The Investment Manager Playbook, What Allocators Don't See.

My last post, the Investment Office Playbook, what managers don't see,

discussed part of what happens inside an investment office that managers don't see,

but that significantly influences the

cadence of capital deployed to managers. Of course, there's two sides to every coin, and this post

discusses what allocators don't see when a manager chooses to grow. It happens hundreds of times

a day. An allocator awaits a meeting with the manager. They've

watched the manager post strong returns implementing a strategy in a small, less efficient market.

It's exactly what the manager articulated when spinning out of a large firm a few years before.

The allocator hopes the manager will stick to their original plan

just this once, but they've seen this movie before. Sure enough, the manager opens the

meeting with four dreaded words. We're raising more capital. The allocator shrugs and thinks to

themselves, don't managers know size is the enemy of performance?

Why are all these managers so greedy? A manager's business decisions are not as one-dimensional

as many allocators think. Allocators often don't appreciate why so many successful managers

have grown beyond their initial expectations.

The Investment Manager's Playbook hinges on its decision to stay the same or grow.

That choice carries implications for the team, investment opportunities, and risks the manager

will encounter in maximizing its probability of long-term

outperformance. In almost any rational assessment, the Playbook favors growth. Expanding

organizations can attract and retain talent and capital, which creates durability. Staying the

same may benefit from focus, but it carries

...