Few offenses are more aggravating to investors in the investor/manager communication process than being misled. Who hasn't been subject to the frustration of trying to ascertain a clear answer from an alternatives manager about an issue germane to the investor's ultimate decision to invest or not to invest? Unfortunately, this avoidance practice is widespread and persistent, falling into the passive stance of a sin of omission.

In the Bible, James the Just describes such a sin as "Anyone, then, who knows the good he ought to do and doesn't do it, sins." A sin of omission is one resulting from not doing something. It is generally used in contrast to sins of commission, or sins that one actively commits. Both forms of sin imply the offender overtly and knowingly understood his actions.

When communication kills

It's often not what a manager reveals that tells the story, but what the manager leaves out. While all of the examples below involve an active stance, they are prime examples of the avoidance practice embodied in sins of omission. Alternatives investors are particularly incensed when served up one of these communication fails.

The Sidestep: When unsure of how to answer a potentially sensitive issue or not knowing the intent behind an investor's question, managers are often guilty of bypassing or avoiding a direct answer. Some of the common pitfalls this tactic is triggered by include questions about an unfavorable performance shortfall, a management or operational weakness within the firm, or fees. Regardless of the focus, investors are never satisfied by the non-answer answer, nor are they fooled by the redirect to another topic without closure to the original question. Practice answering these issues before they are asked, and while the recipient may not like the answer, they will respect t......................

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This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.