Presenting Performance and the Portfolio

Proof Beyond Performance

Excess Returns

Monthly insights for investment marketing and sales professionals


	May 2015


	Investment management is a competitive field where small things can make a big difference. This issue of Excess Returns examines a potential competitive advantage that is sometimes oversimplified or misunderstood by many investment firms. With best wishes, Liz Hecht Founder, Principal and Director of Research Print a PDF of this newsletter

Volume 5 | Number 4

In This Issue

The Right Kind of Proof

Reality Check

Investment Performance Handbook

Alpha Partners is an investment marketing firm specializing in research and presentation strategy. Our goal is to create alpha (excess returns) by helping investment firms win, keep and diversify assets under management.

Alpha Partners LLC
435.615.6862

www.alphainvestmentmarketing.com

The Right Kind of Proof

“Managing money is about one thing: performance.”

— Barton Biggs, Hedgehogging*

I live in a paradoxical world. The CIO of an alternative asset management company told me that he would like investment performance emphasized more heavily in the front of his company’s sales presentation. “You asked for proof, Liz,” he said, “isn’t performance the only proof that really matters?” Meanwhile, later that same afternoon, a marketing professional for another firm argued vehemently against providing any information about performance up front. “I do not want to spend any time on performance,” he said. “Performance is the reason we’re in the finals and it’s the reason our competitors are in the finals, too. It’s a waste of time to talk about performance.”

Both of these firms had enviable long-term track records in the strategies I was hired to market. And this was true by any measure: absolute, index-relative, peer group-relative and risk-adjusted. Both firms also had good stories about why their numbers were consistently strong over time.

But one firm wanted to mention performance decisively up front while the other insisted that it be relegated to the back near the appendices. Go figure.

Beyond Performance: Other Forms of Proof

As regular readers of Excess Returns already know, I agree with Mr. Biggs. I believe it is vitally important to ensure there is one concise yet descriptive statement about strong performance up front in any sales meeting — a statement not only about the numbers but also about the story behind the numbers. What I often find, however, is that a primary focus on the numbers overshadows other compelling forms of proof such as portfolio composition, performance attribution, patterns of performance and examples of the investment philosophy and process.

Portfolio composition. When one buys the services of an investment manager, one also buys a portfolio. What that portfolio looks like, how it has changed over time and how it is changing now in response to new opportunities is a fascinating aspect of many manager strategies that, weirdly, receives relatively little air time in new business presentations. Maybe this is because the portfolio, like performance, customarily is relegated to the back of the book and material in the back of the book sometimes is covered at the end in a rush (if it is covered at all).

Performance attribution. Performance attribution provides valuable context, indicating awareness of what is going on in the portfolio and a high level of commitment to client communications. Firms that systematically provide clear attribution with explanatory detail are firms willing and able to document sources of performance. In other words, they can prove that performance reflects skill as opposed to luck (or fraud). But performance attribution is still hard to come by, especially in asset classes outside of public equity.

Patterns of performance. As with attribution, this form of proof sets the stage for understanding when times are tough. Clients who understand when and why the strategy may underperform are more likely to remain patient when the numbers are weak.

Examples and case studies. I can count on one hand the firms that consistently provide fresh, relevant buy and sell examples consistent with their stated investment philosophy and process. Virtually all examples across asset classes sooner or later somehow or other degrade into what quantitative managers contemptuously refer to as “stock stories” — stories about why the investment team likes the holding without any reference whatsoever to the investment philosophy and process.

Sources. I recently read a long, interesting white paper by an investment company. The paper was filled with interesting insights, brought to life with extensive qualitative as well as quantitative detail. There was just one rather large problem. Very little of this information was sourced. My enjoyment of the paper and positive view of the manager were compromised as I kept wondering, “Where did they get that?” Or, “Really? Based on what?” The problem, I believe, was that the authors were so close to their subject that they took as established truth information that required defined sources.

Facts. Facts are a form of proof, and facts always trump adjectives. “An investment team with an average of 15 years of experience with 10 years of tenure at this firm,” for example, is much more convincing than “a highly experienced investment team.”

