How Not To Annoy Wealth Firms - Lessons For Alternative Managers

Apr 20, 2017 '

How Not To Annoy Wealth Firms - Lessons For Alternative Managers

All kinds of failures and missteps by purveyors of alternative investments can annoy wealth managers and family offices and yet can be fixed, given the right attention. This article looks at particular failings.

Few offenses are more aggravating to investors in the investor/manager communication process than being misled. Who hasn’t been subject to the frustration of trying to ascertain a clear answer from an alternatives manager about an issue germane to the investor’s ultimate decision to invest or not to invest? Unfortunately, this avoidance practice is widespread and persistent, falling into the passive stance of a sin of omission. So argues Diane Harrison, who is principal and owner of Panegyric Marketing, a strategic marketing communications firm founded in 2002 specializing in alternative assets. She is a regulator contributor to these pages. (More details on the author below.) This news service is pleased to share such insights with readers and invites responses. Email

In the Bible, James the Just describes such a sin as "Anyone, then, who knows the good he ought to do and doesn't do it, sins." A sin of omission is one resulting from not doing something. It is generally used in contrast to sins of commission, or sins that one actively commits. Both forms of sin imply the offender overtly and knowingly understood his actions.

It is often not what a manager reveals that tells the story, but what the manager leaves out. George Lucaci, partner at Mercury Capital Advisors, one of the largest global advisory groups in alternatives, says:
“Transparency is one of the foundations of a good manager. The ability to give full transparency should be inherent and, in fact, integral to the manager's culture. Sophisticated investors must have that degree of comfort from the onset to make the due diligence process productive.”

And there’s a real business and legal risk involved in omitting relevant data. As a former SEC enforcement attorney, Ron S. Geffner, partner and Executive Committee member of Sadis & Goldberg LLP, says: “Not only is it in their best interest from a business perspective to be truthful and complete when communicating with investors, but managers have a legal obligation to be complete and accurate in their responses to investors. They cannot have any material misrepresentation or omissions in their communications.”

Marie T DeFalco, partner and vice chair of Lowenstein Sandler LLP’s Investment Management Group, agrees. “An important thing to keep in mind is the Investment Adviser’s Act “anti-fraud rule,” also known as Rule 10b-5. Managers (registered or not) cannot be misleading when offering securities and cannot leave out information necessary to prevent the information that is given from being misleading. Sometimes, leaving something out or giving it a gloss is certainly misleading. The consequences of such action could be: violation of law and related penalties, rescission, and reputational destruction,” she says.

There is more. For example, Irwin Latner, partner at Pepper Hamilton LLP, offers an example of such omissions. “Some managers may have had a disciplinary event (i.e. been subject to a minor regulatory enforcement action by the SEC, FINRA or other regulator) or even a prior bankruptcy filing. These types of things are normally not outrights frauds or anything that bars them from being an investment adviser, but may nevertheless reflect negatively on them. Though they normally do not purposefully hide this history if asked about it, oftentimes they do not readily volunteer it. In my experience, if it is truly a minor matter which should not impact fund operations (and which may involve mitigating circumstances), the manager is generally much better off volunteering the information to a prospective investor without being asked,” Latner says.

There is therefore a great deal that can be improved upon. While all of the examples below involve an active stance, they are prime examples of the avoidance practice embodied in sins of omission. Alternatives investors are particularly incensed when served up one of these communication fails.

The Sidestep: When unsure of how to answer a potentially sensitive issue or not knowing the intent behind an investor’s question, managers are often guilty of bypassing or avoiding a direct answer. Some of the common pitfalls this tactic is triggered by include questions about an unfavorable performance shortfall, a management or operational weakness within the firm, or fees. Regardless of the focus, investors are never satisfied by the non-answer answer, nor are they fooled by the redirect to another topic without closure to the original question. Practice answering these issues before they are asked, and while the recipient may not like the answer, they will respect the candor.

The bait and switch: Anyone who has ever shopped for a car has seen examples of this sales tactic. Car dealers frequently advertise a product with the intention of persuading customers to purchase a more expensive product once they have the customer in their showroom. While there may have been one car available at the lowball advertised price, the salesman will regretfully inform a potential buyer that it is no longer available, but there are many higher end vehicles in stock that would be far more suitable.

Alternatives funds often include different share classes or “special” deals for early stage investors to encourage the faster growth of a young fund. While performance data for the varying share classes will reflect the differences in fees, managers sometimes will tout the best share class performance even while that share class has been closed to new investors. It’s not generally helpful to show potential investors what they can’t have; being clear and direct with what is actually available for investment is the better way to market.

The red herring: A red herring is commonly considered as something that misleads or distracts from an important issue. It’s used typically by one party to divert attention from the real topic of interest of the other party. Historically, the term refers a particular dried red fish which has a strong and unpleasant odor.

