Memos Are an Inescapable Part of the Investment Process. Here’s How They Can Improve.

Addepar surveyed investors on memo best practices.


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Despite being nearly omnipresent in the daily life of allocators and asset managers alike, the investment memo rarely gets its time in the sun.

Indeed, as investment software and data provider Addepar recently shared in a research paper, Google Scholar has zero results on peer-reviewed journal articles on the topic. “Despite their ubiquity and importance, there’s practically no published research in either academia or industry on best practices in crafting or using investment memos,” the research said.

Industry research leaders Barbara McEvilly, Ashby Monk, and Dane Rook worked on the report, which is designed to shed light on how professionals use investment memos and how they can improve the process.

The group surveyed 54 organizations, which included both investment managers and allocators. They augmented their research with case studies on asset owners, including pension funds, a family office, and an endowment.

While the vast majority of investors surveyed — 97 percent — said they use memos to make investment decisions, there is very little publicly available information about these reports, because investors tend to regard them as highly confidential.

However, Addepar found that most memos are structured in more or less the same way. Ninety-eight percent of the investors surveyed included a summary of opportunity; 95 percent included a section on risk factors; 90 percent included a fees and costs section; 88 percent included team bios; and 85 percent included the role that the deal would play within the complete portfolio.


The investment memo process was also similar across organizations. Investors begin with an initial screening that distills the thesis, context for the opportunity, and an assessment of the portfolio fit. After screening, writers usually use a memo template, built in PowerPoint or Word, to complete key sections, which can take as little as two weeks or as long as a year.

According to Addepar, it takes a team an average of two months to complete the entire writing and review process. Some organizations then implement an internal critiquing process, which is designed to stress-test the deal and provide a deeper understanding of the problems that may arise. When that’s complete, some investors will rate the deal — assigning numerical scores to the opportunity, the terms, and the portfolio fit — to complete the diligence process.

In the next phase, the deal is either approved or rejected by the committee, team, or board. The reports are then saved for future reference.

What comes next, though, is largely undefined — and according to Addepar, investors could benefit from adding more structure. “We asked our interviewees whether they have structured processes for ex-post analysis of memos,” the report said. “The majority do not, which is noteworthy in that it reveals how much value is not being captured in current memo processes.”

Some successful strategies include implementing an evaluation process for the memos; holding an annual offsite team meeting to review the memo findings; or revisiting the memos when considering other opportunities offered by the same manager.

Other respondents offered ideas that could improve how memos are created and reviewed. According to Addepar, many cited concerns about the speed of the process, with some suggesting improvements such as “established word count limits and tables of contents that encourage authors to create memos that are concise, digestible, and actionable.”