So yes, managing money is about one thing, and that one thing is indeed performance. But performance is only one form of proof, and investment firms can strengthen their marketing, sales and client service by providing proof in all its different forms.

For more about presenting performance, in good times and bad, you also may wish to read:

When Last Should Come First

Insulation Against Poor Performance

How to Stay Up When Your Numbers Are Down

Reality Check

To elevate the amount of proof in your firm’s presentation(s), ask yourself the following questions:

✔	What do we mean, exactly, by this statement?
✔	Does this statement or number require a source?
✔	Can we factually substantiate this and, if not, why are we making this claim?
✔	Does this presentation (paper, story) capture what we really do in executing this strategy? And if not, what’s missing that would make our strategy come alive?

Investment Performance Handbook

I did not expect to find myself laughing out loud while reading The Handbook of Investment Performance: A User’s Guide, by performance measurement guru David Spaulding of The Spaulding Group. But laugh I did as Mr. Spaulding uses military personnel performance reviews to remind readers how subjective performance evaluations can be. “This young lady has delusions of adequacy,” one review notes, while another comments that “This man is depriving a village somewhere of an idiot.” Subjective assessments like these make one want to run headlong back into the quantitative, objective world of investment performance measurement.

My favorite part of the book, though, was not these examples of subjectivity run amok, but what I think of as “the Shockers”:

Shocker #1	A firm where one of the managers did her own performance measurement calculation rather than rely on what came out of the company’s system.
Shocker #2	The portfolio manager who significantly overstated returns owing to a data entry error (numbers that should have been entered as a minus that were instead recorded as a plus).
Shocker #3	The mutual fund firm that advertised superior numbers relative to the index for a 12-month period based on only two months of performance during that same 12 months.

Who should read this book? Consultants, managers of managers, investment company professionals and anyone concerned with presenting investment performance. Mr. Spaulding provides a straightforward, scholarly consideration of performance measurement, performance attribution, risk measurement and related controls, policies and procedures. A final chapter addresses performance measurement as a growing profession in the investment industry. Those who find this book useful may also be interested in Classics in Investment Performance Measurement and Readings in Fixed Income Performance Attribution.

*	I am indebted to David Spaulding for this reference to Hedgehogging.

Questions? Comments? Dissent? Click here.

Click here for other issues of Excess Returns.


© 2015 Alpha Partners LLC	Alpha Partners LLC Marketing for Excess Returns® 1062 Oakridge Road South \| Park City, UT \| 84098

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April 2025

The Art of Uncertainty

Slashed spending by CEOs. Postponed or canceled construction projects. Jobs being cut and delays in hiring. “The unpredictability of President Trump’s stop-start trade offensive,” The Wall Street Journal noted on April 28, “is paralyzing companies on every front except one―taking an ax to costs.” Where will it all end? No one can know. And that’s why now is a very good time to read a book about the art of uncertainty. Professor David Spiegelhalter helps readers understand how humans have learned to measure, manage and survive the unknown. In addition to key insights about putting uncertainty into numbers, the author provides valuable lessons in successful strategies for communicating uncertainty.

January 2025

The Algebra of Wealth

Income. Compound interest. Investments. Debt. Taxes, Inflation … All play a role in building a profitable life. But so do character traits such as stoicism, focus and making the most of present time. In The Algebra of Wealth, Scott Galloway, a marketing professor at NYU Stern School of Business and a serial entrepreneur, provides expert advice on how to generate income and turn income into wealth. Based on personal experience and behavioral research, Professor Galloway offers vital insights that transcend the typical personal finance book, covering topics such as the futility of worry, treating expense management as a “rational obsession” and finding one’s true identity through hard work as opposed to pursuing a passion.

