Today we are holding a finals presentation for managers our consultant think good, proper and worthy of managing a portion of Wasserdicht Pensioenfonds’ assets. Would these managers have been on the same short list had we employed another consultant? Or the same list if we had looked at Morningstar? Every manager wants to be our friend and to see us. Perhaps next time we do this ourselves.
But then we would not be getting the very elaborate and colourful pre-finals background notes to the managers. This is part of the ‘added value’ of consultants. And this is so valuable that consultants are now deciding to focus on implemented consulting and fiduciary work - their manager selection skills are that good. Anyway, we know which manager the consultant wants us to appoint, the other two are to help benchmark the chosen one.
Manager one, a well-known brand name, comes in at 9.00. A nervous looking portfolio manager protected by an over-confident marketing person. They tell us they will aim to keep the presentation to the 45 minutes we are giving them. I had wanted to give managers as long as they want, but the consultant says that is bad. Anyway, these are the people our consultant is advising us to hire. A fast blur of presentational slides and then our questions.
I go first. ‘What is your outlook for the global economy? How will it affect the markets and how does it affect your portfolio positioning over the next 12 months?’ You can tell a lot by how a manager answers questions. This one is a hedger. ‘Deflation risk or inflation risk…both very possible… markets going sideways, or up, or down, and portfolio well diversified.’
Manager two is in at 10.00. A team of three arrive, representing a boutique based in the US, and unheard of here in Holland. Fantastic presentation, fantastic people, good performance and credible. To the same questions: ‘Deflation still the bigger danger, markets will trend steadily upwards, we will asset allocate according to the volatility environments we find ourselves in.’ But the consultant does not like them as much as the big-brand company: ‘There is reputational risk because no one has heard of them.’
Manager three is late. We start at 11.10. Two people who stumble through the slides. They are not natural presenters but the performance and key ratios are upper percentile. Phenomenal track record but they do not inspire confidence. ‘We see an inflationary environment kicking in, higher interest rates for sure, markets trending slightly downwards and we will still have our bets focused on emerging markets because that is the sort of firm we are…’
And at 12.30, before the obligatory glass of milk and some ham and cheese rolls, I go for some fresh air. ‘Off for a walk? Can I help?’ asks the consultant. ‘Yes I am.’ I reply. ‘But no you can’t help, it’s a random one.’
Pieter Mullen is investment director at Wasserdicht Pension Funds