Vulnerable Is The New Cocky

Shows like Wall Street and Billions aren’t based on fiction.

Let’s face it the alternative investment industry grew up on bravado, ego, and an affinity for risk. You had to have nerves of steel to survive, which attracted a certain type of person. Huge money was being made, the returns were enormous, and hedge funds were sexy. It was a time of big watches and fast cars.

Fast-forward 25 years… the fat has all but disappeared, the industry has matured. Alpha is fleeting and the big wins are further and further apart. You also happened to have a 10-year run where a hobby investor in Iowa was able to outperform some of the most sophisticated investment minds on Wall Street.

Now don’t get me wrong, managers are wicked smart people. Times have simply changed. Investors are simply tired of the cockiness. If you were crushing the S&P by 20% year after year, you deserve to bust out a little swagger. If you are beating the S&P by 23 basis points… not so much.

All in all, investors are tired of “the show.” Everyone is fallible, no one knows what the future holds, and there are a lot of great teams out there. At this stage you are going to get a lot further if you walk into a room with humility and give investors the straight goods – we are really great at this, these are the mistakes we have made, etc.

The institutional community is still beholden to the asset management industry. The huge difference today versus yesterday, they have choice. No one wants to work with the cocksure manager that purposely flashes the big watch. People are searching for managers that show both vulnerability and respect. Don’t believe me, call up and ask any LP you know and ask.