October 2024

The Money Trap

In this tale of Shakespearean proportions, Alok Sama describes his experiences working for one of the most prolific and audacious venture investment entities, SoftBank’s Vision Fund. Fund investments include ByteDance, Nvidia, Arm and Alibaba―along with legendary failures such as WeWork and Sam Bankman Fried’s FTX. At some point in his time as president and CFO of SoftBank, the author becomes aware of a plot to discredit him and a colleague―a plot involving surveillance of his family, a smear campaign in the press, bogus legal threats and even a honey trap. While hoping to learn who and why, the reader gets a fascinating crash course in early-stage tech investing.

August 2024

The Coming Wave

The Coming Wave describes how new technologies such as AI and synthetic biology are going to change the world. Not this year or next but over multiple decades. As a co-founder of two AI companies and the current head of AI at Microsoft, the author is well positioned to understand and communicate everything that can go right with the coming tsunami of new technologies―and everything that can go wrong. This book makes a compelling, heartfelt case for “claiming the benefits of the wave without being overwhelmed by its harms.”

February 2024

The Devil Never Sleeps

The devil is the potential for pandemics, climate change disasters, terrorist attacks and massive computer hacks. A leader in crisis management and homeland security, Juliette Kayyem documents in depth the perils of underreacting to the inevitable. By dismissing harbingers of doom as mere noise, countries and companies risk turning emergencies into calamities, local diseases into global pandemics and manageable negative events into existential crises. This book provides invaluable lessons on how to prepare for the devil, how to limit harm when the inevitable crises do occur and how to pivot in time for future disasters.

October 2023

Wealth, War & Wisdom

The reality of war never goes away. “Once every couple of generations,” writes Barton Biggs in Wealth, War & Wisdom, “an epic event occurs that destroys accumulated wealth.” The U.S., Australia and Sweden “have been lucky―so far―but in Europe, the apocalypse has happened in one form or another on a regular, generational basis.” In addition to tracking the fascinating history of the markets during WW II, this book explores two primary enemies of wealth during war: complacency (it couldn’t happen here, not to us) and failure to diversify by country and asset class.

August 2023

The Price of Time: The Real Story of Interest

Destined to become a classic of economic history, Edward Chancellor’s book provides an intensively researched compendium of all the economic woes that can result from excessively low interest rates. Starting with the ancient origins of interest, the book moves to the unintended consequences of zero-bound (and even negative) interest rates, and concludes with the impact of ultra-low rates on emerging markets.

What’s in the Portfolio?

Excess Returns

Monthly insights for investment marketing and sales professionals


	March 2012


	An organic food company recently helped me better understand certain important, commonsense truths about investment marketing. This month’s issue of Excess Returns shows how education — and not just any education but a very specific kind — builds client loyalty. With best wishes, Liz Hecht Founder, Principal and Director of Research Print a PDF of this newsletter

Volume 2 | Number 3

In This Issue

What’s in the Portfolio?

Other?

Steve Jobs, CMO

Alpha Partners LLC
435.615.6862

www.alphainvestmentmarketing.com

What’s in the Portfolio?

As part of a concerted effort to eat healthy, my husband and I recently began learning more about sustainably farmed food options in our area. There is a well-managed volunteer food co-op and then there is Liberty Heights Fresh, a specialty foods store with a weekly share program; one pays approximately $30 a week for a bag of regionally grown organic produce. The reason I ultimately settled on the somewhat more expensive Liberty Heights option is simple: marketing. Or, to be more specific: marketing through education. Every Thursday morning, the day our family picks up our bag, we now receive an email from Liberty Heights entitled “What’s in the Bag?” Here’s a sample from March 22:

Meyer Lemons, Cunningham Citrus, California

Meyer lemons are distinct from traditional Eureka or Lisbon lemons: their signature round shape, vibrant yellow peel, oily and especially fragrant skin, and low acid, extra sweet flesh. Use in baking, in vinaigrettes and marinades, or to add a special touch to lemonade and cocktails. Store in a bag in the refrigerator for up to two weeks.

For each item included in the bag — this week, along with the Meyer lemons, we find French breakfast radishes, dandelion greens, golden beets and rainbow carrots — Liberty Heights provides a brief description and history, a link to the farms where the food is grown, how it should be stored and related recipes.

