Never Tell An Institutional Allocator That It Is In A Dire Situation!

We spend a lot of time helping GPs figure out how best to approach allocators, what to say, what to do, how to do it, etc. Because of this, we have a lot of insight into what works and what doesn’t work.

Telling and allocator that they need to do something immediately or risk immediate losses simply doesn’t work. This is counter intuitive. You would think that a large allocator would make immediate decisions to curtail losses. The challenge, large allocators hear this a hundred times a day. If they responded or acted to every dire warning, they would be constantly chasing their tail.

To combat this reality, GPs should never “cry wolf.”  Instead, they should approach allocators as educators and make a full and sustained argument as to why their position is valid and worth heeding. The real insight here, it is impossible to do in one interaction. It takes numerous touches across numerous individuals.

Understanding this is one of the key components of raising institutional capital. The more you scream fire the more nervous the allocator will become, yes, even if they do end up going down with the ship. Take your time explaining your position. Provide details, thought pieces, and opinions in digestible chunks. Use phrases and words such as: this is worth considering; this is difficult to refute; and I would be interested to hear your opinion on. It is best to avoid relying on hyperboles, grandiose statements related to losses, and short-term timelines. Again, such statements feel salesy and raise suspicions… even if they are true.

It took me a long time to reach this clarity. I have always believed that fear of loss is a stronger motivator than the opportunity for reward. In this case, however, the fear of loss is overshadowed by the fear of looking impulsive, brash and unsophisticated.

By Kyle Dunn