I would like to ask for your view on the importance of product specialization in the sales profession. My firm works with managers in various areas of alternative assets. Have you observed any benefit to becoming a product specialist?
The importance of asset class specialization
First let's define alternative assets because the list of investments in this “bucket” has grown appreciably over time. I will assume we are including at least private equity, real estate, commodities, other real assets, venture capital, specialty fixed income and hedge funds. With a definition in mind, lets discuss the benefits of a sales professional being a specialist in any one of these investment classes.
Prospective clients, namely asset owners and their investment consultants, will expect you to be exceptionally knowledgeable about all aspects of the product. They will expect you to know the historical rates of return and risk profile of a universe of products in the space. It is important to know who the other providers are and what strategies they use so your marketing communication materials and new business presentations will reflect the competitive advantages of your firm, your team and your strategy process as well as the historical relative and absolute returns and risk levels. You will need to have all the details about your investment vehicle; if you are offering an investment in a fund structure, you must have all details of the fund terms.
It is also important to be able to articulate what role this product will play in a multiasset, multimanager portfolio. This will require you to bring in some macroeconomic issues. How will this product behave in a slow-growth economy or in a period of high inflation? You should also know the historical correlation of returns and risks of your product to other products in a typically well-diversified institutional portfolio. In short, you need to have the big picture covered and product-specific facts at the very granular level.
The real advantage of product specialization is that a seasoned sales professional will know the appropriate target market and what asset owners have invested in the product before. If you are offering, say, a private real estate fund, you can find out who has invested in these funds in the past, the key individual to call on to begin the due diligence process and details of the decision-making process. Yes, it's possible to be a specialist in private equity and private real estate, but having a focus can be a great advantage while fundraising.
Specialization is also very important when calling on investment consultants, as most firms now have a research specialist for each asset class. So consulting firms that are “generalists” will have a real estate specialist, a hedge fund specialist, etc. Some asset owners will hire consultants that specialize in research and manager search and selection for just one asset class — real estate, for instance. Again being a product specialist for real estate can provide the sales professional a great advantage by being able to focus on consultants who only work in the real estate space.
There are some great advantages in being a product specialist beyond just having greater credibility with the asset owner and investment consultant. It can definitely provide some real efficiencies and effectiveness in the sales process.