TOPIC: SOURCING MANAGERS
How do you source new managers?
Over the years, we’ve used a variety of methods to source new managers.
Initially, we source through referrals, word of mouth, existing managers, other third party marketers, or personal networks within the industry. We’ve had poor results when screening industry databases.
The vast majority of our successful partnerships have come through our network of industry contacts and referrals from current and former clients.
Finding interesting, impressive managers has never been a problem for Arrow Partners. Our greatest challenge has been to find those managers whose business philosophy and long-term goals dovetail with ours.
What does Arrow look for in a manager?
We evaluate managers using the same criteria that investors and consultants use; essentially, looking at managers through the eyes of institutional investors.
On a qualitative level, we look at their strategy, what sets them apart, and what it is about their processes that will provide stability and consistency in the future.
We want a manager with “staying power;” one with whom our business will have synergy.
Arrow Partners wants to see a track record that shows a consistent ability to outperform their benchmark and against their peer group. Our preference is, and always will be, to work with good stock pickers.
We know we’ve found a promising manager when we ask ourselves: why haven’t we heard about these people before now?
In other words, we appreciate under-the-radar firms that employ great people and winning strategies, but suffer from poor or non-existent marketing.
Do you work with single product firms or multi-product firms?
Generally speaking, our mandates are for single strategies.
When partnering with multi-product firms, we typically begin by working on marketing one product only. Over time, our mandate may expand to include other products as well.
But at the end of the day, Arrow Partners has found that our best results happen when our managers focus on the one thing they are really, really good at, undistracted by weaker strategies or secondary products.
TOPIC: HOW DOES THE RELATIONSHIP WORK?
How long is a typical contract?
It depends. When Arrow Partners is evaluating a manager, we repeatedly ask ourselves, “Can we raise significant assets for this manager over a 3-5 year time frame?”
As a result, the typical contract length reflects that line of thinking. 3 to 5 years is usually necessary to fine-tune the manager’s story, tactically meet and educate the marketplace about the manager’s value proposition and record, and develop the sales pipeline to achieve our goals.
Why do you require “exclusive” assignments?
We need exclusivity if we are to effectively execute a methodical sales and marketing program that generates momentum within a channel and leads to sustainable activity and growth.
Arrow Partners is typically hired because a firm’s existing sales effort lacks either resources or a successful track record.
In either case, what’s needed is time: time to enhance the story, time to develop appropriate materials and tools, and time to position the firm in the marketplace. Exclusivity provides the commitment we both need to successfully execute our time-tested and successful strategy.
In addition, Arrow Partners would not represent competing products at the same time.
How are you compensated?
Because our principals have sales backgrounds, we are accustomed to incentive compensation.
Although we provide a wide range of sales and sales support services, we only subsidize these costs with a low fixed annual budget. Why?
Arrow Partners has the confidence and track record of successfully drawing assets to our clients. As a result, we are perfectly happy with a compensation arrangement that weighs heavily on performance metrics.
What happens when a relationship “does not work"?
Whether business or personal, bad relationships are a waste of time and money (not to mention the opportunity costs).
Arrow performs extensive due diligence upfront, relying on many different datasets, including (for example) feedback from prospective investors. We use such information to strengthen existing relationships and form realistic expectations.
In our experience, relationships between third party marketers and asset managers frequently break down over unmet expectations and unclear communications. That’s why we try to set realistic expectations that are based on our track record and knowledge of the industry.
If circumstances or market conditions change, re-positioning or an altering of expectations may be required. If we cannot come to an agreement with the client over these new expectations, we may unwind the relationship. This typically happens over several quarters.
To avoid major relationship surprises, the burden is on both parties to keep lines of communication open and honest.
It is not unusual to have ups and downs in a sales process (under-performance and failing in the final presentation are not atypical difficulties). In such trying times, it is vital for both parties to remain respectful and confident in each other’s abilities.
Do you handle client servicing?
We are sales and marketing specialists and believe that client servicing requires a different skill set.
Although we do assist with client service at a higher relationship level, our clients usually have internal client service associates. If not, we may help them find the right resources to handle the day-to-day client servicing.
Client servicing is an interesting area of potential growth for Arrow Partners. As such, we are always evaluating the feasibility of adding it to our roster of services.
TOPIC: STATISTICS & MEASURES
How have your sales processes improved over time?
Our focus has greatly improved. Arrow Partners is now entirely dedicated to the US institutional market. We understand our segments and buyers better, as well as the markets, clients, and tools required for success.
