BUILDING TRUST

What the committee viewed as a manager who lost its way, we described as a team determined to restore its pride based on history paired with more recent interactions.

At times, when the conversation became moored in the nominal stressors of the situation, we steered the discussion back to the task at hand and the ultimate goal of the meeting (and portfolio more generally)—the advantages of approaching this long term. But we took however much time was needed to ensure that everyone in the room was heard.

While these tactics quelled much of the initial protestation, and opened the door to a consideration of our view as the meeting progressed, there seemed to be little tangible support for moving in the direction Crewcial was suggesting. The group’s body language, tone, and words seemed to indicate that we could still be headed for a manager termination—selling low—a most unfavorable outcome.

INFLUENCING AND PERSUASION

However, unbeknownst to us through this discussion, our reasoning had gradually built us an ally from one of the quieter members of the committee, well-respected by the group. In the past, when this individual spoke, others listened. Perhaps due to the relative weight of this person’s words from their limited engagement (i.e., whenever they spoke, which was rare, the rest of the committee paid attention, assuming whatever prompted this engagement must be important), perhaps partly due to good timing, and perhaps due to an existing view of this person as ‘the scholar’ of the group, their influence has a profound effect on this committee. This member re-contextualized our argument, approaching the idea of adding to the position as if it were theirs and reiterating our key arguments in their own words, as a fellow committee member. While this may have been cunning, a bit of hubris, or a mix of both—perhaps consciously allowing us to act as a conductor for the group’s collective anger while remaining untainted on their end, while also desiring a state of dispassionate objectivity—their support of the idea broke the stalemate in the room; momentum suddenly shifted towards a more positive outcome. This shift was not about what was said, but who was saying it, and the timing when saying it. We had identified common ground, and we were more than happy to forgo credit for a favorable overall outcome. We had broken through.

RESOLUTION

From our initial goal of adding 50% more capital to the manager in question, the committee agreed to fully double its position size.

From 1/1/2021 to 12/31/2023, the manager annualized at 50.1% net of fees (a 3.4x return in just three short years). It’s rare that a sensible investment decision proves itself in such short order; however, perhaps this instance was a testament to how obvious the decision seemed in retrospect. More recently, this committee readily agreed to right-size the position in light of this performance, trimming back to the 4.5% position it is today.

DEBRIEFING AND EVALUATION

While the role of good fortune cannot be discounted—from an unforeseen ally to the duration, timing, and magnitude of the manager rebound— ultimately the more controllable factors of patience and long-term discipline facilitated success. This was not an easy decision; capitulation becomes tempting in the face of adversity. The temptation was strong to move on to the next ‘shiny new object,’ in this case a similar strategy in the same country—but ultimately an entirely different replacement would have caused this group to sell low and forgo the returns all but ensured by the patience already suffered during the shortfall.

By listening and employing empathy, the committee was heard and respected, while allowed to discuss itself to a place of tempered emotions. And when an ally presented itself, the opportunity was seized, and a path to a beneficial resolution was revealed.