Investors are particularly sensitive to this avoidance tactic when they are unable to get answers to the issues that are most important to or concern them. Fox hunters used to use red herring as a distraction to confuse hounds from catching the fox during the hunt. But if alternatives managers attempt to distract investors from getting to the heart of a sensitive issue, almost assuredly they will suffer the consequences. As Italian lore goes, “the fish stinks from the head.”

The dodge ball: Dodge ball is a game in which players on two teams try to throw balls at each other while avoiding being hit. The action word here, dodge, also refers to a clever or dishonest trick done in order to avoid something. For example, when investors and managers are engaged in a dialogue about alternatives, if the manager ducks a direct answer to a direct question, and simultaneously throws extraneous data or questions back at the investor, it can be said that is a communications dodge ball. Investors generally notice this tactic and are not amused or, more ominously, distracted from their focus.

The brush off: During the course of a manager/investor information exchange, there are bound to be areas of sensitivity that arise for the manager to navigate. Discounting or ignoring an investor’s probe into one of these is always received as a refusal to communicate meaningfully. Worse, this practice creates a feeling of being dismissed or minimalized for the recipient, something no manager should ever strive to achieve. Not only is this tactic disdainful, but it can effectively shut down the conversation when it occurs and prevent the dialogue from progressing further on any topic.

Far more effective would be for the manager to acknowledge the difficulty of providing a satisfactory answer to a sensitive topic, but to honestly try providing as much information as is possible at the time. Some examples where brush offs have occurred include investor probes into areas of pending legal actions, confidentiality involving an investment deal in progress, or a matter of personal nature, such as divorce or illness, which impacts the business.

The drive by: Similar to the brush off, this communication faux pas occurs when a cursory or flippant answer is offered up by a manager that conveys, intentionally or not, a dismissive attitude towards the investor’s right to ask such a question. Stemming from the urban term drive by, describing a gun shooting from a passing vehicle, such communication actions are considered hasty and careless and imply that either the investor was wrong to ask the question or the answer is so inconsequential that a flippant treatment is appropriate for the manager to offer. Neither assumption does the manager any favors in earning the investor’s respect, or investment, most likely.

The smoke screener: This is the crown jewel of obfuscation tactics in communication. When an answer is proffered that is designed to disguise the truth, confuse, or mislead the questioner, the manager is throwing up a smoke screen. Originally coined to describe an action that inhibits enemy observation of military actions, locales, or troop strength, in its communication jargon, it is a deceptive technique that skirts the line of overt lying.

Managers and their marketers have unfortunately become skilled at using this communication sin in an effort to distract from perceived weaknesses or unflattering information, but invariably investors are turned off by having smoke blown in their face when they try to ascertain the truth of a matter. The result makes the manager look glib or dishonest, or both. In the end, sins of omission and sins of commission both should be avoided. But managers who are guilty of committing omissions might just find that it is what they leave unsaid that costs them the deal.

About the author:
Diane Harrison has over 25 years’ of expertise in hedge fund and private equity marketing, investor relations, articles, white papers, blog posts, and other thought leadership deliverables. In 2016, Panegyric Marketing has been shortlisted for Family Wealth Report’s Outstanding Contribution to Wealth Management Thought Leadership and received AI Hedge Fund's Outstanding Contribution to Wealth Management Thought Leadership, M&A's Excellence in Financial Services Marketing Communications – USA, and AI’s Innovation in Alternatives 2016. A published author and speaker, Ms. Harrison’s work has appeared in many industry publications, both in print and on-line. To read more of her published work in alternatives, please visit Contact: or visit

Mar 14, 2024

Capitol Meridian Partners Raises $900 Million for First Fund; Hits Hard Cap

Founder-friendly Capitol Meridian Partners invests in companies at the nexus of government and commercial markets Capitol Meridian Partners (CMP), a Washington, DC-based firm that invests in companies at the nexus…

Apr 19, 2023

Gates-backed MetaVC Partners raises $62m for debut fund

MetaVC Partners, which is backed by Bill Gates, has closed on $62 million for its debut fund to invest in start-ups working with new advanced materials. Besides Gates Frontier, Microsoft…

Mar 02, 2023

Mercury hires Glendower exec to lead on secondaries

Mercury Capital Advisors has hired an executive from Glendower Capital as partner to lead its secondaries advisory effort. London-based Devrup Banerjee joined Mercury on 1 February, according to a statement…

Nov 02, 2022

eWTP Arabia spotlights Arab-Asian collaboration at SuperReturn Middle East

Dubai, UAE: eWTP Arabia Capital, a leading Saudi Arabia and China based growth stage venture fund, is co-sponsor of SuperReturn Middle East, the leading private equity event serving the Middle East…

Jul 12, 2022

Mercury adds US secondaries advisory exec

The adviser and placement agent sees a growing opportunity in the US lower middle market, particularly in preferred equity. Mercury Capital Advisors has brought a new hire over from the…

Jul 05, 2022

Springwater Capital partners with Morningside Capital Management and LSV Advisors in a structured solution of a European portfolio of alternative assets.