We’ve also gotten better knowing what we do best:
• product positioning,
• direct sales, and
• outsourcing sales support resources (material design, RFPs, database maintenance) to outside contractors who can provide these services faster, better and cheaper than we can.
In addition, our automated processes have improved, which helps produce results that are more predictable and repeatable. It also provides us with the confidence to look ahead and consider adding sales and support staff at the firm.
Some examples of our improved sales processes include:
• a more complete and user-friendly CRM,
• templates for the sales deliverables,
• tracking systems for the information we send out to improve targeting, and
• prospect probability rankings.
What are the biggest mistakes you have made and what preventative measures have you taken?
Our biggest mistakes have been:
• pursuing clients whose needs didn’t dovetail with Arrow Partners’ core competencies;
• spreading ourselves too thin with either too many managers or too many channels to effectively cover; and
• staying too long in a bad relationship
We’ve avoided these mistakes in recent years by
• focusing on the US institutional market,
• developing more stringent criteria when initially evaluating potential clients,
• improving and broadening our quantitative measures of momentum, and
• doing a better job of routinely evaluating and communicating the progress in the relationship
Have you ever represented the same manager twice?
On two separate occasions, former clients have retained Arrow Partners to rejuvenate a sluggish sales effort on behalf of a new product. Given our prior history with each firm, it was quite easy for us to jump back in, establish an efficient tactical effort and deliver quick success.
TOPIC: ABOUT ARROW
How many managers do you work with at a time?
Based on our current size and available resources, Arrow Partners’ optimal active client roster is 2 to 4 clients. Such a limited roster provides us with a strategy diversification that enables us to remain focused and committed to goals of each manager.
We tend to be focused on capacity-constrained asset classes and will not take on any competing strategies that may conflict with one another.
Do you work with “emerging” managers?
Emerging managers tend to be smaller, more focused, and in the greatest need of our particular expertise, so they’ve been a natural source of opportunity. Our emerging manager clients have been among our most successful stories to date.
We like managers who have strong institutional characteristics but are not well-known or remain beneath the industry’s radar.
We are less interested in working with managers that have been around a while and are in need of repairing a broken image or re-branding.
In What market segments or geographical areas does Arrow have particular strengths?
Arrow Partners focuses exclusively on the US market.
Because they are the gatekeepers to the institutional market, Arrow Partners spends approximately 80% of its time marketing to Investment Consultants, sub-advisors, and Registered Investment Advisors. The remaining 20% of our time is spent directly with large institutional investors.
What is your competitive advantage vs. other third party marketers? How are you unique?
Arrow Partners offers a proven, cost-effective sales and marketing solution successfully used by investment managers.
Arrow has a raised more than $2 billion in incremental assets, and generated more than $50 million in incremental revenues for its manager clients.
Our skill comes first and foremost in extracting a manager’s story, capturing their value proposition, and determining a uniqueness that will allow them to stand apart.
In addition, once we’ve developed the story and created the marketing and sales materials, Arrow Partners has effectively and repeatedly helped our clients in how best to communicate their story to investors. We provide continual direct training and feedback.
We rigorously manage the prospect pipeline, find the prospects that will eventually be buyers, and eliminating those who are a poor fit for our client.
Does Arrow Partners have an internship program?
Yes. Every summer since 2007, the firm has brought both paid and unpaid interns aboard. Typically, interns are involved in several important projects, including database management, performance analysis, creating HTML templates, research, editing and composition of graphs, charts, and reports. Applicants should send a resume, college transcript, and cover letter explaining their interest in the position; specifically, how an internship with Arrow Partners fits into their academic study/future career aspirations.
We have hosted interns that attend or attended a diverse group of schools including: University of Pennsylvania, UCLA, University of Michigan, Brown University, Vanderbilt University, Providence College and University of Rochester.
TOPIC: SALES SUPPORT & EXTERNAL RESOURCES
How up-to-date is the database Arrow Partners works with?
A few years ago we decided our database required some updating.
We currently have 7,000 names in the database, so we spent a lot of time making calls, purging outdated contacts, making changes where needed, and all manner of updates.
We estimate that at any given time, our database is close to 95% accurate.
Does Arrow Partners play an active role in the industry?
We are a founding member of the Third Party Marketing Association, and we continue to play an active role.
In the investment industry, we never stop networking and deepening our relationship base. We maintain day-to-day interactions with consultants, investors, managers, and other 3PM firms.
We believe these interactions keep us on our toes and apprised of any and all industry trends which may affect our business, and that of our clients, now and in the future.