Strategies for Providing Portfolio Education

Many investment companies commit significant resources to investor education. Yet most firms still could do a much better job of answering the following simple, straightforward question: “What’s in the portfolio?”

The portfolio isn’t just a list of characteristics or a summary of allocations. It consists of specific investments representing timeless philosophical beliefs, new ideas about what is going on in the world and diligent field research. By focusing on the much-neglected fourth “P,” the portfolio, investment companies very likely will win business in competition with firms that spend too much time selling all the other “P’s”: philosophy, process and people. (In an earlier issue of this newsletter, I explain why a fifth “P,” performance, also is often neglected.)

Here are a few suggestions for making the portfolio come alive:

First, describe what is in the portfolio. This seems simple enough, but certain investment portfolios contain so many different holdings and different kinds of positions that even providing a snapshot can be daunting. But through education about investment themes and the rationale behind related allocations, you can provide detail and color without overwhelming or oversimplifying.

Link the portfolio to philosophy and process. Explicitly answer the question, “How does what we are invested in right now reflect what we believe and the advantages we bring to execution?”

Show how the portfolio reflects your current outlook. Explain how current holdings exemplify your firm’s outlook on the economy and the markets. Sometimes I am told (still!), “We don’t have a top-down outlook; we are bottom-up investors.” Thankfully, the view that bottom-up fundamental research somehow precludes a focus on global macroeconomic factors seems to be changing, giving an edge to firms who can impart understanding of their portfolio from the perspective of the forest as well as the trees.

Teach investors something new. Find ways to bridge from mere data to education about something new — a profile of a new holding, a feature about an industry or country recently added to the portfolio or an explanation of a new performance measure. Raw portfolio data is available in abundance, but stories about macroeconomic themes, specific investments and other explanatory detail are still rare.

Tell stories and show pictures. I can count on one hand the number of investment firms that consistently apply the art of storytelling and photography/illustration to demonstrate what’s going on in their portfolios. Most firms see anything beyond lists of bullets, pie charts, bar charts and graphs as marketing fluff and, of course, therein lies the opportunity for the minority who get it and are willing to do the work.

There are a few good and many bad reasons why investment firms fail to provide portfolio education. Some fear portfolio transparency for legal or marketing reasons; others simply fear being wrong about what’s in the portfolio. There are many better reasons, however, for providing portfolio education, as investors — and that includes aunt Alice as well as sovereign wealth fund CIOs — are always grateful for a true understanding of what is in the portfolio.

This brings me back to what’s in my bag. I did not choose Liberty Heights Fresh because they have the best food (although the food is indeed wonderful). And I did not choose LHF because they had the best price. I chose them because they take the time to provide the most detailed, current, inspiring information about their products. And I likely will stick with them because they regularly teach me something new about what’s in the bag and the larger world where the produce in the bag originates. Meyer lemon pots de crème, anyone?

Here’s what’s in the bag for March 22 (with our cat, Bip). We chose Liberty Heights Fresh not only because of the quality of its products, but also because of the education LHF provides about its products.

Other?

I have been at war against the “other” category for years and I always review our company’s research reports to ensure that “other” is clearly defined with a parenthetical description or a footnote. So I was recently perplexed to receive the following snapshot of what is in my own portfolio:

Such vagueness about 6% of the portfolio, it seems to me, creates several unwanted perceptions about an investment company: (1) that is has an inadequate portfolio accounting system, (2) that it doesn’t mind being fuzzy in client communications about key portfolio details or (3) worst of all, that it does not really understand or care about what’s in the portfolio. In this case, “other” turned out to be a market neutral fund which could not be classified by an older, soon-to-be-replaced portfolio accounting system.

Steve Jobs, CMO

By now many of you have probably read Steve Jobs by Walter Isaacson. The book shows how Jobs, despite his success in playing many corporate roles, was above all a superb Chief Marketing Officer. And what made him hyper-effective as a marketer was his relentless focus on all of the small details that create an excellent customer experience. If you want to indulge in a reading marathon about Jobs, which I can attest is time well spent, you might also enjoy The Presentation Secrets of Steve Jobs, by Carmine Gallo, who in chapters such as “Develop a Messianic Sense of Purpose” and “Make It Look Effortless,” deconstructs the many ways in which Jobs excelled as a speaker. Mr. Gallo also recently published another Jobs-inspired book that may be of interest to investment marketers: The Apple Experience: Secrets to Building Insanely Great Customer Loyalty.

