Wed, Apr 1, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Opalesque Futures Intelligence

Manager Profile: What do investors look for when they approach a manager? Consultant Mark Shore distils his experience in ten tips.

Friday, April 29, 2011

What Investors Want: Ten Points

What do asset allocators look for when they approach a manager?  We asked Mark Shore, who has experience both in due diligence and managed futures. He was vice president and chief operating officer at Morgan Stanley's VK Capital Inc., a commodity trading advisor. More recently he was head of risk at Octane Research Inc., where he did due diligence on funds of hedge funds.

 Currently he is chief investment officer at Shore Capital Management, where he provides research and consulting on alternative investments with a focus on CTAs. He is also teaching a course on managed futures at DePaul University.

Mr. Shore says managers should:

  1. Be open to providing information.
    It is not helpful to tell people who are doing due diligence,  "You don't need to know this, it does not matter," even if the request for information is about a minor issue.
  2. Understand the markets they trade in.
    The experience can be longer or shorter, at different places or just one place. But there has to be a demonstrable appreciation of how the markets work.
  3. Explain what caused the drawdowns.
    Everybody has drawdowns, but they should learn from the experience and help us understand what caused it. "It was bad luck" is not a good explanation. There is always an element of luck but managers have  to be aware of what makes their investment program vulnerable.
  4. Have a well organized research process, undertaken by confidence-inspiring people.  The manager needs to discuss how they do the research and what kind of process they have in place.
  5. Generate the type of volatility that diversifies the investor's portfolio.
    Like cholesterol, there is good and bad volatility. Good volatility fits the portfolio. I don't like using the Sharpe ratio to assess performance because it makes no distinction between the good and the bad- this is due to the assumption of a normal distribution. 
  6. Take care of business issues.
    If the manager's time is taken up by investment and trading-related work, then there should be other senior people at the firm who have the ability to run the business. 
  7. Create an organizational structure that covers necessary tasks.
    It should be clear that all functions are taken care of.  
  8. Make sure the back office is staffed with capable people.
    The back office can be internal or outsourced to a third party, like a large prime broker or administrator, as long as they have the necessary capabilities.
  9. Have a reasonably stable investor base.
    There should be long-term clients and not a lot of turnover in the investor base over the history of the fund.
  10. Be prepared for key personnel risk.
    There needs to be qualified people at the firm who can take over if something happens to the managing partner.



 
This article was published in Opalesque Futures Intelligence.
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Opalesque Futures Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Other Voices: Does the hedge fund industry benefit society?[more]

    This article was authored by Don Steinbrugge, Chairman of Agecroft Partners, a US-based global consulting and third party marketing firm for hedge funds. It is no secret that the hedge fund industry is viewed negatively by a la

  2. Opalesque Roundtable: Emerging managers should avoid chasing 'institutional unicorns'[more]

    Bailey McCann, Opalesque New York: For managers looking to raise a new fund after the crisis, marketing efforts will need to be significantly different, according to delegates at the recent Opalesque Texas Roundtable. "Most of the smaller managers come to the whole fund-raising and marketing

  3. Cohen's private investments deliver strong 7.5% gain in Q1[more]

    From Reuters.com: Billionaire Steven A. Cohen's investments gained 7.5 percent in the first three months of 2015, according to a person familiar with the numbers, helping the former hedge fund manager extend his string of market-beating returns. Cohen's Point72 Asset Management, which invests

  4. Hedge fund launches fall again, $1bn funds found to outperform even smaller hedge funds[more]

    Komfie Manalo, Opalesque Asia: The number of new hedge fund launches fell again in 2014, the third consecutive year of decline, while fund liquidations saw their first drop since 2010, according to the latest HFR Market Microstructure Industry Report released by industry data provider HFR. Acc

  5. Opalesque Exclusive: Cyber security and hedge funds: increased awareness, Part One[more]

    Benedicte Gravrand, Opalesque Geneva: If you look at the recent cybersecurity news from Bloomberg, hackers are frightening the people: they steal photos and threaten to expose them, they can break into ATMs, they ha

banner