Do More to Expose the Sins of Asset Management

I had one thought after reading Mohamed A. El-Erian’s recent Bloomberg column about Bitcoin: He had phoned it in. (His simplistic thesis, that Bitcoin’s decline will either be a catalyst for institutional adoption or the pin prick of “a remarkable and historic asset bubble,” contributes little to the critical discourse surrounding cryptocurrencies.) Perhaps atypical of Dr. El-Erian’s writing, the column serves as an archetype for much of the original content produced by the financial industry trade press. 

This is unfortunate because a ground truth of our industry is that we must always seek to improve how we manage beneficial assets. Those choosing to publicly write or speak — I’ll leave tweeting for another column — have a responsibility to contribute to this progress. Original, critical thinking that leads to new ideas and, accordingly, to better possible investment outcomes, is the goal.

Few, however, consistently shoulder this responsibility with purpose.

I certainly recognize that the professional trade media’s stock-in-trade is news stories (we all are absolutely enthralled by Boca Raton Police and Fire’s decision to hire a new real estate manager) with heavy doses of recapitulated industry surveys, white papers, and academic research. But what often passes for original, thought-provoking content in the professional media is trivial in topic and shallow in thought. 

For example, a ranking of the best places to work in asset management is vapid, not only because of its very topic, but also because of its methodology and metrics: It is self-determined and does not include the assessment of critical business and cultural issues, such as a firm’s policies on, and history of, sexual harassment. Let’s be honest: A survey of the worst places to work would be much more consequential.

In addition, we columnists — including those within the walls of Institutional Investor — should be doing much more to expose the weaknesses of modern investment theory, the sins of the asset management businesses, and the path to the future. A simple suggestion to my peers: Purge yourselves of the need to begin or end your essays with saccharine, folksy anecdotes. Instead, carefully choose every one of your allotted 800 words to expose an original idea that will goad the audience to think differently about how they invest.

The situation is much worse in the burgeoning cottage industry of blogging and podcasts. These independents have shown little interest in using their voices to transform how we invest beneficial assets. Perhaps because they are unfettered by practiced editorial oversight, driven by commercial reasons, or lacking in the necessary skills to produce quality content, this group has chosen to play the role of protector of the ancien régime.

With few exceptions, these individuals produce a regular stream of content that, to quote Noam Chomsky, is “not so much cloaked in idealism as it is drowned in fatuity.”

Podcasters might have access to some interesting (and almost exclusively male) asset managers, but the interviews are all bonhomie and back slapping, in which the host’s every question is fawningly described by the guest as “that’s a great question,” and the guest’s every answer is similarly validated by the host.

One would think that after a hundred podcasts, the host would become restive with his habitual obsequiousness and finally challenge the tropes of his guests. As I listen, I beg the host simply to ask the manager: “Is your underperformance tied to your recent growth in AUM?” “Will you be restructuring fees and terms to better reflect your clients’ interests?” “Why do you omit any consideration of ESG in your investment process? “What evidence can you provide to demonstrate your firm’s commitment to diversity?” “As a VC manager, what provisions do you have in place to ensure female employee and entrepreneurs are not preyed upon?”

Allocator guests should not be exempt from this scrutiny. Don’t accept their buzzwords and ex cathedra declarations. Instead: “Do you consider a firm’s history of sexual harassment in your diligence process?” “Given your persistent inability to select managers that hit their investment target, why don’t you simply go 100 percent passive?” “Have you considered crowdsourcing investment ideas?” “Do you know your portfolio’s carbon footprint?” “How do you foresee including the block chain into your portfolio and management model?” “Could you allocate to an AI strategy, whose investment decision-making could not be explained?”

Bloggers are equally guilty, but none as guilty as those who consider themselves gifted in the art of long-form essays. To those committed to this art, please understand that TL;DR is a real thing, especially when you encumber your posts with multiple epigrams, pedantic self-references (including to one’s own dissertation), and fatuous mentions of Warren Buffett and David Swensen. Alas, there are no ready cures for narcissism and sophistry.

This hope for genuine transformative content from independents is a chimera. Such content would reduce their ability to attract guests and, accordingly, reduce their income and brand value. So, it’s best to accept these independents for what they are: entertainers and impresarios committed to perpetuating the consensus view of investing for their own self-interests.