Let’s face it, the last few years have been very difficult for investors and portfolio managers alike. One thing that should have become abundantly clear is the inherent conflict of interest between both parties. When times are good and markets are moving up at a steady pace, investors tend to become complacent and ignore potential pitfalls. However, when the markets turn down and the environment gets tough, investors panic and start to ask the questions they should have asked long before making their initial decisions.
I have the unique benefit of being a portfolio manager while also serving as chairman of the Investment Committee for Rady Children’s Hospital in San Diego. At Rady’s, I help identify investment managers that will complement the hospitals endowment portfolio. Throughout the year managers present to our team and inevitably the first question we ask is, “Do you and your team have a significant investment in the strategy you are managing?” If the answer is, “No” the manager is likely to be eliminated from consideration.