I feel fortunate to be invested with some of the best managers worldwide. I like to stay invested for as long as possible with minimum turnover — at least many years if not decades — and thereby be the kind of stable, patient and understanding money that every manager comes to appreciate. If not, I probably made a mistake in the first place or circumstances changed in an unfavorable and unforeseen way.
That being said, I am constantly looking for new discoveries. Unfortunately, that cannot easily be achieved through a search on Google or Bloomberg. I tend to stumble across my managers in random fashion and rely on a network of well-informed investors and business partners to point them out to me. Sometimes they also find me and I wish that would happen more often. Here is what I look for and what I do not:
I am decidedly unimpressed with size, a large institutional following, complicated processes with lots of boxes and arrows, armies of analysts, overdiversified portfolios, centuries of “accumulated investment experience” — or a senile board of directors for that matter. Instead, I look for analytical skill, independent thinking, authenticity, fairness and a focus on results instead of AuM — preferably, and that is crucial, concentrated in one or a few individuals only. Don't even try to convince me of the grandiose merits of collective investment decision-making — I won't buy it!
On the other hand, there is nothing wrong with being small, unknown, unconventional or otherwise “different” if you are a true investor. I don't mind if your track record is short since I place little confidence in time series below 10 years in any event. If I like you, your approach and your setup and if I am able to understand what you are trying to tell me I might get very interested. If your track record is long and statistically robust, it needs to be superb or you had better demonstrate supernatural salesmanship.
I don't harass my managers with questionnaires or ritualized conference calls — meaningful monitoring depends on the situation and the person, not on fixed routines. And I don't question them immediately after a period of disappointing results — something that happens to every good manager sooner or later. Managers who never underperform are unlikely to outperform over the long run — those who shy away from betting against the consensus rarely achieve more than mediocrity. And that, unfortunately, is not enough, because average is equivalent to nothing.