DIANE HARRISON

Commanding Capital: 7 Military Strategies for Acquiring Assets

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PANEGYRIC MARKETING| MAY 2014




This article appeared on May 15, 2014:
http://www.hedgeworld.com/hw_blog/read_blog.cgi?section=dail
&story=dail5102.html


COMMANDING CAPITAL:
7 MILITARY STRATEGIES FOR
ACQUIRING ASSETS

Napolean Bonaparte
(15 August 1769 5 May 1821)

oney is one of the driving forces of both business
and warfare: he who amasses the most money
often wins the battle, both on the field and in the
markets. Money equates to power, power garners action,
and action ultimately shapes the future.
Napoleon is generally considered to be the forerunner of
the age of modern warfare. An interesting parallel can be
drawn between the changing face of warfare following
Napoleons evolutionary tactics and the competitive
landscape for raising assets in the alternatives markets
today, where the battle for dominance and success has
undergone its own global revolution since the mid-2000s.
Investors are waging an entrenched war between seeking
returns while balancing risks, often falling short of both
objectives. A recent survey (Natixis Global Survey of
Individual Investors, May 2014) provides some interesting
statistics and observations to contrast with several of the
modern warfare tactics introduced under Napoleon over
200 years ago.
The French Revolution involved an armed force organized
by divisional formations. Napoleons attacks started with
advance forces leading a skirmish, followed by substantial
reinforcement forces massing in surprise flanking and
enveloping attacks against the enemy, designed to utterly
destroy opposing forces. Because of the complexities of
engaging in this new style of warfare, the development of
general command staff began to emerge under Napoleon.
The Natixis survey, conducted globally with just under
6,000 high net worth investors during March 2014, found
that, investors are torn between a desire for high,
historically unrealistic, returns and insecurity about taking
on risk. The survey statistics reveal that 70% of investors
globally face an ongoing psychological battle between the
hunt for investment returns versus the preservation of
capital [67% in 20131], and tied to this, 86% of investors
seek to balance risk and return [84% in 2013].

A comparison of key warfare tactics (courtesy of the
website www.molossia.org) and success strategies for
asset management offers some interesting observations
that may help smaller managers grow their business, and,
ultimately, shape their impact on the investment landscape
at large.
TACTIC ONE: THE OBJECTIVE
My business is to succeed, and Im good at it. I create my
Iliad by my actions, create it day by day.
- Napoleon (1804)
aving a clear vision of key business goals is vital to
the success of any organization, but particularly for
alternatives managers. Based on the Natixis survey,
market volatility has eroded confidence in the markets for
two-thirds (66%) of investors worldwide. To gain investors, a
manager must be able to articulate what it is they intend to
do with the investors money, how it will be achieved and
measured, and why they are the best professional to
achieve this. This is a far more pragmatic and specific
explanation than offering up a generalized mission
statement, such as, To offer investors attractive, risk-
adjusted returns across a range of market conditions, but
unfortunately, this is where most managers stop when
articulating their objective goals.
Managers today must offer investors far greater insight into
their ability to dissect market activity and extract
M
H
DIANE HARRISON
Commanding Capital: 7 Military Strategies for Acquiring Assets
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PANEGYRIC MARKETING| MAY 2014