Springwater, a leading pan-European special situations investment firm, received a preferred equity investment in a portfolio of European private equity assets with a value of over €100 million. Fresh capital raised will…

Feb 17, 2022

Infrastructure Managers Rake in $124B for
New Fundraising Record

Money poured into infrastructure funds at a record pace last year, powered by factors such as a post-pandemic rebound, a range of potential risk and return options and a wide…

Feb 15, 2022

Mercury Capital Advisors Boosts its US Origination and Distribution Capabilities

Mercury Capital Advisors announced today that it has added James Howe and Michael Dunham as Partners to further enhance its origination and distribution capabilities. Howe and Dunham are based out…

Dec 09, 2021

Mercury Capital Advisors Adds Masashi Hirose and Eugene Park to Growing Team

Mercury Capital Advisors announced today that it has added Masashi Hirose as Partner and Eugene Park as Principal to boost distribution and project management efforts for the firm, respectively. Hirose…

Sep 01, 2021

Gaw Capital Partners Takes Top Spot in APAC Fund Manager Ranking by PERE

September 1, 2021, Hong Kong – Gaw Capital Partners ranked first in PERE’s APAC Fund Manager Guide, a ranking based on capital raised over a five-year period, which shows the top 50 fund managers…

Jul 28, 2021

Mercury Capital Advisors Appoints Michael Ricciardi as Chairman Emeritus

Mercury Capital Advisors (“Mercury”), among the world’s elite global private fund placement and advisory firms, today announced that it has appointed Michael Ricciardi, Chief Executive Officer and Co-founder of the…

Jul 21, 2021

Mercury Capital Advisors Announces Four Senior Hires for Distribution Team

Mercury Capital Advisors today announced that it has added four senior professionals to amplify distribution efforts for the firm. Matthew Haimes, based in London, Jill Cohen and Jennifer Tunney, both…

Jul 12, 2021

10 Biggest Trends Shaping the Next 3 Decades, According to Big Investors

Institutional investors and family offices in a recent survey cite digitization, aging population and climate change as the most important trends that will shape the global economic landscape in the…

Jun 15, 2021

Investcorp partners with 17Capital to structure portfolio of alternative assets

17Capital, the global go-to source of strategic financing for investors in private equity, and Investcorp, a leading global provider and manager of alternative investment products, are collaborating to structure a…

Jun 03, 2020

Opportunity-Zone Funds Gaining Momentum

After a slow start, managers of opportunity-zone funds have been raising capital at an accelerated rate, according to Real Estate Alert’s second-annual review of the sector. Twenty-two sponsors working independently…

Apr 22, 2020

Oaktree Leads Rush of New Distressed Funds Seeking $30B

A wave of distressed debt and special situations funds has hit the market in recent weeks in response to the Covid-19 pandemic downturn, jumpstarting a segment that had dwindled to…

Apr 08, 2020

Crisis Sidetracks Fund Shops’ Equity Raises

The coronavirus chaos is taking its toll on fund managers’ capital campaigns. Operators across the country are postponing initial and final closes, or discuss­ing doing so, as investors focus on…

Mar 20, 2020

PE giants eyeing 2 opportunities amidst COVID

We talked to 14 private-equity insiders about how they’re planning to play the coronavirus turmoil. They identified 2 huge opportunities. Market chaos is creating crises and opportunities. Private-equity firms are…

Mar 20, 2020

LPs Slow Pledges to Debt Vehicles

Demand for high-yield-debt funds appears to have softened in the past year. The amount of equity raised by active closed-end vehicles is down for the first time since 2013, according…

Mar 18, 2020

Investors Tap the Brakes on Fund Commitments

After several years of explosive growth, the market for high-yield real estate funds is slowing. The total amount of equity managed in closed-end funds fell for the first time since…


By clicking on this link you will leave the Mercury Capital Advisors, LLC (“Mercury”) website and be taken to a website owned and operated by third parties. These links are provided for your information and convenience only and are not an endorsement by Mercury or the Mercury iFunds™ platform. Mercury has no control over the contents of any linked website and is not responsible for these websites or their content or availability. Mercury therefore makes no warranties or representations, express or implied about such linked websites, the third parties they are owned and operated by, the information contained on them or the suitability or quality of any of their products or services.