male, fat, ugly and bald, seeks Asian women with long toenails.’ People had to be creative and witty and not just post shirtless bathroom pictures….”

She blinked at me blank-faced in response.

Most Millennials don’t know a world without the Internet or iPhones (or as I like to call them, secular rosaries). Instagram, Pinterest, Twitter, Uber, AirBNB and all sorts of social and disruptive technologies have been at their fingertips (literally) for most of their lives. I can only hope that this comfort with technology leads to some revolution in the investment industry, which has long been dependent on pitch books and PDF one-pagers. I’m not sure what the answer is for this (and God save us from a Tinder app for investments where appearance is everything and substance & due diligence are lost), but there has to be some better ways of doing things than the way it’s been done for the nearly 18 years I’ve been in this space.

3)   The Traditional Pathways to Fund Management May Evolve – Does anyone remember the kid that applied to 2,000 private equity firms last year in order to skip an investment banking stint? Have you read any of the many articles on how to get hired into private equity/hedge funds/ venture capital straight out of undergrad? What about the gig economy? Job hopping? Millennial requirements for work-life balance? No matter how you slice it, the bios of next generation fund managers are likely to look pretty different than what we’ve grown accustomed to in the past.

I’m sure there are plenty of other ways that the industry may evolve in the next 10 years or so, but you can bet I’ll be ruminating on at least these possibilities going forward. At least until the re-release of Pretty In Pink hits theaters next weekend. I’ll be hanging with Duckie that day.

AuthorMeredith Jones