Tyra: As the relationship evolves between the GP and its LPs, especially amidst the pandemic, another topic that has been coming up more and more frequently is on the level of sophistication and capital investment in investor relations.

Now that we are moving more into the investor relations side of things, I think is very important even moreso with COVID and how the GP/LP relationship is evolving in your view why do you think the investor relations role, if you think it is, is so important for fund managers today and to the investor?

Additionally, as an investor, what does ‘good’ IR look like and how can it help a manger to grow their business?

Jason: If you’re an investor, you don’t want the fund manager or the analyst, whoever it might be on the investment side, constantly being tied up on calls with their clients, every now and again that is okay, but if I am sitting here as an investor that is writing large tickets – well, ticket sizes don’t even matter – fundamentally you want your hedge fund manager or private equity manager, the investment professionals focusing on investing, not on marketing not on relationship management.

Again, I say that maybe once a month or once a quarter they are getting on update calls that is fine, but you want them focused on what is going on in the markets because things are so dynamic. Things change so frequently and that is why it is really important to have a great and robust IR team and you want people on that side of the table that really could almost be viewed as a portfolio manager themselves and they can speak the language; they know the portfolio in and out; yet they do not have the day to day responsibilities.

I think having people of that caliber, not just there linking a CIO or a manager with investors and coordinating calendars, you don’t want people like that. That is taking up time on the CIO’s calendar away from investing.

Tyra: During your time of more than seven years at Raytheon, how historically has IR evolved since your time there and even throughout your time reviewing managers?

Jason: I have some personal experience to being on the sales and client services side and seeing a lot of boutiques at BNY Mellon and when I came over to UTC now Raytheon and started working more directly with hedge funds, it can really vary based upon the people in those IR roles. It could have been someone that might have been a former PM so they understand the language and they can really communicate the strategy very well.

But sometimes, you find with those IR people they tend to want to do a lot of the talking all of the time and sometimes they don’t ask the appropriate questions in regard to – what is going on with your pension plan? What are your needs? How do you think about this? I think you need someone that hugs the middle in knowing their strategy very well, but then really understands where their strategy fits within that allocator’s allocation.

Tyra: From the allocator’s perspective you definitely want someone who asks you those questions of what are you looking for from your allocation and how they fit in because that makes the conversations much more effective and resonant.

Jason: Exactly, for example in March, if a manager knows that we are running a portable alpha program and we are trying to get 250-350bps over cash – not at the individual manager level, but rather the total portfolio level within our hedge funds – but if a manager was down 10-15% they should think automatically ‘ok Jason isn’t going to be too happy with this type of performance given that he is trying to run a relatively low volatility stable type of return stream strategy via portable alpha’ and again not that I would necessarily ding any one manager for poor performance in March because ultimately I do have strategies that might be a little more implicit short volatility or have some sort of embedded beta there, but for them just to be aware of how they are being used in our program goes a long way.

So then when we hop on a call, they understand what my pain points might be internally, and they might be able to anticipate the kinds of questions that I am getting internally from the rest of my team.

Tyra: What other types of best practices that would dictate a fund to have ‘good’ IR practices or institutional quality IR practices. Please feel free to walk us through what good IR looks like for you or bad IR looks like for you?

Jason: Transparency is the main part. There are some funds that just won’t be that transparent in terms of their positioning. I can understand because they don’t want that getting out to ‘The Street’ at the same time if you really view our investment as a partnership and we respect each other’s privacy and confidentiality then that really shouldn’t be an issue.

Especially, when it might be something that is a bit broader in terms of what a fund is doing, maybe in terms macro types of exposure or macro types of fund. Where it is not like they are invested in these illiquid assets that if someone catches wind of what their position is then that could blow up their position. So just understanding that just because you might have good performance or a long track record at least for me that doesn’t mean you are off the hook with disclosing what your positions are and how you are positioned.

Again, you don’t have to get into the ‘nitty gritty’ details, but at least providing some sort of transparency in the way that you are thinking is going to go a long way.

Tyra: How has the expectation evolved in IR requirements from the allocator perspective, defining further the difference in expectation between a newly invested manager versus a longtime/ legacy manager?

Jason: I would reiterate some of my earlier comments. We want someone on the IR side being able to take our calls anytime and speak to what is going on in the portfolio without a PM having to be on the call. I don’t think certain designations, such as CFA or CAIA, are a requirement for these jobs or some sort of concentration in finance at a school. Those skills can definitely be learned over time without those designations, but sometimes that may be a good starting point for managers when looking for new talent.

You really want people in those seats who really love this business and loves the investment management side and investing in general. Not someone who is there just for the generous compensation that tends to reside within this industry.

