Institutional Investors’ BS — Decoded

Illustration by II

Illustration by II

“I have a hard stop at 11.” Translation: “Your pitch failed. I’m going to reclaim my day.”

When saying no is a huge part of your job, you have scores of ways to say it. “No” means “No,” but so does “I’ll pass your deck along to our venture capital guy.”

Investors responsible for the world’s largest pools of capital — pension funds, sovereign wealth vehicles, university endowments, philanthropies, and the like — have to “thanks-but-no-thanks” people many times every day. If you have all the money, people want to sell you things — especially their services for investing it.

Both parties — asset manager and institutional allocator — know the dance steps and speak the coded language.

“Thanks so much for coming in,” the chief of a $3 billion foundation might say to end a tedious pitch meeting. “We’re not actively underwriting Peruvian organic agriculture infrastructure at the moment, but that was really interesting. I’ll be in touch.”

She will not be in touch.

Last year the investment head of a $1 billion-plus family fortune put pen to paper, translating the industry’s overused phrases, sales jargon, and excuses into plain — often cutting — English. He let Institutional Investor publish it, as long as he remained anonymous.

The piece was a hit.

Tens of thousands of people read it on II; countless more found it on dodgy outlets that plagiarized it, including Zero Hedge. But the viral sensation also cut awfully close to the bone. “Funny because it’s true” slides precipitously into laughing-to-keep-from-crying when the joke’s on you.

Several money managers responded to the original guide (“It’s really funny!” = “I have a new ulcer and scrapped my pitch deck.”) with an idea: Let’s turn the tables. How about translating allocators’ abundant BS?

So we did. This sequel comes out of hundreds of suggestions from asset managers, sales and IR professionals, II editors, and institutional allocators themselves.

“Not for attribution,” the emails from big-name institutional CIOs always started. “But these are lines we use ourselves have heard other LPs/colleagues use . . .”

A Translation Guide to Institutional Investor–Speak

What allocators say versus what they really mean.

  • We are patient capital. = We are patient capital as long as you perform.
  • I read your pitch deck. = I looked at the returns and bios.
  • Thanks for the update. = This was not worth an email.
  • Send me your deck, and I’ll take a look. = Please stop emailing me now (and for all time).
  • I see you’ve cc’d my CIO to try to get me to look at your fund. = You are dead to me.
  • How did you get comfortable with <insert decision>? = WTF were you thinking when you did <insert decision>?!?!
  • There is too much key-man risk. = Your ego fills the room.
  • We are looking for managers with less AUM. = You are greedy for fees.
  • We aren’t convinced you have a repeatable process. = You’re a gunslinger who makes it up as you go along.
  • We weren’t able to check all the boxes during late-stage due diligence. = We made a few calls asking about you, and hoo-boy! I actually wrote “yikes” right there in the box, see?
  • We’re working through our pipeline and don’t have the resources to dedicate to this. = I don’t want to invest or spend the time explaining why.
  • We require a three-year track record before consideration. = We require a three-year track record before consideration, dum-dum.
  • Diversity and Inclusion is absolutely part of our due diligence process. = We just choose to ignore what we learn.
  • We follow the Yale Model. = It’s nice and cozy here in the center of the herd.
  • We’re long-term investors. = Don’t come crying to me when the markets are down. It’s not my fault.
  • We will be evaluating private energy next year. = Houston is warmer in January than Boston.
  • We look for differentiated strategies with an edge. = We are hopelessly driven by FOMO.
  • We continue to be constructive on tech. = We would never allocate to a manager we only met using technology.
  • Alignment of interest is absolutely critical in successful manager relationships. = Good thing we both like steak dinners.
  • Fees are very important in our manager selection process. = We don’t have access to any really good managers.
  • There’s no leverage in our portfolio. = There’s no leverage in our portfolio . . . that I know of.
  • Our Sharpe ratio is top-quartile. = Our returns are bottom-quartile.
  • I have a hard stop at the top of the hour, so we’ll need to wrap up. = You failed to make the sale. I’m going to reclaim my day.
  • Why don’t we circle back in the new year? = I really don’t want to take your call, and I’m hoping you’ll forget to follow up.
  • Our equity portfolio underperformed due to sector rotation. = We have no idea what our managers are doing or why they lost money.
  • We went into that trade early. = I made a tactical bet that was wrong, and refuse to admit it. But if you wait a little while longer, I’m sure we will be right.
  • I can’t make it that day — board meeting. = Now that I’ve delivered our firstborn, literally nothing could make me try to reschedule with the board. If I have more kids, I’ll just plan labor around the meetings.
  • I make it a point to respond to every pitch email as a basic courtesy. = I spend six hours every weekend plowing through maybe 20 percent of them, and frankly deserve some credit.
  • Thanks for your patience. = I am really sorry and feel bad. Otherwise I just wouldn’t have written back at all.
  • Endowments learned tough lessons in 2008. I hope we remember them in the next crash. = This university will bounce professors’ paychecks to make capital calls from our private equity managers. The endowment is not for students. That’s why our new emergency financial plan sells their blood plasma before our private market assets.

Bonus: Consultant Translator

  • We use a team approach to serving clients. = A junior person does all the real work behind the scenes. We will rotate your relationship to an ever-more-junior person every few years.
  • You get our best ideas. = You get the same ideas as everybody else.
  • We pursue alpha. = We pursue excess return and don’t really know the definition of alpha or where to find it.
  • Our client-to-consultant ratio is low. = We call everybody over the age of 25 a “consultant.”
  • We advocate diversification. = Complexity makes us indispensable.