An Extremely Niche Column on Asset Management Sales

Institutional allocators are finally facing reality: They will have to invest with asset managers they’ve never met in person.

Patrick T. Fallon/Bloomberg

Patrick T. Fallon/Bloomberg

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Dear Readers: I have good news, for once.

Maybe it’s that I’ve been on a sparsely populated Maine beach for a week and am immensely refreshed.

Maybe it’s the (Hendrick’s) gin.

Or maybe it’s at that the allocator data is actually, finally turning in the favor of sales and distribution teams.

Yes, it’s the third. Definitely not the second.

Last week, Institutional Investor held a virtual roundtable for healthcare funds. As always, we polled the audience on business practices, portfolio moves, and their expectations for the future.

One question focused on the article of dogma that I’ve encountered nearly every day since the East Coast locked down March 12: Allocators will not place capital with managers they had not physically met.

Here’s what we asked: “In terms of allocating assets to new managers, what best describes your expectations for an extended Covid-19 travel lockdown?”

If I had been forced to predict the outcome beforehand, this would have been my guess:

  • Because of the investment team’s discomfort, I will not allocate to new managers who I have not interacted with in person: 65%
  • Because of the board’s discomfort, I will not allocate to new managers who I have not interacted with in person: 15%
  • By the end of 2020, I expect to allocate to new managers who I have not interacted with in person: 5%
  • By the end of 2021, I expect to allocate to new managers who I have not interacted with in person: 5%
  • During the pandemic, I have already allocated to a manager(s) who I have not interacted with in person: 5%
  • Before the pandemic, I already allocated to a manager(s) who I did not interact with in person: 5%

But to the delight of almost anyone who makes a living by gathering institutional assets, these were the actual results:

  • Because of the investment team’s discomfort, I will not allocate to new managers who I have not interacted with in person: 13.2%
  • Because of the board’s discomfort, I will not allocate to new managers who I have not interacted with in person: 2.6%
  • By the end of 2020, I expect to allocate to new managers who I have not interacted with in person: 34.2%
  • By the end of 2021, I expect to allocate to new managers who I have not interacted with in person: 25.0%
  • During the pandemic, I have already allocated to a manager(s) who I have not interacted with in person: 22.4%
  • Before the pandemic, I already allocated to a manager(s) who I did not interact with in person: 2.6%

Contrary to conventional wisdom — and, the data show, the pre-Covid reality — nearly 60 percent of healthcare investors believe that we are about to enter a time where mandates will flow to managers that allocators and consultants have not met in person.

We also asked a couple more fascinating questions:


I believe I will be vaccinated for Covid-19 in:

  • Q4 2020: 2.6%
  • Q1 2021: 16.0%
  • Q2 2021: 33.3%
  • Q3 2021: 21.2%
  • Q4 2021: 10.3%
  • 2022: 9.6%
  • Never – there won’t be a vaccine: 2.6%
  • Never – even if there is a vaccine: 4.5%



I will accept in-person meetings with allocators/managers in:

  • Q4 2020: 9.5%
  • Q1 2021: 20.2%
  • Q2 2021: 32.7%
  • Q3 2021: 10.7%
  • Q4 2021: 1.8%
  • 2022: 3.0%
  • When a vaccine has been widely administered: 22.0%

Based on the discussions that followed the polling, the logic, as far as I could discern, is that in March and April, allocators generally thought Covid-19 would be a short-term issue. Lockdown would flatten the curve and we’d inch back to work by June, with many precautions.

But by June, it became very obvious that this was not a short-term issue, with many major companies announcing that office presence wouldn’t be demanded until the summer of 2021. Allocators realized that there is simply no way that their portfolio lineup can stay the same for another 12 months, and no matter how great KKR and Bridgewater are, they can’t have all the assets.

And so conventional wisdom has largely been abandoned: It is no longer true that allocators require meeting their managers in person before giving them money.

That’s a good thing for asset managers.

As one allocator put it at the roundtable, “As a long-term investor, it didn’t seem all that onerous to postpone mandates from the first quarter until the second quarter. But then, as time went on, we realized that this isn’t a short-lived event, and we really need to readjust our thinking. We can’t just stop investing — and, given the markets, we don’t want to. We want to be nimble. We look for that in our investment managers. So we can’t be nimble, it’s a little hypocritical for us to ask it of managers.”

If you want to know more — like which strategies will see inflows — it’s time to become a virtual member of the Institutional Investor and Alternative Investor Institutes.

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