It’s Time to Take a Stand. You Do You.

"A camel is a horse designed by committee."
- Sir Alec Issigonis

I am not psychic, I don’t have ESP, and I don’t know you personally. But…if you are an alternative investment manager, I bet I can guess a lot about you.  

I’m getting the sense that you and your team have significant experience managing money. You have a unique strategy that employs a proprietary process or a proprietary model…it’s a bit hazy. Maybe you just leverage proprietary relationships. Anyway, some combination of these enables you to generate attractive absolute returns uncorrelated to broad benchmarks. Wait – that might be attractive risk-adjusted returns uncorrelated to broad benchmarks. You are disciplined, you manage risk, you have an institutional platform and your interests are aligned with your investors. Small animals like you.

How’d I do? I have to admit, it’s really not as hard as it looks. You try…

I’m thinking of a car company that describes itself this way:

We manufacture an array of carefully engineered automobiles in a variety of styles and uniquely-named colors. As a result of years of performance innovation and aerodynamics, all of our machines can accelerate from 0 to 60 mph - and decelerate from 60 back to 0 - in under 12 seconds. The interior of our vehicles is elegantly crafted to provide both function and beauty and include genuine leather, carpet, and a steering wheel.

Who is it?

a). Acura
b). Alfa Romeo
c). Audi
d). Cadillac
e). Chrysler

f). Honda
g). Jaguar
h). Jeep
i).  Land Rover
j). Lincoln

k). Mini
l).  Nissan
m). Toyota
n). Tesla
o). Could be any of the above

You get my point. Say things generically enough, you end up describing everyone. Or in actuality, describing no one.  It’s the “Barnum effect”.

IT’S NOT REALLY ABOUT WHETHER A MANAGER IS ACCURATELY DESCRIBING WHAT HE DOES. IT’S MORE A QUESTION OF WHY SHOULD ANYONE CARE.  SO WHY ARE MANAGERS STILL SAYING THIS STUFF?

Going back to guessing – I guess they do it for one of two reasons: 

1.       They confuse these descriptors for their value proposition. But really, these are merely ‘features’ and not ‘benefits.’ If most anyone can legitimately use the same words across a bunch of attributes as you to describe themselves (whether deserved or not), then it’s not “edge.”

And the reality is – these things are simply just expected. An investor wouldn’t be talking to you if he didn’t think you were experienced or was able to ‘manage risk.’ Do you really need Ford to tell you that their cars have wheels?

2.       They think they are ‘supposed’ to because that is what they believe the audience wants to hear. They don’t want to risk standing out for fear that they might alienate prospective investors that are on the fringes.

Frankly, this is a cop-out. A compromise of ginormous magnitude. You want to stop wasting time fund raising? Stop trying to be all things to all people. Sooner or later they will figure it out anyway – and unfortunately, it’s much worse if they find out you are not what they expected after they have allocated money to you.

Managers need to pick a side. Take some marketing risk. The goal isn’t to be all things to all people. Determine the one or two things that really make you special or different or interesting; find the few investors that really value those things and share your beliefs; and focus all of your energy on connecting with them.

Otherwise, you will just end up being the guy with the camel trying to pawn it off as a thoroughbred.