investment opportunities and results in order to win their
capital. The first step in winning the war of asset-gathering
begins with articulating how you are capable of doing so
through a demonstrated and understandable process.
TACTIC TWO: THE OFFENSIVE
To have good soldiers, a nation must always be at war.
Napoleon
ost of the investment community, managers and
investors alike, would agree that staying on top of
the markets is a battle in itself, and never more
so than over the past 7-8 years. Alternatives managers are
acutely sensitive to the war of attrition (in the form of
redeeming assets), as well as to the intense ongoing battle
for acquisition of new assets in their fiercely competitive
investment world. Although he may have worn a wreath of
them on his head as Emperor of France, Napoleon knew
better than to have rested on his laurels and managers who
want to get ahead need to embrace the same sense of
urgency in managing their business.
Waiting for performance results to bring in new business or
hoping investors will find the company through database
searches and come knocking on the door to invest is the
warfare equivalent of capitulation. Assets are won through
positive, proactive, and effective outreach to the investors
who are seeking opportunities in line with the managers
style and delivery. This translates to a daily and continual
effort to meet these objectives though all facets of the
business, including investment, marketing, and operations
activities across the board. Alternatives managers should
establish a business plan for meeting objectives, conduct
regular status checks on the efforts of the investment,
marketing, and operational teams and course correct
where a gap is identified.
TACTIC THREE: SECURITY
It is better to have a known enemy than a forced ally -
Napoleon
nowing your weaknesses and how to address them
is as essential to success as capitalizing on
strengths. Most people, and alternatives managers
are no different, are much more comfortable talking about
and devoting attention to improving that in which they
excel. But improving on whats lacking in a business will
yield greater long-term results, as that improvement effort
widens the potential pool of investors who will have less of
a reason to rule out the manager based on shortcomings.
In addition, it forces a manager to take a hard look at the
intellectual and technological inventory of the company,
and work on improving areas that fall short. Its often a
difficult task for an alternatives manager to devote time
and resources to pinpoint whats not going well in the firm,
operationally as well as in marketing, as opposed to
spending a greater portion of time and money on ramping
up the success factors in an effort to deflect or minimize
the weaker areas of the business.
But in terms of marketing to the ultimate consumer, the
investor, the Natixis survey reveals that, unfortunately,
despite two-thirds (66%) of investors globally indicating a
traditional approach to investing is perhaps no longer fit for
purpose, nearly six in ten (57%) say they dont understand
alternative investments and one in two (51%) dont feel
they have access to alternatives as an individual investor,
including 44% of high-net-worth investors. Investors are
hard-wired to identify reasons not to invest, and they often
employ advisors to help guide them in the identification of
these risk factors when considering new investment
managers.
For alternatives managers looking to improve their odds of
winning new assets, it can be helpful to partner for a period
of time with an outsource consultant to help identify these
areas needing improvement, and work together to evaluate
the people, processes, and performance measurements
that need upgrading.
TACTIC FOUR: UNITY OF COMMAND
Soldiers usually win the battles and generals get the credit
for them. Napoleon
he people that are integral to the running of a
business ultimately bear the most responsibility for
its long-term success. This can be a hard truth for
some alternatives managers to accept, as they often
believe that numbers, not people, drive the business at its
core. But people with money invest with people who
produce results. The investment essentially boils down to a
decision on the people behind the performance.
One of the hardest shifts for alternatives managers to
accept has been the dramatic change in investor sentiment
M
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DIANE HARRISON
Commanding Capital: 7 Military Strategies for Acquiring Assets
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PANEGYRIC MARKETING| MAY 2014


from a preoccupation with return to a higher fear of risk.
The Natixis survey, representing a global heat map of
current investor beliefs, makes this clear: the rise in
confidence across many countries coupled with a pervasive
risk-averse attitude could reflect a new normal, in which
increased confidence (in overall market performance) does
not translate into increased risk-taking.

The manager who stubbornly clings to the belief that
performance ultimately trumps all, and remains convinced
that, if you post it (e.g. high returns), they will come, is
putting their business at risk of missed opportunities to
grow assets. The modern-day war for asset growth requires
a new approach, including efforts to amass the right human
capital to build trust and confidence through an integrated
team that resonates with investors.
TACTIC FIVE: ECONOMY OF FORCE
Strategy is the art of making use of time and space. I am
less concerned about the latter than the former.
Space we can recover, lost time never. Napoleon
here is no doubt that alternatives managers of all
persuasions are in a battle for assets that is a
marathon, not a sprint. This requires a systematic
and disciplined approach to gain ground. The marshalling
of forces is perhaps most crucial in the first line of defense,
educating investors. Education that provides a solid base of
knowledge about the sector and its role in portfolio
investments is vital in the early stages of raising assets.

