LYNDHURST INVESTMENT CONSULTING, INC.

Transcription

1 LYNDHURST INVESTMENT CONSULTING, INC. Presentation to: THE ALTERNATIVES INVESTMENT SUMMIT Presented by the Investment Management Institute THE NEW SALES CYCLE July 9, 2009 Greenwich, Connecticut

2 When will Capital be Deployed? In this unique environment, I believe that the thawing process has begun in the institutional consulting marketplace. I actually thought the deployment process would start in the second quarter but I believe the equity market s rally provided an opportunity to steady nerves before making substantive changes. Thus, Consultants are being cautious but are trying not to be paralyzed. Therefore, I am anticipating an extremely active 3Q and 4Q. 3Q = Terminations and Searches 4Q = Hirings and Allocations

3 Where will Capital be Deployed? So where will Consultants deploy capital? Quite simply Where they are most comfortable! With a useable and effective solution. To me, the use of limited partnership products was much like the.com era. From 1998 to 2000, investors wanted to buy any stock with a.com. From 2005 to 2007, was the era of investing with any strategy that had, LP. As we now know, neither era resulted in what was originally intended. Thus, the key to understanding this new sales cycle is to understand the current psychology of the Consultant.

4 The Lessons from 2008 As 2008 came to a close, Consultants attempted to figure out what had just happened. The introspection resulted in the asking of the following critical questions: Did we really understand the investment strategy? Did we really validate the manager s assets and pricing mechanisms? Did we really put enough emphasis on the strength of the organizational structure? Did the largest investment organizations really equate to safety? Today, the Consultant is hypersensitive. Consultants just cannot have another manager with a legal issue or be invested with another manager that closes its doors.

5 Investment Manager Considerations For investment managers, the Consultant is going to be even more demanding than in the past. Investment managers that are attempting to successfully grow their organizations need to make the following considerations: Managers will have to be willing to spend time with the Consultant to educate first and sell second. Managers will need to provide access to the organization in order for the Consultant to gain comfort. Managers need to understand that this is where the Consultant puts their reputation on the line. Managers will need to be given permission to check and validate your organization s service providers and custodians.

6 Positioning Strategies to Consultants There will always be an opportunity for both large firms and smaller boutiques. But, those opportunities will not be present at every consulting organization. Thus, the most important message that I give to managers is: Learn and know your firm s personality and then match that to the consultant with similar personality traits. So, it is important for LPs to ask questions to learn about your prospective consultant clients rather then simply trying to sell. 1. What type of end clients do you focus on? 2. How does your consulting firm make investment decisions? 3. What business rules do you have? 4. What are your minimum requirements for investment managers? 5. Do you utilize single strategies or fund-of-funds?

7 The 8 L s of the New Sales Cycle To assist in your preparation, I have created my 8 L s for working in this new sales cycle. Address the following eight topics and you will have productive meetings with investment consulting organizations: 1. Losses = How has the loss of revenue impacted the firm s operations? Are you concerned about the ability to pay bills? 2. Life Expectancy = How strong is the firm s capital base to withstand poor results and further asset loss? Is survivability an immediate concern? 3. Legal = Are there any outstanding issues? Are you properly and proactively registering with the regulatory agencies? Do you have strong general counsel? 4. Leaving = Have there been departures at the organization? If so, what has been the impact? What has been the firm s response to the departures?

8 The 8 L s of the New Sales Cycle Continued 5. Lessons = What was learned from last year s experience? What enhancements were made at the firm? What enhancements were made to the investment process? 6. Learning = Are you willing to take the time to educate consultants so that the consultants can become comfortable enough to recommend the firm s strategy? 7. Lock-Up = Do you have a lock-up provision with the firm s strategy? If so, how do you justify having such a provision in this sensitive time? 8. Leverage = Do you utilize leverage with the firm s strategy? If so, how will you make consultants comfortable that the strategy is not going to be excessively risky?

9 Contact Information 7113 Three Chopt Road ~ Suite 207 Richmond, Virginia Office Fax Todd J. Peters: tpeters@lyndhurstinc.com