I would also just say that I think we have gotten away from what I’ve heard about the earlier days back in the ‘90s and the early 2000s with entertainment and events I mean to me being on this side of the table that just sounds exhausting to go to all of those things. I don’t want someone being all ‘chummy chummy’ and go to this game or that game.

Number one, we can’t do that anyway because of internal compliance reasons and number two, if we could I wouldn’t be likely to do that maybe every now and then you do want to see people outside of the office in a setting that isn’t a work environment. But I want to be in that environment with the investors, not with just the IR person or salespeople there. I am here to form a deeper relationship with the whole firm not just the face of the firm

Tyra: Does having someone singularly dedicated to investor relations versus having a CIO or COO make a fund more attractive to you in terms of as a candidate to allocate to? Do you like seeing a dedicated IR person?

Jason: If it is economically viable for a fund to have the COO and the Head of IR broken out separately into two distinct roles, I think that makes a lot of sense. But again, I am not going to be firm with someone that is young and up-and-coming emerging manager for not having that at the outset. That is a huge cost you need to incur in order to do that.

If you can build it before the assets come in that is great, I am not so sure if that is a best business decision earlier on and that kind of evolves over time. But once you get over a certain breakeven threshold where it does make sense to have it broken out. Then I think you do need to have two separate and distinct roles for that.

Tyra: Do you believe there is a certain AUM level when you expect to see that?

Jason: I think that really depends on what type of strategy it is and what the capacity might be longer term and what the margins of that business are so I am not so sure I would put an AUM threshold on that. I think it is really dependent fund by fund and firm by firm.

Tyra: In your opinion, can a third-party marketer be a good temporary solution? If so, how long would you find it to be acceptable?

Jason: It depends, I try not to have any bias against any third-party marketers, either for or against. But, I think if you are a larger firm and you have a third-party marketer, then that just seems a bit odd because then you wonder what types of transparency and communication you’re going to get if you become an investor and they don’t have dedicated person in that seat that can serve as the ‘talking head’ or that serves as a lens and/or prism into the transparency and communication into a firm.

I certainly wouldn’t ding a firm for having a third party marketer in the earlier days, but then I would want to understand what is that firm’s plan going down the road once they meet their certain thresholds and objectives in terms of AUM and profitability to make sure that they have a plan to hire someone for IR as opposed to just relying on third party marketers indefinitely.

Tyra: When you say ‘large’ can you define what you mean by ‘large’ of when they should have an IR person?

Jason: I think it depends on what their capacity is so if you are a long/short small cap manager or microcap manager that would be very different if you were a multi-strat. So, again I can’t put any exact dollar amount on it. That is really tough to do.

Tyra: We do sometimes see a fund at what may be considered a larger size manager such as a $500M or $1Bn manager not even have a dedicated IR. Would you define that to be around the threshold where you would expect it to be in place by then?

Jason: Somewhere between $500M – $1Bn, if you don’t start looking for a dedicated IR person then that could be problematic. But at the same time if you are a small cap or microcap manager [that has capacity restraints] that really can’t go above $500M or $750M or maybe a $1Bn then perhaps it does make sense for someone to have a dual roles in the firm such as a COO/IR job and you also have a limited investor base, so it may make sense for people.

Tyra: Sometimes we see funds hire heavy on the investment professional side (i.e. 5-8 investment professionals), which we understand are necessary to the business, but will not have a dedicated IR person. They may use the services of a third-party marketer to fill that gap, from your perspective when does the structure of the team not become as optimized as it should and when should they consider an IR person?

Jason: It goes back to what is their strategy, capacity, investor base and some people may need it and some may not.

If you have 100-200 investors in a strategy that is capacity constrained, you might need an IR person, but if you have a concentrated investor base of 10-15 for $500M or $1Bn then perhaps the COO type of role could fulfill that requirement.

Tyra: How do the dynamics of working with a third-party marketer versus a dedicated IR person ‘feel’ from the allocator perspective?

Jason: It depends on where you sit, since we are such a larger allocator, we tend not to look at too many funds that would be involved with a third-party marketer. Any times that I have, it just never seems like incentives are aligned because if you are talking with a marketer whether it’s a third-party marketer or whether it is internal you really want someone that can speak to the strategy and not just connecting dots or connecting ‘me’ with a firm in terms of purely just an introduction and then they get some sort of a fee on the backend in the case that we invest on behalf of our beneficiaries.

A lot of times third-party arrangements do not feel like they are that genuine in terms of alignment of interest because they have no longer term incentive like a dedicated IR person would at a firm.

Tyra: I think it is pretty safe to say, as soon as a manager can afford it that having a dedicated IR person is preferable, am I correct in saying that?

Jason: Yes, I would say so.

Tyra: Can poor communication and IR-related outreach affect your decision to allocate? How would it affect your decision to recommend a manager to another investor?

