Investor Engagement in the early days of CoVid-19…

…or alternatively, “The 9th position play for new investment product. Yes, you’re a tail-ender!”

So you just happen to have for sale the world’s greatest ever investment, risk-adjusted of course. It’s here right now, demanding investors’ immediate attention. You want to scream to the market, “Buy now; don’t miss out!”

But more realistically, where does this “greatest ever” new opportunity really sit in the scheme of things, in the midst of a game-changing pandemic? Where does even a more “usual” run-of-the-mill investment strategy fit in, as a new purchase in institutional investors’ priorities today? As we all now appreciate, this CoVid-19 environment is not “business-as-usual” for any activity, and that’s equally true in investor engagement, perhaps more so.

For marketers and buyers of “illiquid” investment strategies, the lack of market pricing, visibility and liquidity might at first appear to provide a comfort blanket in stormy weather, an extra window of time in which to take a breath, be more strategic, step back and ponder the world’s deepest problems lying ahead. After all, it’s surely a blessing that we’re less vulnerable to panic waves of buying and selling in order to achieve or deploy liquidity, compared to our liquid market peers. But that more likely means greater potential inactivity, perhaps slowing down even further some already quite slow decision-making processes, and all within a “stall speed” economy.

So best make sure you understand the key perspectives and lenses that institutions rightly adopt in a crisis. Here’s my brief take on current institutional investing priorities, formed over several crises and updated post recent investor discussions in this CoVid-19 pandemic crisis, which can truly lay claim to being a “this time it’s different” moment.

Priority #1. Marginal capital — margin calls, hedges, derivatives, repo, subscription lines - efforts here are largely actioned by now or at least a strategy is underway or a cash allocation/bucket readied for dripping in or fast response

2. Volatility exploitation — for those with nimble fingers and toes. Largely re-hedged or exploited by now

3. Discounted liquid opportunities — most of the major early bargains have been had, but eyes are wide open for further disruption, sell-offs and hidden mis-pricing (needs more work), particularly if driven by redemptions or stressed intermediaries

4. An all-portfolio stress test — dust down or re-run those stress tests from last year’s theoretical exercise, particularly with an eye on forward cash flows / liability payments, demands and general liquidity

5. A public versus private markets review, considering of course nominal allocations and the "denominator effect" — how is the lens on liquids vs illiquids looking? Not a strategic asset allocation exercise; that will come in due course, one dust has settled….maybe, just maybe, in 2020. But definitely a tactical review, in terms of where do I seek to obtain or deploy cash first/next and in what amounts.

6. The private markets portfolio and our existing managers: capital calls are accelerated and expected distributions delayed — how does this affect cash balances?

7. Existing managers — “opportunistic” deals, special situations and funds arising, new planned raises and co-investments in existing businesses and other opportunistic acquisitions through known managers/partners

8. OMG — nothing new please as we have no bandwidth given all of the above!

9. Now then, I can breathe again. Let me now turn my attention to the world’s greatest ever investment…..but hold on, it’s a new manager and a new strategy. So we’ve a long and winding road ahead. I hope you can be patient with us.

OK, you get the picture. Your "world’s greatest ever investment" is a tail-ender in the mind of your prospective investor…at best!

And even those other 8 priorities above it are frankly already playing second fiddle to the really important stuff in our lives. The stuff none of us can measure, but which undoubtedly occupies, nay dominates, everyone’s waking hours presently. That stuff, which can’t be counted but which now counts, is this:

• the health and security of one’s family, friends and colleagues;
• working arrangements and operating logistics, assuming you're fortunate enough to keep/have a job (as most of us in investment still are, at least for the moment).

So what to do?

Well, rule number one, the golden one if you like, is: Make Relationships Count. People matter. Relationships matter. Now, more than ever. When you’re a zoom, MS Teams, Skype or phone call distant, you're a great deal further than a quick coffee or beer away. Long term relationships in that context? Really important. The ties that bind us, built over years and transactions, will bear fruit. So do KEEP IN TOUCH.

But with what? Rule number two: Relevant product. Yes, be broad, or detailed. Yes be informative and useful. But above all, BE RELEVANT. That means in relation to investors’ priorities. I’m afraid for the time being, that probably means….NO NEW PRODUCTS. Unless they’re a) really RELEVANT. eg crisis-related, liquidity or risk enhancing, stress-exploiting…and b) can be done quickly, without a steep information/complexity/due-diligence hill to climb, because the investor is already there on the subject, knows it backwards, understands or has looked at it before.

What if I haven’t relevant product? Then rule number three: Give relevant information. Investors don’t live in a cocoon. We might all be quarantined, but our lifeline is still the engagement of others in our industry. Investors are the same, and likely in the same boat. But together we are, we remain, “the market”. Disjointed and fragmented we may be, but investors, consultants, marketers, fund managers, fund administrators, custodians, regulators...we are all equally struggling to make sense of this new, hopefully temporary world. Any new, differentiated angle, such as an interesting crisis-related update from the asset managers, your risk team's views, originators' observations…can be a useful perspective for investors and will be appreciated.

More than anything, Rule number four: Listen well and be patient! Be respectful of investors’ more urgent and pressurised responsibilities. Real livelihoods and thus lives, real life savings, real life insurance payments may be at stake in their hands. You are likely and perhaps understandably way down their priority line. Listen to their message on their priorities again. Be patient, supportive and humble. So what if you don’t see action for a few more weeks or months?

Investment marketing, remote zoom or telephone engagement with anyone - investors included - in a CoVid-19 crisis might sometimes seem like a lesson in masochism. Yes, I'm afraid your “world’s greatest ever investment” might be a tail-ender at best in these current, early-adjustment, circumstances. But if you maintain your credibility and relationships in this time of crisis, investors will respect and remember you in the months and years to come. And you may yet get the chance to score the valuable runs.

See also: CoVid-19 coronavirus. A black swan’s potential impact on pensions, society & geopolitics