Thu, May 6, 2021
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. AssetMark launches customized portfolios on the iCapital platform[more]

    Laxman Pai, Opalesque Asia: AssetMark, the turnkey asset management platform, is offering a new portfolio construction service to RIAs via the iCapital Network platform that services $73 billion in global client assets across more than 760 alternative investment funds. The customized alternati

  2. PE/VC: 'Frustrated' limited partners are questioning PE-sponsored SPACs, European venture reaches all-time high in the first quarter of 2021[more]

    'Frustrated' limited partners are questioning PE-sponsored SPACs From Institutional Investor: It's hard to imagine that private equity firms would have stayed out of the booming business of special-purpose acquisition companies. But private-equity-sponsored SPACs could lead to conflicts

  3. PE/VC: Thoma Bravo's $12.3bn purchase of Proofpoint is the largest private equity cloud deal, Private equity likes sports, but do sports like private equity?[more]

    Thoma Bravo's $12.3bn purchase of Proofpoint is the largest private equity cloud deal From CNBC: Prior to the Proofpoint deal on Monday, the largest cloud acquisition by a private equity firm was the $11 billion purchase of Ultimate Software in 2019. Just last week Thoma Bravo complete

  4. SPACs: Biotech firm Roivant Sciences to go public via $7.3bn SPAC deal, Pearl Energy-backed Streamline Innovations weighs SPAC deal, SPAC crackdown threatens gauzy forecasts that power EV startups[more]

    Biotech firm Roivant Sciences to go public via $7.3bn SPAC deal From Forbes: Seven years ago, Vivek Ramaswamy created Roivant Sciences with the aim of finding a new financial model for drug development. On Monday, Roivant Sciences announced it would be going public by merging with a sp

  5. SPACs: A SPAC-tacular surge, SPAC hot streak put on ice by regulatory warnings, Jim Cramer recommends buying SPAC-target Grab at lower price levels[more]

    A SPAC-tacular surge From FA Magazine: During a period of extreme volatility and a global pandemic, the initial public offering (IPO) market had a spectacular year in 2020 in terms of the number of new listings and proceeds raised, along with the rise in popularity for Special Purpose