Celebration cocktails

Institutional-Quality Operations in Financial Asset Management

Managers of money must establish quality to convince prospective allocators and raise assets for their funds. The goal is to reach the level of sophistication of operations that $100M+ AuM funds (ideally $1B+ funds), enough to satisfy institutional investors, therefore aptly named institutional-quality operations in financial asset management.

The management of a fund has many moving parts to it, both in the CIO and CEO sides, finance and management, execution and vision. These include, both not only:

  • Actual investment processes (from idea to research to investment thesis to actual execution);
  • Risk management and compliance processes;
  • Fund administration (trade settlements, accounting, ordering systems – usually multi-prime when institutional-quality – and others);
  • Retaining and developing top pedigree talent;
  • Auditing (internal or independent, usually the latter when institutional-quality);
  • Capital raising and fund marketing (usually with a specific set and format of materials when institutional-quality);
  • Investor Relationship Management/Customer Relationship Management;

As my personal experience in coaching asset management leaders focuses mostly on influence and persuasion, the areas that I have knowledge of and tackle are:

  1. Superior CIO/CEO execution (vocational customization of the role + interaction with other roles);
  2. Effective talent hiring, assessment, retention and development;
  3. Elite team performance and collaboration;
  4. Impeccable capital raising and allocator relationships;

Let’s tackle each one of these in detail.

1. CIO/CEO Execution in Financial Asset Management

We go into more detail on being an institutional-quality CIO/CEO on its own article, but at the end of the day, summarizing, an institutional-quality Chief Investment Officer/Chief Executive Officer is someone who can:

  • Focus on the core areas of specialty for them, delegating the rest to complementary people;
  • Is clear on fund/portfolio construction and articulates it clearly to their team;
  • Is clear on the actual decision-making process governing the investment process, from idea to trade execution;

2. Talent Hiring, Assessment, Retention and Development

Talent in financial asset management shouldn’t be measured only by performance, but also cultural fit, idea generation, contribution to firm processes and other aspects. To effectively raise talent an effective CIO/CEO, besides mastering the fundamentals of managing people, they must:

  • Hire and indoctrinate talent that fits with the company’s values and culture (raw performance alone is useless);
  • Plan talent’s long-term growth and guide them in acquiring those skills;
  • Help them and assess them on their contributions to idea generation, trader-analyst collaboration, research models and other firm processes/systems;

3. Team Performance and Collaboration

If you have an effective, performing team that is aligned with your values and culture, an effective CEO/CIO knows how to empower them by:

  • Promoting frequent idea generation brainstorms/sessions to foster creativity in group settings;
  • Promoting trader-analyst collaboration by defining types of ideas want, fit with portfolio/fund construction, research criteria and execution parameters, and taking the best cases and replicating them;
  • Helping them with their common biases and emotions, either through personal knowledge or quick reference techniques;
  • Promoting “trader clinic”/”Traders Anonymous”-style meetings to help traders share vulnerabilities and discuss weaknesses;

4. Capital Raising and Allocator Relationships

In order to be an institutional-quality capital raiser from allocators, an effective CIO/CEO must:

  • Have in place an effective system for marketing materials and investor communication (from email to meetings to phone calls and/or others);
  • Clearly articulate the investment process, track record and team CV;
  • Project an image of institutional-quality operations from auditing to brokerage systems to investment process;
  • Perform two versions of their presentation to private and institutional clients, focusing on more detail to educate private clients and on less detail not to drown institutional clients;
  • Strike a mix of private and institutional clients to hedge against possible domino effects of redemptions or lack of alignment;
  • Align with allocator trends like liquidity and transparency, standing out the more proactive they are in things like presenting quarterly third-party independent audits;
  • Be able to assuage fears of different

Conclusion: Towards Institutional-Quality in Financial Asset Management

We took a look at the influence and persuasion side of institutional-quality operations in financial asset management. Sophisticated money managers must be able to:

  1. Focus on their strengths as CIO/CEO, be clear on fund/portfolio construction and make that clear to their teams;
  2. Hire and indoctrinate talent that fits with the company’s values and culture, help them grow long-term and contribute to idea generation / trader-analyst collaboration / research models and effectively deliver CPG (critique-praise-guidance) to them;
  3. Foster growth and unblock performance from team members by promoting and systematizing idea elements like idea generation, trader-analyst collaboration, research model definition, “Traders Anonymous” war story sharing, and/or others;
  4. Systematize fund marketing, efficiently articulate investment and decision processes, project institutional quality, strike a balance between educating private investors and valuing the time of institutional ones, striking a mix of clients, alining – or even leveraging – allocator trends like liquidity and transparency, and assuaging fears of investors to maintain good IR;

These elements are not even close to the full demands of institutional-quality operations in a hedge fund or asset management firm, but they focus on the human and influence/persuasion elements of what make an institutional-quality manager of money.

Investopedia has a great article going deeper on the specifics of Institutional Funds. While not exactly the same thing, the goal is for a prospective fund manager to have the same quality of operations as these funds have (ergo “institutional-quality” operations).

Find more of our resources on the resources page, or specifically head to articles, reports and/or interviews.

Master Persuasion. And More.

You'll receive techniques, reports, and case studies related to the main area of focus of your choosing:

    We respect your privacy. Unsubscribe at any time.

    Further Articles

    Facing Brutal Facts

    Some techniques to face harsh realities and brutal facts when you have slid into your comfort zone or are deluding yourself thinking things are easier now.



    Report Covers - Executives

    Asset Management

    Report Covers - Asset Management

    View all our reports here.