Tony Lanning, a member of the fVenn team, recently estimated that he had viewed over 10,000 fund decks over the course of a 30-year career in the upper echelons of manager selection, and that 5% at best were fit for purpose.
We therefore wanted to set out the key things we’ve absorbed over the years from our selector network in terms of how to get a fund deck right. We’ve done it in a tongue-in-cheek manner, accompanied by the no-nonsense perspectives of some senior contacts on the buy side.
- Firm not fund
Your audience may well have low awareness of you as an organisation, let alone any familiarity with your offerings – despite having met you on countless occasions – and so always introduce your fund decks with an elaborate exposition of your corporate credentials to build confidence. Start the presentation with mission-critical information such as your corporate history, employee headcount, office locations, profiles of people the fund buyers are unlikely ever to meet, and our awards (no matter how distant). Include a full list of all your strategies – particularly helpful as background before moving on to the strategy you actually want to discuss.
There will be lots of time to dwell on less imperative matters such as the fundamental investment need being addressed, the strategy’s role in a portfolio, the market anomaly or opportunity being exploited, how investment risk is mitigated and so on.
“Fund firms often pitch at not to potential clients, leading on themselves and what makes them so good. Often this comes with a deluge of information … a tsunami of cliché, if you like. Most fund buyers, however, want a conversation that helps them establish whether the pitching firm understands their business, their client needs and how they can help address those needs – ideally in a concise, focused and thought-provoking narrative. With apologies to JFK, think about how you can help your clients deliver good outcomes and run better businesses, rather than how they can help you.”
Richard Romer-Lee, CEO, Square Mile Investment Consulting
- More is more
In developing the fund deck as an all-encompassing piece, be sure to communicate everything the audience could possibly want to know about your firm, the fund, the investment approach, the market environment and the portfolio managers. This conveniently dispenses with the need for any irksome and time-consuming follow-up meetings with potential buyers of the strategy – a saving of both time and money.
It’s foolhardy to condense a fund deck to 20 or so slides; it’s far more effective to produce something weightier – we recommend 100 slides as a bare minimum.
“Be sure to state explicitly, right up front so it jumps off the page – I don’t want to go trawling through 50 or 60 pages – that this is the market anomaly you’re trying to exploit … because if you’re not trying to exploit a market anomaly, I might as well just go passive.”
Dean Cheeseman, MD – Client Investment Solutions, Mattioli Woods
- Philosophy impedes velocity
Whilst a few fund buyers might want to understand the core beliefs that are driving the portfolio managers’ investment decision-making, they’re represented by smaller, less sophisticated firms and are unlikely to move the needle in terms of sales.
It’s more impactful to explain what the PMs are doing and how they’re doing it than to explore why they’re doing it. Investment philosophies are too nebulous a concept to merit inclusion within a commercially-driven document such as a fund presentation. The sooner you can get on to less abstract territory – such as a meticulous and exhaustive dissection of the investment process – the better.
“With regard to fund manager presentations, there’s too much emphasis on how the fund is managed as opposed to why the fund is managed in that way, whilst senselessly ignoring the key aspects which differentiate it from its peer group and the type of market conditions in which it’s likely to thrive or struggle.”Peter Toogood, Managing Director – Investments, Fund Research Centre
- Talk the talk
It’s essential your fund decks feature ‘industry-standard’ phraseology that reassures your audiences you’re an established, credible firm, such as: ‘rigorous investment process’, ‘high conviction’, ‘proprietary risk management framework’, ‘best ideas’, ‘unconstrained’, ‘through the cycle’, ‘fundamental analysis’, ‘market-proven’, ‘risk-aware not risk-averse’, ‘asymmetric return profile’, ‘embedded ESG’ and ‘client-centric’.
The key benefit of this approach is that your audience will always know exactly what you mean, removing the risk of any ambiguity in your messaging and dispensing with the need for further elaboration, substantiation, quantification … or other such self-indulgent fripperies.
“A manager should be able tell me what they do and why in the first 10 minutes. When are they likely to perform and in what environment are they likely to underperform? They need to say what they mean and mean what they say. I’m not overly troubled by a manager with a strong value tilt underperforming in a growthy environment, but to detect a style drift to growth would be a red flag.”
Darius McDermott, Managing Director, Chelsea Financial Services
- The devil is in the detail
Ensure that the slides are sufficiently well populated with content so as to reassure the audience that you have left no stone unturned. They should almost invariably contain multiple bullet points, a liberal sprinkling of acronyms, two or more charts (ideally multi-layered and of different formats), numerous explanatory call-outs, ancillary imagery and/or graphics, a range of decorative colourways, and all requisite footnotes and disclaimers.
The key is to build credibility by way of an impressively complex presentation that exudes sophistication. Don’t be wary of technical overload – it evidences rigour and signals mastery of your field.
“I want to give the fund manager enough rope for them to hang themselves … but I also want to give them enough rope to prove themselves. You’ve got all these different data points, but it doesn’t tell me anything as to why that made them buy the stock at the time and why it makes them still want it today.”Richard Philbin, CIO (Investment Solutions), Hawksmoor Investment Management
- Performance, performance, performance
Resist any temptation to underplay performance content – all data are equally important, and more data equate to more credibility.
Include benchmarks, peer group averages, medians, quartiles and ‘illustrative composites’, and do so over aggregate, discrete and rolling periods. Numbers should appear to at least two decimal places needless to say, even if forecasts or estimates.
Don’t stray into extraneous territory, such as what key challenges were encountered along the way, what actually drove returns, what you might do differently in the future and the market environment in which the strategy might underperform.
Remember that strong performance can always be ascribed to factors such as stock selection, active positioning or high conviction, whereas poor performance is inevitably a function of macro headwinds, style rotation or exogenous shocks. Similarly, volatility can be reframed as temporary dislocation.
“Most fund decks are really poor. They’re normally far too long and heavily populated with pointless slides which fail to address the real concerns that are uppermost in the minds of discerning buyers.”Ben Yearsley, Co-founder, Fairview Investing
And so there you have it … half a dozen handy, easy-to-follow tips that will go a long way to ensuring your pitch decks get the cut-through they undoubtedly merit – follow them assiduously and watch those sales soar! And now for the final word, which neatly encapsulates everything …
“As a fund selector, I am looking to rate the credibility of the process and the team. I am not looking to be impressed; I am just looking to understand. The managers who stand out are those who recognise that we are evaluating philosophy consistency and process durability/adaptability, not merely chasing returns. The most impressive presentations are rarely the flashiest. They are the most intellectually honest.”
John Husselbee, Head of Multi-Asset, Liontrust Asset Management
By Neil Scaife of fVenn Consulting
