Zeroism and the Allocator Status Quo

Matthew “Eddy” Edwards is, in his own words, “a former allocator, 2x emerging mana
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  1. Avatar for twclix twclix says:

    After almost 20 years marketing “alternative” asset managers to institutions, I have to say that this is, by far, the most penetrating look into the institutional decision making process that I have ever seen. We raised capital for all manner of hedge funds–but, since the GFC, have stuck to the illiquid strategies (PE, VC).

    We are currently marketing a crypto fund, targeted at $600 mm, with no hard cap, so I can report that the facts on the ground, today, are exacly as described.

    Interestingly, demand is coming from the clients of wealth managers and clients of consultants–though mainly wealth managers. Wealth managers cannot insulate themselves from their clients’ willingness to think outside the box. Consultants, on the other hand, are hidebound much more than most institutional allocators–but still have to answer to their clients. The consultants’ discretionary clients, along with the OCIO crowd are certainly not getting recommendations to invest in crypto. The standard refrain is: “we have a bit of exposure through our VC portfolio and don’t really need any more, we’ll wait and see what happens.” Notably, it’s only the non-discretionary wealth managers and consultants clients’ who are putting the pressure on their advisors to check out crypto managers.

    In organizations with diffuse ownership (pension funds, endowments, foundations, insurance companies, and funds of funds to name a few) it’s a circle jerk all the time, all around. But, just like the single guy dancing at the concert, if the institution is serious, there MUST be literally an internal champion for crypto. And this individual can come from different parts of the firm.

    One major public pension fund has the head of their RE activity heading up the crypto team. Why? Usually, it’s because he’s the guy who invested personally and is fascinated with the potential of this new technology. Most of these champions are younger, natch. And most are crypto investors. But there are a few very senior guys who have profited greatly from crypto. In those cases, they have not reached into their own organizations to shake up the complacency. They have made their fortunes and don’t need to upset the applecart in their firms.

    In any event, this article was absolutely 100% spot on. Thanks for writing it, Eddy!

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