Editorial: Long-Term Thinking

A letter from aiCIO's Editor-in-Chief Kip McDaniel on the magazine's 40 Under 40 list, a representation of "the very best of our target audience’s youthful tail."

It is both easy editorially and tempting business-wise to relegate the asset owner to second-rate status with lists such as our 40 [Mostly] Under 40. While beneficial owners may defer, those wishing to sell something to those owners will almost always speak, and while neither the State of Wisconsin Investment Board nor Wake Forest nor Boeing will be placing advertisements in our magazine anytime soon, those wishing to reach those capital pools will.

You’ve undoubtedly seen the outcome of this tension in other magazines: “The Best Manager You’ve Never Heard Of,” “Fund Manager of the Year,” “Top Equity Analyst Team,” and so on. They might be interesting, but they’re often a sop to advertisers—and, I would argue, aren’t nearly as interesting as what we’ve produced here. 

With our 40 [Mostly] Under 40, there are subtler details at play. Taking into account some vagaries of local situations (some asset owners are quickly becoming asset gatherers, of course), this list represents the very best of our target audience’s youthful tail. In one sense, we’re playing a long game here, betting that the value of providing peer insight is more beneficial to our audience than providing a list viewed as a potential sellout to sponsors.  

There is precedent here, however, and it comes not from our fellow magazines but from the asset managers we are largely ignoring in this issue. The very best managers of the past decade (and the next one, I suspect) have viewed the courting of pension, endowment, and sovereign fund capital as a long-term enterprise. They don’t march into a CIO’s office and pitch a product that may not even fit into the fund’s current portfolio. Instead, they invest heavily in client-relations teams and in providing world-class research to the people they think of more as partners than clients. They invest in gaining the insight necessary to know a fund’s board members (those men and women who often have the final say) and consultants (the gatekeepers, although this, perhaps, is changing) and key influencers, and in customization. They are, in essence, betting that a larger investment at the beginning of the asset-gathering phase will reap outsized benefits at the end of it. 

In honor of the few who are committed to true long-term investment, perhaps we should list exemplary money management firms next. But then again, the firms themselves would likely view this as short-term thinking—the antithesis of their business models. So perhaps we won’t. 

–Kip McDaniel