Questions? Comments? Dissent? Click here.

Click here for other issues of Excess Returns.


© 2012 Alpha Partners LLC	Alpha Partners LLC Marketing for Excess Returns® 1062 Oakridge Road South \| Park City, UT \| 84098

April 2025

The Art of Uncertainty

January 2025

The Algebra of Wealth

October 2024

The Money Trap

August 2024

The Coming Wave

February 2024

The Devil Never Sleeps

October 2023

Wealth, War & Wisdom

August 2023

The Price of Time: The Real Story of Interest

Insulation Against Poor Performance

Excess Returns

Monthly insights for investment marketing and sales professionals


	October 2011


	How can investment companies insulate their businesses from experiencing the same ups and downs as their portfolios? The answer to this question is particularly important now when the markets are prone to daily bouts of schizophrenia. This issue of Excess Returns explores certain timeless sources of business stability in an industry where the product being sold, performance, changes frequently and dramatically — and often for no clearly discernible reason. With best wishes, Liz Hecht Founder, Principal and Director of Research Print a PDF of this newsletter

Volume 1 | Number 10

In This Issue

Insulation Against Poor Performance

The C-Word

Being Wrong

Alpha Partners LLC
435.615.6862

www.alphainvestmentmarketing.com

Insulation Against Poor Performance

Back in the fall of 2000 one of our clients showed me an educational presentation by a company that I will call Famous Value. Our client, the CIO of his own firm, also was on the board of an endowment that had hired Famous Value. Famous Value, being famous for value in a hyper-growth market, had been underperforming spectacularly for some time. Our client showed me several performance bar charts in a recent presentation to his endowment, and the vertiginous decline in human wealth made me feel slightly sick, even though it wasn’t my money.

But the decline in asset values was not this CIO’s focus. His focus was on the high quality of Famous Value’s communications. Famous Value, he explained, was able to retain clients even during protracted periods of underperformance owing to the caliber and frequency of its communications. Famous Value in fact also was famous for having a large, talented, well-paid communications team — at a time when most investment firms were only just beginning to realize the importance of communications. This gentleman wanted his own company to provide communications materials equal in quality to those of Famous Value.

Five Ways to Performance-Proof Your Investment Business

While our client was on the right track in focusing on communications, his company did not have the resources to build a Famous Value-style communications department. There are, however, several commonsense ways to retain clients when performance is weak, whether your firm is large or small — and without necessarily having a large communications team:

1.	Show up and act like you want to be there, in good times and bad. I have heard several stories about investment professionals who call to ask, “Do we really have to attend this meeting in person? Can’t we just do it by phone?” The moral of these stories usually goes something like this: “As soon as there is any shortfall in performance, that company is gone. I’m never going to bat for them.”
2.	Teach your clients something new. One of our firm’s key philosophical beliefs is that people want to learn something new. If you consistently provide clients opportunities to learn — about investing, the current markets and their portfolio — they are more likely to go to bat for you when you need support. And not only because you offer educational opportunities but also because they understand at a deeper level why your firm invests the way it does and why their portfolio might inevitably underperform during certain periods.
3.	Provide context. This is part of the educational process. Your numbers may be down on an absolute basis, but they still may be pretty darn good relative to the indices and peer group managers as well as on a risk-adjusted basis. In our practice we see investment professionals who are inordinately apologetic about underperformance without providing this context (the opposite of those who don’t even want to show up for routine client review meetings).
4.	Admit your mistakes. Sometimes performance is dreadful because your investment decisions were wrong. In these cases, many clients will value your firm’s ability to identify and decisively address sources of underperformance. Correcting and communicating mistakes signals both investment process integrity and human integrity. (Discussing mistakes without alarming your clients, however, requires a certain amount of finesse. The September 2011 issue of Excess Returns considers strategies for communicating mistakes effectively and the book Being Wrong, noted in this issue, explores the art and science of learning from mistakes.)
5.	Develop multiproduct relationships. Offering more than one product is one source of stability, but the real stability comes from cultivating multiproduct relationships. If a client leaves you for poor performance in one investment strategy, that doesn’t mean you have lost the relationship — unless that client invests in only one of your firm’s strategies. This is why many investment companies seek to build stability by offering solutions to big-picture client investment challenges — as opposed to merely selling products.

