7 Top Mistakes Portfolio Managers Make When Talking to Gatekeepers

For asset management firms that hope to make headway with asset growth in 2019, the performance of their portfolio managers will be key. And, we’re not talking about portfolio performance, though that is always important. We’re actually talking about their performance in front of a critical audience – the gatekeepers and investment consultants behind the decision to select funds for institutional portfolios, model portfolios and select lists. In getting the attention and a favorable nod from these highly discerning investment professionals, big budgets, marketing and sales people are simply no substitute for your portfolio management team.

And that can pose a conundrum for asset management firms with portfolio managers who lack deft at presenting the best possible face of the firm. The typical research team for an institutional investor conducts 800 to 1000 manager calls and meetings per year and might only hire less than 1% of the managers they interview. That’s like looking for a needle in a haystack, which is why it’s important for PMs to stand out – just not for the wrong reasons.

For PMs to gain any traction, they must be prepared to fully engage gatekeepers and research teams on their terms. More importantly, they need to avoid the big mistakes that can be deal breakers.

Denigrating the competition. Portfolio managers must be able differentiate themselves from their peers. However, if that comes in the form of denigrating the competition, it won’t score any points. The more effective PMs can clearly articulate what differentiates them from their peers and, in doing so, can have everyone walk away with a good sense of who they are and what makes them unique without disparaging their peers.

Making a sales pitch. It’s important for portfolio managers to be well-prepared and organized in their presentation. However, if it devolves into an overly scripted sales pitch, they will lose any opportunity to connect with their audience. Gatekeepers are more responsive to a dynamic dialog that reveals useful information and answers their questions. Portfolio managers who are passionate about what they do don’t need slide decks or scripts.

Not acknowledging past mistakes. Some portfolio managers may feel the need to massage the truth when confronted with performance challenges, certain portfolio decisions or a divergence from investment mandates. The problem is many of these issues can be independently verified and, when a portfolio manager is found to be less than forthcoming, it can erode trust.

Gatekeepers are more inclined to appreciate portfolio managers who acknowledge their mistakes. It is much more meaningful when portfolio managers can provide a clear explanation of their decision making process and what they learned from the mistake. It can actually help to instill more confidence in their investment process.

Lack of conviction in philosophy or process. Portfolio managers who can’t clearly articulate their process and the philosophy that drives their investment decisions, may appear to lack conviction in them. The problem becomes even more acute when two portfolio managers in the meeting can’t agree on fundamental elements of their process or philosophy. That can create the impression that the team lacks cohesiveness, which would be a concern for clients.

Fund holdings don’t match philosophy. Gatekeepers want to discuss strategy and the philosophy behind it. But, when the fund’s holdings don’t seem to fit the fund’s philosophy, portfolio managers better have a sound rationale. For instance, if the fund claims to be a conservative high yield fund and many of the holdings are below investment grade bonds, the portfolio better be prepared to discuss the reason for the divergence.

All talk no listen. While portfolio managers may be smart people, they may not be the best communicators. Portfolio managers who take over meetings, avoid answering questions or read straight from the fact sheet, may be viewed as arrogant and condescending. At the very least, it demonstrates no interest in listening, which is enough to turn any potential client off.

Not being forthright about turnover or succession. One of the bigger concerns of gatekeepers is the stability of fund management. If the portfolio management team has experienced turnover in the last few years, portfolio managers need to be forthright in addressing the issue. For seasoned portfolio managers, gatekeepers want to know if the fund has a succession plan in place.

In trying to differentiate themselves in a positive way, portfolio managers need to realize that gatekeepers look beyond track records and slide decks when evaluating funds. Many take a holistic view of the fund, including the firm, management, strategy, philosophy and even the firm’s culture. They can read a fact sheet on their own so, when they take the time to meet with a portfolio manager, they expect to engage in a dialog and learn new things. Above all else, they expect candor and integrity.

In many cases, you may only get one chance to present the best possible face for the firm. It makes sense to work with your portfolio managers to ensure they are well-prepared.

Dan Sondhelm is CEO of Sondhelm Partners, a firm that helps asset managers, mutual funds, ETFs, wealth managers and fintech companies grow through marketing, public relations and sales programs. Click to read Dan’s latest Insight articles and to schedule a complimentary consultation.