Asset Managers Are from Mars, Investors Are from Venus (Part 1)

I feel I have been thinking about this for a long time and hinted to at least part of it here and there…. But I realize I have never spelled it clearly, or not in a language that would have been easy to understand for everyone.

After all, I often write and talk about math relating to financial matters, in particular private market investments, and I (only with a bunch of other people I guess) feel at ease reading between formulas’ lines.

Asset managers are from Mars, investors are from Venus

Asset managers mistakenly expect investors to think, communicate, and react the way asset managers do; investors mistakenly expect asset managers to feel, communicate, and respond the way investors do.

It appears that “the most common relationship problems between asset managers and investors are a result of fundamental psychological differences between them”.

Like in the book that inspires this post, I identify two major differentiation traits. In this first part of the post, I will cover the first one. Take this as semi-serious food for thought.

• The first is about the difference in the way the asset managers and investors react to stressful market situations. When tolerance to a stressful situations is exceeded, asset managers display preference to “retreat into their cave”, ideally closing their funds’ gates, celebrating the privilege of structural illiquidity, and have the time to re-examine the problem later from a fresh perspective.
  

  The retreat into the cave has historically been hard for investors to understand.

  When investors become unduly stressed, their natural reaction is to look for someone to talk about it (even if talking doesn’t provide a solution to the problem at hand). This sets up a major conflict dynamic.

  Asset managers retreat as investors get closer, demand transparency and expect to talk “liquidity and mark to market”.

Have you ever experienced similar feelings as an investor or as a manager? It would be great to know.

Thanks for reading and bearing with me for now. In the second part of this post, which is coming out soon, I will describe the referenced second differentiation trait that tells that indeed asset managers are from Mars, investors from Venus.

(Originally published on Pulse: https://www.linkedin.com/pulse/asset-managers-from-mars-investors-venus-part-1-saccone-cfa?published=u)