The ability to initiate and build personal and professional relationships with institutional investors has become extremely problematic in some instances because of the relatively new rules for public pension funds around what constitutes “gifts and entertainment'' and in other cases because institutional investors in general like endowments and foundations are incredibly pressed for time, having taken on greater responsibilities while working with smaller staffs than in prior years. The one constant: We are still a relationship business, and in the final analysis, people prefer doing business with others they like and respect, assuming, of course, all the other qualitative and more quantitative criteria for selection are satisfied.
Building meaningful relationships with consultants has become more difficult as well. For starters, their due diligence process has become much more robust. Also with the expansion of the industry, consultants are approached by an ever-increasing number of sales executives. They are representing a much larger number of products with a growing number of investment strategies, more complex styles within strategies and a myriad of new investment vehicles and fund structures.
In short, the sales executive must spend time with the institutional investor and the consultant because both parties are important participants in the ultimate award of the business. The one advantage in biasing your time allocation slightly toward the consultant, however, is the “scaling factor” because consultants usually have 10 to 15 pension clients. Consequently, if a consultant views your firm favorably for all the requisite quantitative and qualitative reasons, there is a built-in leverage factor for the sales executive's effort.
Building relationships is still a key ingredient in successfully garnering assets. But you must know your prospects and what is “suitable” for them and their investment objectives. If your products aren't a good fit, don't even begin to waste the institutional investor's or the consultant's time. Otherwise, you will never develop a relationship.