The Annual Meeting: Where You Sit is Where You Stand
You have arrived as a money manager when your annual meeting or investor conference is no longer held in your conference room. There are, however, two caveats to this rule. If the meeting is held at the Holiday Inn Express conveniently located by the airport, I’m sorry to say you’re still toiling in the backwaters of the industry. And if you book your annual meeting in Phoenix in the middle of July because you can get a good rate on the meeting space, you’re not going to have investors for very long.
However, if you hold the meeting for your investors in the finest hotel in a world capital or exclusive resort (in season), host the dinner at a five-star restaurant, and hire a public intellectual or famous ex-politician to speak, you’ve made it. You’ve gotten to the point where you can spend hundreds of thousand of dollars of your investors money on telling your investors as little as possible about how their investment is doing.
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As an institutional investor, I’ve found these meetings to be the biggest waste of time and the most useful opportunity all rolled into one. It’s a misuse of time because a well-constructed annual meeting sticks to a carefully rehearsed script. Every presenter, whether he’s the CEO of a portfolio company or a hedge fund manager, has been coached to only reveal information that has already been communicated in the firm’s sanitized newsletter and financial results. I suppose I might pick up a useful clue from the presenter’s body language, except that media experts have sculpted the performance. It doesn’t help that I’m drawing all over the meeting materials.
If the performances are canned, perhaps the obligatory Q&A will unearth some nugget. The annual meeting isn’t designed to allow this to happen. If your investment performance is good, half the audience will prefer to retire to the salon for coffee and pastries, and the other half will want to know when you’re going to raise your next fund, and if they can get an allocation. On the other hand, if your performance is bad, you’ll construct the conference so that the time for questions is crowded out by those banal presentations. Of course, if you’re truly desperate to avoid a nasty interrogation, you can always schedule the annual meeting in Phoenix in July.
As a money manager, your biggest worries are those breaks in the action when your investors and your team mingle over cucumber sandwiches or bruschetta stuffed mushrooms. Those informal gatherings were the most useful due diligence opportunity when I trekked to annual meetings. My goal was to get as far away from the ears of the bosses as possible and engage a portfolio company CFO or obscure portfolio manager in conversation. This was never an easy exercise, because those folks had been warned about guys like me.
After many hours of speakers and PowerPoints, the next item on the schedule is the gala dinner. You’d think that an endless supply of fine wines would loosen tongues and provide the intrepid investor with unscripted insights. If the dinner is held in a museum or old home, the docent’s tour is the highlight of the evening, followed on occasion by a thoughtful speaker. And those speakers had better talk about something other than investing, or it's better to head back to the hotel early.
Investors aren’t allowed to sit just anywhere at one of these meals. However, a large investor, or one considering becoming a large investor, needn’t consult the seating plan. They’re going to be sitting at the main table with you, your most senior colleagues, and the guest speaker. When I represented a large investor, I automatically sat at that table. If we invested enough money, I was seated at the right hand of the money manager himself. If we failed to commit to the manager’s next fund, I was assigned to a table next to the kitchen door.
If you’re planning one of these dinners, you might be a bit more astute about the seating arrangements. The table by the kitchen door was often the most useful seat in the house, because as an investor, I usually learned something useful from my dinner companions as the doors flapped open and closed.
As you can see, the annual meeting is largely a waste. However, investors don’t mind being wined and dined or spending an extra day seeing the sights or skiing the slopes. There is one more opportunity to get something useful out of this extravaganza. It’s the ride to the airport. An investor should, if possible, share a taxi with one of the presenters at the annual meeting. You’d be amazed what you can learn while stuck in traffic on the BQE.