At this year’s iConnections Investment Institute Fall Forum, we asked investment officers for their advice on selecting managers in the post-COVID world. Social distancing and digital working has created an unprecedented situation for allocators — so how are they working around the problems?
In this, the first of two exclusive articles, Ted Seides questions several investment officers to discover how they are adapting to the unique set of circumstances in today’s financial world.
What’s changed in due diligence under COVID?
“There are four different groups. The first group is re-upping, with a manager you know well. Group two are managers you’ve been following for a while, you’ve been to their offices, you’ve met them, talked to their team, but not pulled the trigger yet. You can still get there in during COVID. Group three are new to you, and you haven’t had the chance to meet. You can still get it done if you know their clients really well, their network, their outlook. You can get comfortable after a lot of calls with them and a lot more work — the importance of your network is the thing.
“Group four is the hard one. We don’t know them, we don’t know people on their reference list, the partners in their group. On-site due diligence is important to gauge their culture: culture matters, and it’s hard to gauge that on a Zoom call.
“When you think about it, most questions you want to ask managers are culture-related. How do you make decisions? What’s the culture of the group? How do you work together? You need to understand them, so if there are cultural changes later on, you can base your decision on the facts you found out now.”
How important were these groups before COVID?
“Group four took a lot more work anyway; we would meet with all the senior leaders as a group, then get them to send in their junior people one by one. They are where you learn the culture, the decision-making processes. If you get the same information from both groups, then great. The big question is: how do you make decisions, we repeat that question in many different ways. You can do workarounds, you can be comfortable with references, but this is an important part of the process.”
How do you keep moving forward with investment decisions?
“Because you can’t meet in person and see their culture, you’re doing deep references, trying to get to know the individual without meeting them. A re-up is easy, in the sense that it’s a longstanding relationship, so you have less pressure on the decision.”
Is there a difference between Zoom referencing calls and traditional calls?
“Everyone says they have Zoom fatigue, but it is hugely important to be able to see people now. To see how a person reacts — it’s much quicker to reach a higher level of understanding.”