Mistakes fund managers make – #5 of 5

The mistake: Not qualifying their prospects.


At first glance this one seems like a rookie mistake, but even people who have been in the business a long time still do it sometimes: wasting time talking to the wrong people.

It’s not that the “wrong people” are bad people. But your time is valuable, and it shouldn’t be spent helping fund buyers hit their KPIs, or helping junior staffers learn how to interview fund managers.

A pro tip: Hold more of the initial meetings on Skype. The fund management business is notoriously shy when it comes to technology, but we talk to plenty of fund buyers, and they are more and more accepting of web meetings. In fact, they say web meetings are a very effective way for them to qualify or disqualify fund managers. They might be even more glad than you are that you suggested a Skype meeting first.

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The full audio:

About Baldwin Berges

Baldwin has been active in the investment industry for more than 20 years. His specialty is all about positioning investment opportunities so they are easy to understand and developing strategies and systems to convert more opportunities into business during long sales cycles.

About Matt Krause

Matt began his professional life managing inventory levels for wholesale import companies and forecasting labor costs for national retail chains. Since 2006, he has been teaching professionals how to present themselves and their companies better. His clients work for companies like Citibank, Allianz, 3M, P&G, and Deloitte.

Transcript of the audio:


Give me point number five. What’s on your mind for that one?


Matt, we spoke about this a little while ago. It’s about the qualifying of your prospects. It’s very important that we do that. I used to do this. I’m as guilty of it as anybody else. I used to make this map of “it seems like,” for example, “we haven’t been to Milan in a while. We have to go back to Milan.” Then what you do is you pull a list, and then you basically either email them or call them and say, “Hey, we’re going to be in Milan that day. Would you like to meet with us?” A lot of people say, “Yeah, sure. That sounds great. It’s been a while, good to catch up. Yeah, sure.” You took it as, “Yeah, sure, we have to see them because they’re interested in seeing us. They may actually eventually become clients because of their relationship.” It’s all hunky-dory. You go to Milan, and you do all these meetings. At the airport, on your way back, it’s like, “Okay, so maybe there’s half an opportunity here, after like ten meetings.”

I think one of the things that you have to understand is that this is not a very good approach, to just go and see whoever you can. The reality is that – if you’re a fund manager and the people you’re meeting with, fund buyers and/or private bankers and/or all the professionals whose job it is to meet fund managers – you are helping them achieve their KPIs. Which means that a fund selector gets measured on the amount of meetings he has with fund managers. Even though they have no intention of investing, you may just be helping them get those numbers up.

That’s one thing – big mistake. People are polite. They may pretend that they’re really interested.

The second one is where they just use you to gather information about an investment that they already had in mind.

For example, you say, “We have to invest in commodities.” You sort of know who you want to go with, but just to make sure that you get yourself well educated, you meet a few other commodity managers to basically enrich your view, to justify, or to maybe disqualify that decision that you already made. A lot of managers get used for that extra education. That’s the second reason why just the number of meetings isn’t enough.

Another one that I’ve been through more than I want to admit is where you take the meeting because let’s say you have a few junior people around and you’d really like them to learn the ropes on how to interview managers. How great it is that the manager is coming to Milan so you can throw the junior in the meeting, to give him some target practice? It happens all the time. This is the playbook. You’re flying out to Milan. “Oh, we’re going to see the fund selector.” Then last minute, he got tied up and you have a junior sitting in front of you. You’re actually sort of helping them with their education. You can build a relationship with a junior, because when the caterpillar becomes a butterfly or the snake becomes a dragon, it’s good to know the dragon. But that’s really not on the radar right now. That’s I guess another reason.

Then finally, you know what else happens? People just get bored with their job and they just like to hang out in the meeting room and get a free lunch. This is universal, especially in certain countries where business lunches are a tradition. Having a nice free lunch at a nice restaurant every day is a nice perk to have. That’s the reason why qualifying your prospects is so important.

How do you qualify your prospects? Well, I’m afraid you have to do a little bit of work. Thankfully, if they’re a fund buyer or they’re a pension fund or a foundation, they’re obliged to publish what’s in the portfolio. You really better spend some time doing some research. “Are these guys effectively allocating to this asset class?” If you see more than two managers, then the game is on because, yes, they are allocating and they’re obviously looking to diversify. They probably want to talk to you for a reason. If you’re struggling with doing the research, then we fall back to that previous advice we gave on make sure that your meetings are just trailers.

Another way, which is rare, which I really encourage also, is just do your first meeting on Skype – or on whatever web platform.

I was at the fund forum in Berlin on Monday. I’m telling you, a lot of my friends there are fund buyers that I’ve been working with for a long time. They’ve gotten over it. They like the web meeting thing. It’s perfectly okay. I mean, if they’re serious about allocating the funds, for them it’s a very effective way to also disqualify or qualify the right fund managers. It goes both ways.


Let me back up to a case that you mentioned a couple minutes ago. You were talking about, for example, “I represent an African fund, and I’m going to Milan and I’m meeting with some-”


That’s exactly my story.


Yeah. “I’m meeting some potential investors, and they just want to learn more about investing in Africa.” How would I qualify them?


That’s the thing. If you can do the research and see if they have … Usually when they go to Africa, they’ve been very active in emerging markets before. That’s already an indicator that there’s a real business case. That’s the most obvious way to look at it. Look at their portfolio. If you look at their portfolio, you can see if they are willing to think a bit out of the box. How many alternative strategies do they have? Things like that. You want to look at how exotic is the appetite of my investor? I’ve been there. What you described was my life. “Go and propose Africa to a fund allocator.” You definitely wanted to make sure that they either have a fund that has to invest in Africa, or they have an allocation to it, or they do have a habit of investing in exotic asset classes.

With this example, the real-life thing, I’m serious. I’m not kidding. We said Milan, and we said Africa. I found out later that two of those guys that I regularly met with were married to African women. I don’t know, maybe it was just general interest. No, I have to be fair. Because of that, one of them actually invested because he went to Africa quite often, and he just knew that there was something going on there. It could be. There could be something about this that has nothing to do at all with investments.