Achieving Success with Strong Investment and Business Leadership

Achieving Success with Strong Investment and Business Leadership

Having equally strong investment and business leadership is a necessity and a key competitive advantage for an asset management firm in today’s market. Many savvy asset managers have failed or faltered due to business mismanagement. Consequently, investors conducting due diligence on asset management firms typically scrutinize the leadership and management of the businesses, and of the investment processes intensely.

Distinct Leadership Responsibilities

There is a clear division of responsibilities and expertise required for running an asset management firm effectively and for spearheading investment success. Business management encompasses a diversity of areas – the infrastructure, financials and budgets, business and marketing plan, compliance/legal, technology, cybersecurity, human resources, etc. The Chief Investment Officer leads the research and investment professionals, oversees the investment process, portfolio construction and risk management, and in most cases, interacts with clients and consultants. The market is skeptical that one person can manage, much less lead all of these areas well.

Emerging and smaller asset management firms are generally constrained by limited capital and revenues. The firm’s founder and Chief Investment Officer is often tasked with running the firm’s business as well as delivering investment performance. This can be a challenge at best and an impediment at worst. Firms that invest in a President, COO or other senior professional with the appropriate expertise and skill sets to lead the business management, generally go further faster and are more likely to succeed. For institutional investors, spending their fee dollars wisely, and minimizing headline and career risks are top priorities.

Building with a Plan

Having a well-defined strategic business plan is a must for asset management firms of all sizes. A respectable plan includes near-term, intermediate and longer-term goals for both business and investments, and of course, the visions must be aligned. Key elements include:

  • AUM and revenue goals, and timeline
  • Resources (internal and outsourced) – current and planned expansion
  • Systems and technology – current and future
  • Budget (operational, travel, entertainment, prospecting and presentations, conferences, PR, outsourced services)
  • Sales and marketing strategy (databases, target markets, distribution channels) –implementation plan
  • Client, consultant and prospect communications (materials, website, social media)
  • Performance objectives and benchmarks, incorporating client needs the firm’s investment strategies can address
  • Capacity targets by strategy
  • Product development
  • Professional development
  • Intellectual capital
  • Succession plan

Business and Investment leaders of successful asset management firms continually and collaboratively review their business plans, assess progress in reaching milestones, and modify as appropriate.

How to Shine in Due Diligence

An asset manager’s ability to answer tough questions regarding the management of their business and investments with authenticity, brevity and clarity is essential. Tough business-related questions raised in due diligence reviews vary depending on the maturity of an asset management firm.

For Emerging Managers:

  • What is your break-even point in terms of AUM/revenues?
  • How is your firm capitalized?
  • How long is your runway should assets be slower in coming than expected?
  • How are you going to attract and retain talent?
  • What roles will you be adding next and at what point?

For more established firms:

  • Is your firm profitable?
  • Do you carry any debt?
  • How much operational cash do you keep on hand?
  • Have you had turnover of key business management or investment professionals?
  • What is your current ownership structure?
  • How do professionals earn equity in your firm?
  • What is your succession plan?
  • What is your asset capacity?
  • What is your cybersecurity policy?
  • Has your firm experienced any regulatory issues or lawsuits?

Answering these questions directly, concisely and without becoming defensive helps build the confidence of potential investors in your firm’s leadership, long-term viability and success. Showing evidence of strong leadership and management is paramount.

Attributes of Well-Led Firms

Attributes that reflect strong business and investment leadership of an asset management firm include:

Investment Leadership Attributes

  • High-conviction leadership with history of attracting, motivating and retaining investment talent
  • Well-resourced, collaborative and stable investment team
  • State-of-the-art investment systems and tools
  • Value-added trading
  • Understandable investment process
  • High transparency of investment process and portfolios (show versus just tell)
  • Consistent, proactive communication with clients and consultants (during good markets and bad)

Business Leadership Attributes

  • Financial stability
  • High continuity of operational, client service and sales professionals
  • Measured growth of AUM
  • Solid infrastructure to support AUM growth and investment offering expansion
  • Effective succession planning and professional development
  • History of no regulatory or legal issues

Pair strong investment leadership with strong leadership of the business management, and you have a winning combination.

“Leadership is the capacity to translate vision into reality.” ~ Warren G. Bennis

Do you have any tips or suggestions for helping asset management firms achieve success through strong investment and business leadership? Please comment below and share this article if you found it helpful. Stay engaged by following us!

Charnley & Røstvold, Inc., a preeminent marketing consulting firm to asset management firms ranging in size from start-up firms to some of the world’s largest investment firms with over $1 trillion under management. Charnley & Røstvold helps clients with competitive positioning, marketing strategies, key messages, presentation refinements, communications and sales training, consultant relations and client service programs.

Christine Røstvold, co-founder of Charnley & Røstvold, Inc., is a popular industry speaker and author. Christine was a founding board member of PAICR (Professional Association for Investment Communications Resources), and served on the Advisory Board for more than a decade.


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