John Molesphini, Global Head of Client Success for eVestment, was recently invited to participate in a FundFire webcast along with Meredith Jones from Aon Hewitt on the topic of how asset managers can find success on investment databases. Database profiles are an important first step for managers wanting to gain exposure to the institutional investor marketplace.
During the panel discussion, Molesphini shared advice on how managers can use narratives to stand out among increased competition, insights into how eVestment is being used by consultants and investors, best practices for populating investment databases and ways that managers can measure the success of their investment database marketing efforts and use their resources more effectively.
Using Narratives to Highlight Advantages on Investment Databases
At eVestment, we can see how managers are portraying themselves on our database. “If you think about how to differentiate yourself in such a competitive marketplace, it’s important to understand what your peers and competitors are doing,” Molesphini said. “A lot of what we see from a narrative perspective is that the consultants and investors are in fact reading them. They are being heavily consumed on our platform to support the data that managers provide.”
Managers need to be sure to accentuate the differentiating factors and competitive advantages in their narratives. “Often, we see similar, very vanilla, plain descriptions that are the same as what everyone else is writing. The risk there is that you are losing an opportunity to get in front of investors and consultants and explain what you do, how you do it well and how you do it differently than other managers. You may not get a second chance to highlight these factors and managers should be taking advantage of this opportunity.”
How Consultants and Investors are Using the eVestment Database
eVestment is fortunate to work with 570 institutional investors globally, across all different client types and regions, as well as over 180 investment consultants who leverage our platform to better advise their clients. “Why is this information important to managers?” Molesphini said. “We have a unique opportunity at eVestment to see how our platform is being used and how manager data is being consumed by these investors and consultants. We can see what people are interested in and what data points and sections of the platform they are using.”
Resources are scarce for consultants and investors as well, who don’t have time to meet with every single manager. This, plus the increased importance of investment databases over the years, has led to the rise of “shadow searches.” Many plan sponsors are using the eVestment database to work behind the scenes and a manager might not even be aware they are being considered for a shortlist.
“We’ve heard from managers that they will get a call to show up at a finals presentation where the manager had no idea the search was even going on,” Molesphini shared. “Other stories we have heard is managers who were told they were being considered and an on-site was being scheduled to make sure that everything met their standards, but that they had already run through the decision-making process.”
What happens when a consultant or investor is running a screen on eVestment? What are they looking at first as they are narrowing down their options? “Managers always assume that performance is a leading factor and is always going to be looked at first,” Molesphini said.
While performance is critical, here is the typical screening sequence we are seeing on our platform from our investor and consultant clients:
- Asset Class and Universe. As a starting point, they are beginning with a group of managers they will be able to compare on an apples-to-apples basis.
- Firm AUM, Vehicle Availability, Product AUM, Derivatives and ESG, Firm Ownership and Product Personnel. They next want to make sure the manager offers the vehicle they are looking for. What are the firm and product assets? A hot topic these days is the use of derivatives and ESG. What is the firm ownership? Has there been turnover on the team and how long has the team been with the firm?
- Narratives, Philosophy, Process. Narratives are being read to see if the description is being supported by the data that has been provided.
- Performance Relative to Peers, Risk, Consistency. Once the list is narrowed down, then performance does come into play. Does the performance support the investment philosophy they have described?
Seven Best Practices for Populating Investment Databases
- Answer what is being asked. Don’t make assumptions about data points. What is the data point being used for? Understanding the ‘why’ behind a certain data point will help to ensure you answer it correctly. “We sometimes will see managers take an approach where they have data they want to provide as opposed to providing the data that is being requested. It’s important to keep in mind what the other side of the table is looking for and why they are asking the question.”
- Don’t be an outlier. Try not to force your strategy where it doesn’t belong. You want to make sure you can be compared to your actual peers. “You don’t want to be on the tail end of the spectrum. If you are an outlier in certain areas, you do run a risk there.”
- Be consistent. If you are providing an answer one way one quarter, ensure you are doing the same for subsequent quarters. Also, be consistent from database to database. “Several investors and consultants use more than one database. If they find inconsistencies, those then must be explained. Explaining something takes time and you might not even have the opportunity to do so if another manager’s data is easier to work with.”
- Dedicate resources. Databases should be considered right along with websites, marketing materials and PowerPoint presentations as an opportunity to present and market your firm.
- Review data frequently. Have an understanding of what you have provided. Don’t just populate it and forget it. “We see narratives in 2017 that use statistics from 2013, and the firm didn’t realize they had that in there.”
- Provide data promptly. Understand that different data might be available at different timelines as part of your internal processes. “We’re seeing the database being analyzed now three and four business days into a quarter. That seems aggressive, but there’s a demand for data out there earlier and earlier, and you need to recognize that from an operational perspective.”
- Get buy-in from your experts. Provide the context and your understanding of databases and what they are asking back to your internal teams. The better they can understand what the data is being used for, the better data you will get to populate the databases.
How to Measure Success on Investment Databases
On the eVestment platform, we can see which strategies are passing and failing screens – and whether they are failing due to missing data or to criteria not being met. “All too often, we see missing data as a reason for a manager being excluded from a screen,” Molesphini said. “And on our platform, clients can screen on whether data was provided for a field – not only the value of the field – as a means of shortening that list of managers.”
With missing data, the reason could be that the manager did not yet input the data at the time of the screen. This highlights again the importance of timely data population, as previously mentioned. “We are typically over 80% performance complete across our traditional strategies around the 8th or 9th business day of the quarter. We alert our clients when that happens so they can start using the platform to run their analyses. The other data sections typically fill in around the 15th or 20th business day – characteristics, assets, personnel, etc.”
We have seen some managers chose not to provide a data point they think is not relevant. “The data is being consumed by investors and consultants. If you choose not to provide data because you don’t think it’s relevant to your firm or your product, that can be a risky tactic. By not providing that data, if someone is looking for it, you will be excluded by default.”
However, if a data point is truly not applicable to you, then you might be better off leaving it blank. “If someone is looking for that data point, and you don’t fit that criteria, you should not pass that screen because you are not what they are looking for. You don’t want to be the orange in a tree of lemons.”
Using Resources Wisely
You can also use information that is publicly available to get some insight into how consultants and investors are viewing your firm or strategy. It’s important to use your resources wisely in such a competitive environment. “You may not compete for every mandate or every opportunity, so find the ones where you are the best fit and go after those.”
Your population efforts should be discussed at a strategic and tactical level at your firm to make sure that your data and the message you are trying to convey to the marketplace is consistent across databases, RFPs, marketing materials, your website and even your in-person conversations.
“There was a recent RFP from a public fund where the requirements were items such as less than 100 stocks in the portfolio, had a to have a specific batting average, had to have a certain amount of product AUM, of firm AUM, no personnel turnover, had to have a certain active share, etc. It was very specific in terms of what they were looking for and yet they still received submissions from managers who did not qualify. The risk there is that you are spending time on an opportunity where you have a decreased chance to win. Focus your resources on where you have the best chance to win.”
It’s important to understand how the databases are being used and who is using them. Managers can learn how to be better informed to understand how and why they are positioned the way they are. Always populate data as if you were the person on the other end consuming it. Databases can be your first impression, but could also be your last impression. What impression do you wish to make?
If you are interesting in submitting data to the eVestment Global Database, or talking to us about how to get the most out of your investment database marketing, contact us today.