It’s an interesting question really – would you give your money to someone whom you have personally met and didn’t like? To my quantitatively minded colleagues, there is no doubt. We should allocate to anyone who has passed our operational due diligence and who has produced the numbers and track record to warrant an investment. But is there more to it? Do we need some sort of human confirmation to gain more trust, and do we have to be friends with the people that manage our money?
In our quest to build an alternative investment portfolio for our family, we have met many managers over the years. Rather unsurprisingly, we have found a high correlation between the so-called “A-Factor” (level of dislike), and the amount of money under management or rather the fees that are being charged. We have seen it all and every stereotype of the nouveau riche you can possibly imagine. And at times, we have also felt the narcissism that goes along naturally with having made a lot of money, and everyone telling them that they are god’s gift to the world.
One of my favourite stories was when we met the CIO of a $8bn arbitrage strategy a few years ago. He was on a roadshow in Europe to raise more money for his fund. Given our estimates, this particular individual had trousered more than $500m personally in the last 10 years. We were invited to one of their swanky offices in Knightsbridge and I was told that I only had 20 minutes, as the schedule was very tight. So, there I was, little family office guy and the master of the universe. As he talked and smiled at me with those glistening white teeth, I could think of only one thing: why are you here on your seventh meeting of the day, talking to a schmuck like me?
Not everyone is like that of course. And the thing is, we don’t judge. If these individuals have made the money as they have, then they deserve all the riches that go along with performance. Certainly, the quants have it right, if they make money for us what do we care? I just wish they would make it a little easier to like them as we give them yet more money, so that they may become even more rich and possibly even more sure of their own superiority in the process.