With all of the excitement and noisy positioning around Newcits, hopes for broad adoption and strong inflows are sky high. But don’t confuse motion with progress. Without an evolutionary leap beyond dependence on an outmoded asset allocation framework, this whole thing is going nowhere in a big way.
The influence of alternative ideas and approaches constantly redirect and reinvent the mainstream. Innovations first introduced outside of the mainstream and, in many cases, defined as counter to it, become broadly adopted and eventually accepted as mainstream themselves.
The manager meeting is the crux of the selection process. For selectors, it is the link between a fund’s historical record and its future potential, by understanding the direction a manager is likely to take the fund.
Face-to-face meetings with fund managers give selectors the opportunity to get beneath the veneer of expertly designed pitchbooks, well structured questionnaire responses and marketing spin.
Convergence and engineered evolution within large parts of what is termed traditional and alternative investments have entered a state of general acceptance. There are considerably fewer detractors to the idea than five years ago (particularly as it has become reality) but still a lot of confusion about its implications remain.
Over the past couple of months, I have been re-evaluating many common tenets of the manager selection process. My goal has been to separate what is done out of convention, habit and convenience from what is actually meaningful when identifying great managers.
The food we eat defines us; the way we eat it is equally telling. For many in the U.S., unlike most of our colleagues in Europe, eating lunch at one’s desk is standard practice on at least a day or two during the week.
For many, “the market” is the S&P 500. Nearly a trillion dollars are invested “passively” so as to emulate its performance and exposures while 3.5 trillion are benchmarked to it.