What is “Institutional Quality”?

What is “Institutional Quality”?

From single family offices on up through to large public pension plans and even sovereign wealth funds, investors (allocators) are much more likely to engage with investment managers who have some degree of institutional pedigree, polish, credibility, and professionalism. Investors do this as a way to “de-risk” their initial investment allocation and to make the process of tracking the investment more manageable.  Since it is not always clear to those raising capital what it means to have an “institutional quality”, we thought it would be helpful to list a few key elements.

The following are Ten Signs of institutional quality that investors actively or subconsciously look for in an investment manager:

1. Firm leaders are well-spoken, dress appropriately, responsive and clear in their messaging.  Meetings and calls are interactive, properly paced, and respectful.
2. The manager can comfortably field tough questions and does not display angst discussing their investment process, philosophy, team, and challenging periods in their track record.
3. The manager’s investment strategy is described in a concise fashion such that the allocator can repeat it to his/her colleagues.
4. Follow-up after calls and meetings from the placement agent and/or manager are gently persistent, informational, and help to develop a relationship.
5. An institutional quality manager will deliver performance that meets or exceeds expectations and when they do not, the manager is transparent as to the reasoning and steps to correct going forward.
6. Certain strategies lend themselves to a need for NDAs. The manager must be comfortable sharing enough information so that a potential investor can determine whether they even want to go through the NDA process.
7. Following all steps from initial call/email through to signing subscription docs, the manager is one step ahead and is in a position to provide a teaser, a presentation deck, performance attribution, data room, any/all docs, etc.
8. Marketing materials must be polished, professional, error free, and cannot contain unserious, amateurish graphics.
9. The senior team members have experience, relevant track records, and well-written bios.
10. Senior team members must be polite, kind, and pleasant to work with and should not shy away from being direct and candid.  During due diligence and negotiations, the senior firm members must not get too heated or impulsive.