The Site-Visit Fetish

Any perceived benefits derived from in-person diligence meetings pale in the face of the consequences of an easily transmissible and fatal virus.

Illustration by II

Illustration by II

Unless you’re the Governor of Georgia, you know we are not going back to normal. But where are we going?

If you’re an allocator, probably nowhere.

Contrary to the beliefs of some right-wing ideologs, Covid-19 is highly contagious and is killing people. It will continue to kill people for some time.

I begin with the assumption that Boards of Trustees and sponsoring organizations recognize that a critical part of their fiduciary duty is to ensure the people to whom they have delegated the management and administration of their pool of beneficial assets are fully not dead. This means they must be healthy.

Given the current pandemic and its long tail, I cannot imagine a Board or Trustees or sponsor permitting its CIO and investment staff to participate in non-essential external business meetings. Likewise, I cannot imagine allocators are keen to risk life and limb to participate in such meetings.


And to be clear, regular, on-site manager visits and in-person new manager due diligence visits are non-essential meetings.

The risk associated with these meetings is entirely asymmetrical and the need for such meetings is based on a behavioral bias.

These meetings require staff to travel, and the elements of travel — planes, trains, ride-sharing services, hotels, restaurants — expose them to life-threatening risks (while exposing others to the employee’s possible asymptomatic condition). Any perceived benefits derived from in-person diligence meetings pale in the face of the consequences of an easily transmissible and fatal virus.

But beyond this simple science, it’s time we realize that a site visit is an anachronistic diligence requirement.

Video conferences, phones calls, written materials (ideally available in the cloud), and references can be used to accomplish the same results and provide all the basic information. These can be supplemented with technology. Today, for a reasonable price, managers can buy robots with audio and video capabilities that allocators can remotely operate to tour of a manager’s office and interact with the staff. This technology also allows multiple members of the allocator’s staff to participate in the “visit.”

I can hear my contemporaries rejecting such a new-fangled approach and appealing to the old adage that “before I can hire a manager I need to look him in the eyes.” Not only does this appeal put a behavioral bias ahead of community welfare, but it is rendered useless when the manager is wearing a mask.

Face it, Covid-19 changes everything.

More deeply, the site visit fetish is perversely predicated on the belief that the allocator/manager relationship is fundamentally antagonistic, with the manager endeavoring to hide some key fact about the company or strategy. A site visit gives the allocator on-the-ground the opportunity to uncover this perceived deception.

Putting aside an allocator’s ability to play Secret Squirrel, consider that mutually beneficial fiduciary relationships founded upon such distrust is doomed to fail. The allocator/manager relationship must be first and foremost founded upon trust: You trust that the manager will always act in your best interest, which includes disclosing material changes in circumstances in a timely fashion (assuming it has not buried all of its employees under all-encompassing non-disclosure agreements). Genuine trust negates the need for face-to-face meetings.

Additionally, manager site visits falsely assume that co-location is the default work structure. As the pandemic shows, this structure presents managers and their clients with deadly concentration risk. The assumption reveals not only a disregard for the health of the co-located workforce but also an ignorance of collaborative technologies and the benefits of distributed work forces.

The norm of non-essential physical meetings also applies to managers visiting an allocator’s workplace. These meetings typically require the manager to use a common mode of travel to arrive at your office. (And a tip to managers: given the current underperformance of so many managers, now is not the time to be arguing for taking private jets to non-essential meetings.)

Even when done with proper social distancing and safeguards, their physical presence introduces an unnecessary element of risk into your workplace. Ask the manager to explain what about this meeting cannot be accomplished with technology.

In the end, all this is quite disruptive to one’s work flow and common practices. Sure, it requires a new mode of interaction – but if we assume the health and welfare of you and colleagues is required to properly exercise your duties as fiduciaries, there is no real choice.

One final thought — and I truly regret writing this in Institutional Investor because I so love being a part of them — industry conferences are non-essential activities. Not only are they non-essential; they are the epitome of a high-risk event. Conferences bring together scores of people from all over the world who, through their physical presence in a confined area, interact with each other and then, a few days later, go back out into the world.

No amount of social distancing (and we can forget about elbow bumps) and hand sanitizer can mitigate this risk.

But if you’re still thinking about attending an industry conference this fall, use this as your benchmark: For the first time since World War II, Oktoberfest 2020 in Munich was cancelled.