A financial reason for doing so is backed by the Natixis
survey findings: Understanding alternatives is very closely
correlated with investing in alternatives, with a cross-
sectional correlation coefficient of 88%. This is much
higher than for discussing alternative investments with an
advisor. This seems to point to the fact that there is only so
much an advisor can do in talking about alternatives with
their clients; it needs to be the clients who engage and get
an interest in understanding what its all about, before they
can feel confident to invest.
Managers ready to take inventory of their operations and
resource capabilities and embark on the process of first
educating and then marketing to investors will likely
achieve greater gains over the long run. Preparing
themselves and their team for a sustained effort appears to
be a better battle plan than a short-term, high-impact
method. The shift in focus from marketing in a hard-hitting,
widespread way to a strategy that begins with education
designed to teach investors about the ways to evaluate
alternatives is one that managers need to embrace now,
not in the future.
TACTIC SIX: MASS
There are but two powers in the world, the sword and the
mind. In the long run the sword is always beaten by the
mind. Napoleon
nce a manager has decided upon an appropriate
course of action, creating the environment for
achievement begins with planning, followed by
execution. It is a highly correlated process that requires
organized effort backed by sufficient resources to achieve
success. Many a great idea has been stymied by a lack of
conviction in seeing it through, but probably an even
greater number of efforts have failed because they lacked a
planned process for successful completion. Alternatives
managers rarely lack conviction in their abilities, but
perhaps fall short of owning the execution skills to see a
plan through to long-term success. This is one of the main
reasons that assembling a strong team (in-house and
outsourced) is a trait shared by many of the highest
achievers in the industry.
If we return to an earlier description of the beginnings of
modern warfare, Napoleons attacks started with advance
forces leading a skirmish, followed by substantial
reinforcement forces massing in surprise flanking and
enveloping attacks against the enemy. This effort required
the development of a general command staff under
Napoleon. Similarly, an alternatives manager must
embrace the notion of massing directional force and
growing an appropriate chain of command to carry though
the various initiatives, that together, form the overall
business plan.


TACTIC SEVEN: MANEUVER
Victory belongs to the most persevering. Napoleon
T
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DIANE HARRISON
Commanding Capital: 7 Military Strategies for Acquiring Assets
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PANEGYRIC MARKETING| MAY 2014


inally, the evolution of success requires a flexibility to
adapt, both on the battlefields of war or in the
financial trenches. Devising a plan and the means to
execute it also includes having the foresight to change
course or redirect around obstacles as they appear. Dogged
determination to stay the course can work under some
scenarios, but there are times when redeploying efforts and
capital short-term is the better course of action long-term.
The Natixis survey summarizes the dilemma faced by
todays investors: The path forward calls for a change in
investors approach to investing, one that includes a new
understanding of risk and reward, more meaningful
performance benchmarks and disciplined involvement in
the investment process with an advisor who understands
their goals and personal risk tolerance. It is an approach
that manages risk by using it as a portfolio advantage,
rather than a necessary evil of investing. Through
diversification that levers upside and downside risk with
correlated and non-correlated asset classes, investors can
move beyond the risk/return impasse and build portfolios
that aim to accomplish both.
For todays alternatives manager, adapting an approach
that addresses the desires of these investors makes good
business sense. Employing tactics, some perhaps borrowed
from the modern warfare toolbox, can support this effort
through creating an educational environment that
influences these investors and their advisors and moves
both toward a greater comfort level with alternatives
investing. This tactical approach may yield real results that
grow alternatives managers business.
Diane Harrison is principal and owner of Panegyric
Marketing, a strategic marketing communications firm founded in
2002 and specializing in a wide range of writing services within
the alternative assets sector. She has over 20 years of expertise
in hedge fund marketing, investor relations, sales collateral, and a
variety of thought leadership deliverables. Panegyric Marketing
received consecutive year awards in 2013-14 as IHFAs
Innovative Marketing Firm of the Year and AIs Marketing
Communications Firm of the Year- US. A published author and
speaker, Ms. Harrisons work has appeared in many industry
publications, both in print and on-line.
Contact: dharrison@panegyricmarketing.com or visit
www.panegyricmarketing.com.

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