The challenges faced by allocators are not always obvious to fund managers yet ultimately they translate into commercial decisions that drive the purchase or sale of a fund. Putting aside performance, these challenges include:

1. Large vs small managers. It is widely recognised that larger managers underperform smaller managers. However, smaller managers carry greater business risk and less infrastructure. How far down this path can an allocator go and is the end investor willing to accept that risk?
2. Differentiation. Accepting only large managers creates a herd mentality (particularly with wealth managers and pension funds), and means many portfolios start to look the same. Allocators considering a move from one advisor to another advisor or consultant may struggle to find a specific motivation unless the fund selector has a differentiated offering with a perceived shrewd decision-making process. 
3. Information inefficiency. Quant screens and the press only give an allocator an incremental advantage when making investment decisions. “Word-of-mouth” can prove just as valuable in information terms if a correct mosaic can be composed. 
4. Product knowledge. Allocators get paid to allocate and it would be remiss not to have some knowledge of what most investment managers do in their space. They also need to be able to explain why they did not proceed with a particular investment. 

Ultimately, this is where the value of meetings becomes evident. Face-to-face meetings are often invaluable when it comes to institutional asset allocation, particularly given the complexities of this industry. It is not always communicated by asset allocators, but we often hear that when evaluating a manager trust comes first, process comes second, and performance third. If there are any doubts about the hierarchy of this reasoning, just remember that Madoff was great in terms of performance. The value of meeting someone is almost immeasurable given the amount of non-verbal information that can be collected from a meeting. 

Although none of this is disputable, the flipside is the time taken up by meetings. The sheer scale of growth in the industry means it is virtually impossible to unpick every strategy and not every manager has something to “bring to the table”. A lack of transparency, or a significant communications gap, for instance between an allocator and manager, can mean that allocators are wasting time meeting certain managers when there are other managers with whom they genuinely do want to engage.

Managers can also suffer from a lack of transparency or communications gap because many allocators do not openly advertise what they are looking for from a particular portfolio construction. 

As we all know, fund marketing usually involves roadshows. Managers will typically do a few crucial meetings and then branch out to a wider audience in order to fill their schedules. This often requires direct outreach to a broad allocator set that may, or may not be, interested. Beyond this, these allocators are often very difficult to reach. 

The reason why it is crucial to get a certain volume of meetings is because the volume affects the close rates. Equally, successful asset raising is a question of discovery and process. In other words, it is invaluable to find out who has an interest in the product and to manage the sales process in a disciplined and thoughtful way. Murano carried out a study on meeting close rates amongst professional business developers and found that meeting close rates average around 6%. In other words, one in every 20 meetings should result in an allocation. The whole process tends to take an average of around 18 months, involving six to eight points of contact. 

So, from a manager perspective, there is a lot of pressure to initiate these meetings and begin a dialogue with prospective allocators. The pressure has been building as the industry grows, with roadshow planning taking longer and longer to achieve. In the early 2000s, it would probably take one day of calling to fill one day with five meetings. Today, it is estimated that it can take up to a week of calls to achieve the same result. 

For many allocators, these meeting requests can represent the flip side of a coin. On the one hand, manager visits are a crucial part of the discovery phase. The information gathered about the state of the markets can prove invaluable when considering portfolio construction, strategy selection and manager choices. However, this information comes at a price. A constant bombardment of requests for meetings via email and unsolicited phone calls can be overwhelming. Murano recently conducted a global report on the inbox composition of some of the world’s largest and most recognised institutional allocators. They found that of their total inbound email traffic, roughly:

• 50% was performance updates
• 30% was meeting requests
• 10% was spam
• 10% was other relevant emails

A further challenge faced by both institutional allocators and managers alike is the likelihood of missing opportunities. Not only has the number of managers increased, but the allocator base has grown, to the extent that many managers do not have sufficient awareness of all of the allocators who could allocate to them or might have an interest in their product.

The combination of these factors has prompted Murano to launch Pueblo (www.mypueblo.com).

In many ways Pueblo is a natural spin-off from Murano, a bespoke investor research and consultancy firm that’s often billed as “the matchmaker of the asset management industry” and whose clients include several high-profile firms. 

After years of listening to both managers and allocators vocalising their frustrations, we began to reflect on a workable solution that could bypass needless processes and improve efficiency in the manager identification and engagement process. While traditionally cautious about technology solutions to what we view as relationship-driven businesses, we thought that aggregating manager visits on a web-based platform seemed to be an elegant solution.

The look and feel of the Pueblo platform is a bit like a dating/travel site on which allocators can manage their schedule of visits. Each allocator records his/her own investment preferences and Pueblo then presents that allocator with managers who meet the requirements in the areas stipulated by the allocators. The site is curated, and we think it is vital that allocators should have complete control of the meeting process throughout the development phase.

The value proposition for managers is equally promising. Managers sign up to the platform and create their own homepage, detailing information about their company, strategy and corporate differentials. They can then upload such documentation as fund fact sheets, team bios and investor presentations. Pueblo uses two-factor authentication and every user is vetted prior to access to the site to ensure manager information is protected and high-quality security standards are maintained at “every link in the chain”.

In essence, Pueblo facilitates the identification of managers in areas in which the allocator is interested. This may be strategy, asset class or regional focus but it can also be manager location. Pueblo helps allocators to coordinate manager visits. Allocators often travel in order to do on-site due diligence and want to maximise the time value of these trips. Pueblo allows allocators to screen managers who are located in areas that they are travelling to and who meet the investment criteria they wish to select. 

As well as data security, client confidentiality is protected during the development of Pueblo, so user activity is monitored only to the extent needed for performance metrics. Pueblo doesn’t monitor allocator/manager chats but does monitor anonymous clicks for performance, impact and growth metrics.

Pueblo serves as a “window” to funds listed on the platform but is not involved at any stage in the sales process of those funds. Marketing and investor engagement are the sole responsibility of the listing manager. Every allocator using the platform is vetted to ensure they meet qualifying requirements. The platform is for regulated allocators only and HNWIs are discouraged from signing up. Critically, the service offered by Pueblo is allocator-driven with allocators deciding which managers and funds they wish to meet before initiating direct engagement. As such Pueblo remains outside the constraints of reverse solicitation rules.

Currently, Pueblo is a free service open to all, provided the manager and allocator are known. In time a fee will be introduced for managers using the platform. The service will remain free for the professional allocator.