Jason: Since I worked for a handful of years on the sales and client services side, I know how crucial it is to be the face or the front lines of a firm. Now if I were given a bad impression from an IR person over a first meeting or a first couple of meetings or you just come across someone who might be super nice and super personable and they are just not that engage on the investment side then that could be representative of the way that the principal of that business runs their business or what they value in terms of their firm and what they are building. I want someone who is super sharp on the investment side that is bringing the firm’s story, capabilities and strategy to me. I don’t want someone who is ‘chummy chummy’ and not be able to get into the nitty gritty.

I just view that the CIO, Founder or the investment people don’t value their investors and prospective investors. They view that as ‘we just need someone to call on this person every now and then and have lunch with them or bring them out to a ball game or have a coffee and stop by’ and they never have to really actually say much about the strategy or get into the details. So, whenever I come across firms where I sit down and ask these IR people the questions about their strategy and again this may not be detailed questions. But when they defer to ‘well we have to have a call with someone from the team’ then I view that as a firm that might not be that top notch.

Tyra: It goes back to your exact comments earlier; you want your investor relations to have knowledge reflective of your PM. They really are the front line of defense for a fund when speaking with investors. As an investor you don’t want the superficial conversations, you want to know the ‘nitty gritty’ of how the portfolio is performing and why it is performing in any one direction.

Jason: Yes, and sometimes those roles may not even be an IR person and this might be a role at the larger firms that have product specialists/portfolio strategists. I know not all firms can afford the multiple layers of sales, IR, product specialists. To be quite honest, I think a lot of firm’s don’t even need that where if you just hire the right people with the right background and skillsets, they can play all three of those roles.

Tyra: To that point, what do you think is the right background and skillset for a top-notch IR person to have?

Jason: I hate putting labels on things, but I guess I’ll have to for this question. I think having some sort of background in investment management, it doesn’t mean you have to have managed money or have been a PM, but were you in some way shape or form more towards the front lines of investment decision making or at least had some sort of background that shows a demonstration of really being into and passionate about the global financial markets and capital markets. I think some sort of background or degree in finance, economics, CFA or CAIA.

Again, I don’t want to paint people with a broad brush because there are plenty of people who don’t have those credentials that are uber aware of everything going on in the world and have a fantastic understanding of the investment side. But more often than not, I usually find people that are really good on the IR side might have been former PMs or they might have been allocators, or they might have been industry or sector specialists or just have had a bit more experience on the investment side. Then purely only being on the sales side.

Tyra: How much weight does a fund’s marketing deck play a role in your decision-making process?

Jason: A deck is a deck, it’s just a factor, but if you have a crummy deck it goes to how you hire on the IR side. It goes back to a saying that I like “how you do anything, is how you do everything” so if your deck doesn’t look like it had a lot of thought put into and it looks like copy/paste from excel charts or spreadsheets and very basic templates and PowerPoint. It shows that you really didn’t put a lot of effort into it. Again, it doesn’t really show that positively on the overall firm.

The other thing is transparency and having things in there that you know an allocator would want to see. You don’t have to have them reach and say great, you sent me your deck, but it doesn’t have anything as it relates to long/short gross net exposure, your return streams, your bios or backgrounds just all of the basic stuff – performance, philosophy, process, people. If you don’t have those main things you shouldn’t even send out a deck.

Tyra: I’m sure you’ve seen numerous decks, without naming names, can you give us an example of great and bad decks. What is also interesting is that you have a sales background too and in some ways a sensitivity to seeing those types of things. I would love to get some color on that from your side of the table.

Jason: I love detail, I don’t mind slides that have a lot of stuff on them, whether its narrative or stats and data. But, you shouldn’t go too deep on the front end. The first pages of the deck need to be your core message and your core offering. It is so difficult for even an allocator to differentiate between what makes this strategy good versus a similar strategy if you’re just looking at a deck. Again of course no one invests based upon just the marketing deck, but a lot of managers need to realize that they are not that different from a lot of other managers so don’t try to pretend that you are different or unique because I can guarantee you that you are not.

So, what you really need to focus on is what distinguishes you and what do you do that might be similar to someone else, but you believe you do it better because of ‘x, y, and z’.

It is really focusing on what’s your core message, what is your core value add that you bring and really just spell that out on a page. What do you invest in? Why do you think there is an inefficiency in what you invest? What do you believe are your competitive advantages or distingushments? It doesn’t need to be something that is uber unique or something that I’ve never heard of. If it is, then that’s fantastic. But I guarantee you, I’ve probably heard it all, so, it is just about making that more simplified on a front end instead of diving into a whole bunch of examples or details on the front end. So, start high level then get into the ‘nitty gritty’ details with the examples and what not as you go further and deeper into the deck or put that into the appendix, if it is not a part of your core offering or story.

