Asset Managers’ BS — Decoded
A handy translation guide to the sales jargon and IR excuses that one family office chief is sick of hearing.
Investors who hire other asset managers to run their institutions’ money take thousands of meetings throughout their careers, often hearing out multiple fund pitches in a single day.
And they pick up patterns. With annual investor letters, for example, the longer they are, the worse the performance tends to be. Holiday gifts likewise inversely correlate with alpha. Receive a bottle of vintage single malt Scotch from a hedge fund portfolio manager who usually just sends a card? Uh-oh.
The investment chief for one institution-sized single-family fortune decided to put pen to paper, translating these overused phrases, sales jargon, and excuses into plain — and satirical — English. He agreed to let Institutional Investor publish it, provided he goes unnamed. (Like most family offices, that one is allergic to publicity.)
- Now is a good entry point = Sorry, we are in a drawdown
- We have a high Sharpe ratio = We don’t make much money
- We have never lost money = We have never made money
- We have a great backtest = We are going to lose money after we take your money
- We have a proprietary sourcing approach = We invest in whatever our hedge fund friends do
- We are not in crowded positions = We missed all the best-performing stocks
- We are not correlated = We are underperforming while the market keeps going up
- We invest in unique uncorrelated assets = We have an illiquid portfolio which can’t be valued and will suspend soon
- We are soft-closing the fund = We want to raise as much money as we can right now
- We are hard-closing the fund = We are definitely open for you
- We are not responsible for the bad track record at our prior firm = We lost money but are blaming all our ex-colleagues
- We have a bottom-up approach = We have no idea what markets are going to do
- We have a top-down process = We think we know what markets will do but really who does?
- The markets had a temporary mark-to-market loss = Our fundamental analysis was wrong and we don’t know why we lost money
- We don’t believe in stop-loss limits = We have no risk management
Asset managers might wince at this list, but they’re in good company. The family office chief wrote one for allocator-speak, too.