We need to go Back to The Future
Fund Managers and institutions need to go “Back to the Future” in support of their obligations to the institutional and private investors, who invest through them and in doing so, place their confidence in them.
Often the industry created protocols that exist around the capital raise and distribution process prevent investment into assets or endeavours that would otherwise, with the right quality of invested capital, thrive.
There are far too many intermediaries that determine the rules and have a desire to compartmentalise fund managers and institutional investors into categories such as Private Equity, hedge fund, debt lender, venture capital, venture debt etc. Each compartment is supposed to define an investment profile based around appetite for risk, appetite for return and the term of the investment, but in reality, they rarely achieve this.
While labels can be helpful, they can also be very counter-intuitive and show how disconnected the two processes of capital raise and capital distribution are. If all assets and endeavours were invested in based on the actual risk profile as opposed to a perceived risk profile, then the investment would be significantly more rewarding for both the investor and the investee.
The Truth About Risk:
Risk is a factor of bad planning and a lack of understanding, and it is not a factor of the asset class.
Invest the wrong kind of capital into an otherwise low-risk asset or endeavour, and it will fail.
Invest the right type of money into a poorly planned asset or an effort, and it will fail.
Invest the right kind of capital into a well-planned asset or business with a clearly defined demand model; it WILL succeed and exceed expectations.
Part of The Solution:
Highams Saaz represents the future of fund management, and it achieves this by focusing on the success of the investee business or project.
Interestingly we represent the future by going back to basics and by aligning our commercial model to that of the investor and the investee.
We are not a hedge fund, we do not venture capital, we are not debt, and we are not private equity. We take the best from each of these models and sit in a category all of our own.
Focusing on the success of the asset or business is the only real way to underwrite and optimise the success of the investment. Investors should invest on terms that mutually support their objectives and those of the investee. Misaligned goals create risk.
The focus of any fund manager or institutional investor should be on due diligence and planning:
1. Demand, Market Size, Market Volatility
2. Delivery, Cost, Sustainability and Term
3. Objectives, Planning, Performance Benchmarks and infrastructure
4. Risk Management, Due Diligence and BlockChain protocols.
What Focus Should Fund Managers have:
Ultimately institutional investors should be focused on enhancing the goals of the individuals who have invested in them, and they should avoid an undesirable short-termism approach and should avoid creating conflict between the investor and the investee.
Institutional investors should be stewards of their investee companies and projects. There is a drive from both the public and private sectors for institutional investors to provide greater stewardship of investments through greater engagement with assets and endeavours of the investee companies by adopting a longer-term more sustainable approach to value enhancement and income growth. Thus by default helps to reduce the exposure to and impact of short term financial and market risks.
In recent years funds have been made available to Fund Managers based on track record, size and perceived but unverified processes and performance. This approach has led to losses, even the lowest risk investment categories due to the implementation of inappropriate investment strategies. Sometimes the need to deploy capital and the reliance on individual expertise outweighs the focus on due diligence and process.