The best way to performance-proof your investment business is to meld all of these positive attributes — a heartfelt desire to meet with clients, education, context, process integrity and human integrity — into relationships where your clients become genuine die-hard fans. Fans rarely switch sides, even after an extended losing streak.

For additional information on retaining relationships when performance is disappointing, please visit the following articles in the Art & Science section of our website:

Bedside Manners for Client Service Professionals

How to Stay Up When Your Numbers Are Down

The C-Word

In most walks of life outside the investment world, change is perceived as positive. Many investment managers, in fact, like to invest in change because change spells opportunity. Yet these same investment managers will go to great lengths to hide or disguise change at their own firms. Changes to the investment process are never called by their real name but instead are euphemized as “refinements” or “enhancements.” Investment managers are afraid that change will be viewed as a dangerous break in consistency. But what if consistency is proving to be consistently wrong? What if the world has become more complex and difficult, requiring change to remain successful? Well then, why not embrace the C-word? Admit that you have made a change in your investment process. Institutional investors and consultants are not naïve. They understand change and may even welcome it, particularly if you provide a compelling explanation of why change is necessary.

Being Wrong

Did you know that, even according to the lowball estimate, medical mistakes are the eighth leading cause of death in the US — worse than breast cancer, AIDS and motor vehicle accidents? Or that for commercial aviation to take the same toll in the US as medical errors do, a sold-out 747 would have to crash every three days, killing everyone on board? You would if you had just read Being Wrong: Adventures in the Margin of Error by Kathryn Schulz. The book examines lessons learned from error in every walk of life and thus is bound to be of interest to investors, who in order to be successful must systematically identify, evaluate and learn from their mistakes.

Questions? Comments? Dissent? Click here.

Click here for other issues of Excess Returns.


© 2011 Alpha Partners LLC	Alpha Partners LLC Marketing for Excess Returns® 1062 Oakridge Road South \| Park City, UT \| 84098

April 2025

The Art of Uncertainty

January 2025

The Algebra of Wealth

October 2024

The Money Trap

August 2024

The Coming Wave

February 2024

The Devil Never Sleeps

October 2023

Wealth, War & Wisdom

August 2023

The Price of Time: The Real Story of Interest

Hope for Sisyphus

Excess Returns

Monthly insights for investment marketing and sales professionals


	August 2011


	During times of market turmoil, investment managers have an obligation to communicate swiftly and decisively with their clients. Yet decisive communications can be tough when the market oscillates daily between fear and greed. This issue of Excess Returns considers how some investment firms excel at communicating effectively when times are tough. We also provide a few topical favorites from our reading list — including a novel reminiscent of Edith Wharton with real-life stock charts. With best wishes, Liz Hecht Founder, Principal and Director of Research Print a PDF of this newsletter

Volume 1 | Number 8

In This Issue

Hope for Sisyphus

A Tale of Reach and Grasp

Eyefuls of Bark

Alpha Partners LLC
435.615.6862

www.alphainvestmentmarketing.com

Hope for Sisyphus

On the eve of the US long-term debt downgrade, my husband and I are preparing for our regular quarterly meeting with our investment advisor. We manage our portfolios separately. He is conservative and I am moderately aggressive, so we tend to balance one another. This time, though, he is asking me questions that I cannot readily answer — about the implications of the downgrade and how he should position his portfolio given the recent Sisyphean activity of the markets (one step forward, three steps back).

