We work regularly with diverse and emerging investment managers, including through our Callan Connects program, which we established in 2010 to help managers foster better outcomes for institutional investors and their participants/beneficiaries.
To further educate this community, and to encourage the robust dialogue between asset managers, institutional investors, and consultants that we believe is a benefit to all participants in the institutional investment community, I wanted to offer some tips for diverse and emerging managers based on our experiences.
Diverse and emerging firms should make sure they have a consistent marketing message across all forms of communication. And that consistent message should be aimed at providing comfort to potential clients about the organization and its products, focusing on:
- Organizational strength and stability
- Consistency of investment philosophy and process
- Repeatability of performance
- Honesty and integrity
- Ownership and capital commitment
When filling out requests for proposals (RFPs), requests for information (RFIs), and other questionnaires, diverse and emerging managers should follow these best practices:
- Clearly articulate benefits
- Double-check for accuracy
- Answer the question being asked
- Review before sending
When meeting with investment consultants like Callan, diverse and emerging managers should have an understanding of how the consulting firm interacts with managers, including logistics such as the best way to schedule meetings (Email? Phone call? Web form?). At the meeting, managers should focus on investment product(s)/strategy(ies) that are doing well.
In developing the agenda for these meetings, managers should make sure they cover these topics:
- Investment product/process
- Compliance and trading
- Other communications issues as stated above
Congratulations—you’ve received the mandate from a client!
As part of that effort, the client will conduct regular reviews. To handle those effectively, we recommend these steps:
- Create a custom presentation structure to address client issues/concerns
- Avoid an excessive number of performance charts
- Reinforce details that provide consistency of style and performance
- Set expectations for relevant future time periods
- Provide organizational/product updates
In those presentations to clients, we find these tips help produce more effective communications:
- Create a flexible presentation structure
- Clearly articulate value added
- Avoid getting bogged down in details
- Best meetings do not rely on the materials but on a productive dialogue
Organizational and Personnel Changes
Of course, significant changes at the firm will happen. The trick is to develop a thorough communications strategy ahead of time to communicate those changes to clients. Here are the key issues:
- Be proactive
- Do not bury significant personnel and organizational changes with other communications
- Be completely honest and up front
- Avoid vague or negative statements
Another way of communicating with clients is to create a newsletter. But these must strike a balance, since institutional investors are already receiving a tremendous amount of information. Our suggestion is to treat the newsletter as an executive summary; concise and focused for quick reading. All of the content should add value; avoid telling clients what they could learn elsewhere.
While these tips apply to all managers, we recognize that diverse and emerging managers face special challenges in the marketplace, often because they tend to be small, with relatively short track records, and limited internal resources. With that in mind, we have crafted this set of tips to help them overcome these issues and better position themselves for success with clients and potential clients.