Messages from investment professionals and organizations traverse the ecosystem with regularity. Some types of communication have been around for decades — think of the updates of mutual funds or separate account managers that used to arrive in the mail — while other forms and forums are relatively new. The ease with which views can be spread electronically, including on social media, has caused an explosion in activity.
Instead of a comprehensive view of the standard approaches — and the risks and opportunities involved — here are four examples from disparate organizations.
MITIMCo
Most communications from asset owners are internal (to governing boards, etc.), although government pension funds may be required to share information more broadly. Some other entities do it voluntarily by sending reports to stakeholders or by making them public (with varying degrees of transparency regarding strategies and methods).
In one sense, the 2022 letter from the MIT Investment Management Company was celebratory, marking the fifteenth year that the current leadership has been in place managing the endowment and its enviable record of return. But the letter focuses on the challenges involved in the investment process and the “forces that make it very hard for anyone to generate compelling returns over long stretches of time.” As a result, MITIMCo tries to do some things differently than others; its manager selection, its team structure, and its Cambridge real estate program are highlighted as areas in which that is the case.
Other topics include an exposition of some of the organization’s mistakes and its preparations for the inevitable downturns that occur. (The 2023 letter, due in a month, will no doubt deal with how that all worked out.)
MITIMCo also has a site with lots of information for and about emerging managers, a good example of an uncommon tactic.
Permanent Equity
The latest annual report from Permanent Equity also looked back over fifteen years — “in the trenches.” It buys and operates businesses with annual owner earnings of up to $25 million. Unlike a typical private equity fund it “has no active intent to sell,” with fund lengths of almost thirty years and the opportunity to extend beyond that.
Much of the report, written by founder and CEO Brent Beshore, is personal in nature (and, again, forthcoming about mistakes). Reading it, you come to understand the character and ethos of the organization. Results are mentioned briefly and new employees and investments are introduced, but most of what is covered concerns the philosophy of the firm and its reasons for being.
Permanent Equity also has done a great job with newsletters. An October Fortnightly cited the “Permanently Playbook” updates as featuring “original content and helpful links to other sources, all presented in an engaging way.” In addition, president and CIO Tim Hanson started writing “Unqualified Opinions” this week and they have been great so far.
Jefferies
Monthly “Leadership Letters” come from Rich Handler and Brian Friedman of Jefferies, “a leading global, full-service investment banking and capital markets firm.” There are 117 of them available online, an example of the value of an archive of materials for those who want to see how the focus of an organization changes over time.
The most recent edition, “People and Purpose,” recounts the big questions at the firm at various times: in the late 1980s, ten years later, in the midst of some crises in 2011, and during 2020, the year of Covid. It closes with a look at the priorities of today mentioned in the title, including these points (among others) in the people section:
The “eat what you kill” mentality no longer exists at Jefferies. It doesn’t mean we have lost even one drop of our entrepreneurial spirit. It just means we think bigger, broader and for longer as we build our careers and our firm.
It is pretty clear that too many firms don’t prioritize their people the way they should. This is a HUGE opportunity for us. We can be The Wall Street Firm that is HUMAN. This doesn’t mean we are immune from making the tough decisions that always permeate our industry, but how we make those decisions can and will define us.
In the culture of Wall Street, those are notable and difficult goals.
Lindsell Train
A November thought piece from James Bullock of Lindsell Train is an example of a longer-form exploration of an underpinning of a manager’s investment philosophy.
It tries to square “the disruptive backdrop of enormous industrial and technological change” with Lindsell Train’s goal of investing in “rare, exceptional companies;” more than half of its holdings are in companies that are over a hundred years old.
Three ways of thinking about the survivability of companies are described, each plotted in graphs which are included in the piece. They inform the judgment that “the longer something has endured, the longer it is likely to go on enduring,” that the act of survival “itself is a demonstration of survivability.” Despite that, “there seems to be little if any evidence of a survivability premium” in the valuation of firms in the marketplace.
We all “talk our book.” Good communication goes beyond that to offer ideas worth pondering and portals into underlying beliefs and goals.
Published: February 17, 2023
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