Tyra: Wrapping up here, do you think funds are successful on a whole today as it relates to IR?

Jason: I hate putting things in a whole sense. I see plenty of crummy and I see plenty of fantastic ones. I am probably bias towards ‘yes they are doing pretty well’ because I am not going to invest in the ones that didn’t have really good IR teams. Just as another word of advice for managers, if you’re sending out blast e-mails that has your latest year-to-date or monthly performance and you think that that is going to catch someone’s eye, at least it is not going to catch my eye, maybe it will catch other people’s eyes, but definitely not mine.

If it is a pure copy/paste and you’ve gone through zero effort of even understanding what we do at Raytheon Technologies or United Technologies, it is very easy to google search my name, my colleagues’ names or my firm and look up articles in terms of what our philosophy is and the way we think and just go on LinkedIn and try to triangulate those points. It is very simple and if you are at least not trying to make that connection.

Then it goes to show that they are really not putting in the effort and if they aren’t putting in the effort, then why did their boss or the founder/CIO hire them. Did they maybe miss something and why that person isn’t going the extra mile and again that goes back to the saying “the way you do anything is the way you do everything”. So, if you get a bunch of lazy sales people/IR people and that is just indicative of just how the firm may be run.

Tyra: I really like that quote – “the way you do anything, is the way you do everything”. To wrap up closing thoughts, what should a fund be doing and thinking about today as it relates to investor relations and further developing the relationship with prospective and current investors?

Jason: I think in general a lot of people are adapting to this new work environment. I think you need to be cognizant of the person that you are contacting and get a feel for whether they are already in a position to move forward and do new things or whether their employer may be a little more hesitant in moving forward.

I am not saying that as an indication of how we are because there are a lot of things going on internally before we can start hitting our stride in with new allocations.

Although we are always meeting with new managers and we always have a good team of people we will invest in when the time is right. Basically, you just need to be more aware of people’s situations at home and they might have kids in the background and be a bit more aware of the new environment.

The other thing is communication and marketing collateral and making sure it is not too watered down and at the same time it is not too ‘hey I just sent you a 100-page deck with 20 trade examples and all these details’, which is fine at some point to get to, but if you send that to someone on the front end and their brain is going to explode and it might be too much for them to digest and I don’t even know where to start. To slowly hold their hand over time and go deeper, deeper and deeper.

Tyra: What is the best way for a fund to approach you or even other investors on initial contact?

Jason: Definitely not phone call because I never answer my phone. Not because I don’t like talking with people, but there is only so much time in the day so if I am in some sort of deep analytical work that I need to do, I’m not going to interrupt my day and what I am doing to do that and if you leave me a voicemail I probably am not going to call you back.

Marketers probably hate hearing this, but it is probably more word of mouth and getting into the networks of people that I know and if you know someone that I know and I trust that person recommending you to me then that’s going to be a much more likely to get a first pass than leaving me a voicemail or an e-mail. I do read all of my emails and if they are multiple paragraphs long or have a lot of attachments, it will probably get the automatic delete button.

I don’t have the time to go through an email to read your narrative about why you’re so great or what you’re doing this year or why you think you’re so unique when I can probably point out ways how you are similar to another manager that I’ve looked at 2 hours ago. It is really keeping things short, concise and to the point and really getting your core message across.

Tyra: You brought up a really interesting point about getting into your network, do you think now that we are in COVID times there is a roundabout way to get in front of an investor?

Jason: Yes, if it’s an existing manager that we invest in and they know that I’m looking for something or know that I’ve had interest in the past on a certain strategy that manager doesn’t necessarily have, and they know someone I’m more than happy to make those connections and to take a look.

I mean again I’ll take a look at anything; it doesn’t take me too long to know whether it can pass the initial sniff test. I know the types of investments and the profile that we need for our for our plan and we can’t really do start-up managers/emerging managers, but yet we do have a customized fund of funds relationships with managers that can do that for us and then I’ll work with our fund of funds manager to take a look at those types of opportunities, but I think another thing that managers can do more of is just having more kind of not product or strategy focused sessions, but more higher level ‘what are investors thinking’ or ‘what is that firm’s thinking higher level about’ maybe their market or markets in general just to get people talking and get the discussion flowing and the more ways that they can introduce allocators to other allocators and maybe get recommendations that way I think that’s helpful too.

Tyra: Do you have any final thoughts related to all things investor relations, fundraising and fund managers?

Jason: No, I think we pretty much covered it. IR is the first line of defense and if you don’t hire high-quality people, then at least for me, that is indicative of whether you’re a high-quality firm or not. How you do anything, is how you do everything.

Tyra: Thank you Jason for your time today.