So I head to the Internet to gain some perspective, visiting the websites of some of the largest investment managers — all companies with billions of dollars under management and impressive communications teams. What I find there ranges from feast to famine. Some firms offer so much rich, diverse, timely commentary on current market activity that it’s almost overwhelming (in a good way). I invest with some of these companies and I am happy to see that they are cognizant of what is going on in the world. Other sites for multibillion dollar asset managers, however, prominently feature commentary on news that is now many months old, just as if this mess of a market had not happened yet, and still others bizarrely ignore current events altogether.

I visit the site of a firm renowned for the accuracy and timeliness of its macroeconomic insights and all I find is a lot of brand messaging and public relations blather about what a cool place it is to work. I find this insulting and I bet other people, including prospective clients, feel the same way. Presumably the macro insights are reserved for paying clients, but this firm, which is not closed to new assets, would be better served by at least affording prospective clients a glimpse of its legendary acumen.

Communications Strategies for Volatile Markets

When times are tough, asset managers — all asset managers, but especially large, multiproduct firms — have an obligation to communicate. In my review of dozens of websites for multibillion dollar global firms from August 8, the Monday after the downgrade, to the end of this month, I encounter several commonsense strategies that strike me as being particularly effective:

Move Fast. The best websites always have new information and insights, with postings time-stamped for freshness.

Educate. Moving this fast might mean that these firms don’t necessarily have fully formed views yet. But they can still help investors by explaining what is going on and what it might or might not mean. On certain asset manager websites, for example, I was relieved to find answers to questions about the downgrade that I had not even thought to ask.

Be systematic. The investment business at the higher levels has become a publish-or-perish enterprise. By having a series of regular publications, the best firms are automatically geared up to address big-picture events in a timely fashion.

Communicate with a human face. Fireside chat-style video clips with Chief Investment Officers and lead Portfolio Managers present a human face when investors are most in need of reassurance and accountability from the people managing their money.

Consider the big picture. Communications are never more important than during times of stress. Your firm has a simple choice regarding what message you want to send on your public website: “We have no interest in the larger top-down world around us” or “We are here for you and we want to help.”

Fortunately, most global investment firm websites want to help. I read everything I can and I start feeling a bit more hopeful, a bit less like Sisyphus. I have a well-informed conversation with my husband prior to our portfolio review meeting and we are both well prepared. This process gives me a huge measure of sympathy for those who are responsible for investing billions of dollars of other people’s money. I am grateful to the asset managers who have helped me to understand what is going on; in the future, I am more likely to visit their websites, and to continue investing with them.

A Tale of Reach and Grasp

“‘Only fools and charlatans try to time the market,’ he announced, looking at Joe. ‘Which are you?’ Listening to him, Joe thought how satisfying it would be to punch him in the face.”

— From A Hedge Fund Tale of Reach and Grasp … or what’s a Heaven for?

In addition to scouring asset manager websites for perspective on the current markets, I head to Amazon where I am happy to find the latest book by Barton Biggs. I am delighted to find that it’s a novel — and a novel with stock charts no less! The dust jacket compares A Hedge Fund Tale to An American Tragedy and Bonfire of the Vanities, but to me it also reads like the best of Edith Wharton.

Eyefuls of Bark

“Here I was, obsessing over all these individual companies, and never once giving thought to the bigger picture, geopolitical or otherwise. I not only was missing the forest for the trees, I had my face pressed up against the trunks so closely I had eyefuls of bark … I vowed that I was going to try to do more macro research and risk management, a high concept that had permeated the hedge fund world after LTCM [Long-Term Capital Management], but that I and a lot of others viewed with ambivalence.”

— From Diary of a Hedge Fund Manager, From the Top, to the Bottom, and Back Again

Diary of a Hedge Fund Manager, by Keith McCullough and Rich Blake, provides one investor’s firsthand account of the manic, lemming-like orientation of the stock market during a boom. As with A Hedge Fund Tale, the perspective of history provides balm to the soul. As I always say, when the going gets tough, the tough … read.

Questions? Comments? Dissent? Click here.

Click here for past issues of Excess Returns.