What Drives Manager Selection: Perspectives by Channel

Alts Leaders Survey 2024 | Research Note #2

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Executive Summary

Manager selection is rarely about just one thing and never about the same thing across all channels. While factors like track record and asset class are broadly important, their weight varies significantly by gatekeeper. These distinctions have real implications for how managers approach product presentation, resource allocation, and engagement strategy. I have received countless inquiries on how to approach distribution firms best. This note offers a window into channel preferences and provides insight into how best to approach gatekeepers.

Manager Selection Criteria by Channel

2024 Alts Leaders Survey

Very Important (1) to Less Important (10)

Key Insights

1. Strong Track Record Is the Common Ground

A strong track record is universally vital. Banks (2.0), National RIAs (1.5), IBDs (1.8), and Independent RIAs (2.0) all rank among their top two considerations, suggesting that credibility and performance history remain table stakes regardless of channel. The abundance of offerings juxtaposed with a limited number of offerings on their respective platforms sets Alternatives apart from publicly traded counterparts. The increasing number of offerings available today allows gatekeepers to be more selective. We anticipate more institutional managers will bring even more offerings to market. A proven superior track record is a must. 

2. National RIAs Focus on Legacy Relationships

National RIAs ranked existing relationships significantly higher than other channels and second only to Track Record. This likely is attributable to the slow cadence and methodical approach to diligence a new sponsor. Given limited resources, the easier path is to approve a second and third fund with an existing firm rather than start anew. Another contributor may be the recent adoption of Anchor Shares, which gives clients an advantage in pricing if firms commit to early participation in a fund and commit significant capital. While Anchor Shares are available to all firms, this approach has been common to this channel for decades. Perhaps add examples.

3. Independent RIAs emphasized structure (2.0).

This phenomenon is connected to operational considerations and compliance limitations. Most software-driving operations at an independent RIA require securities with CUSIP information to update pricing information easily. Managing portfolios as an independent decentralized entity underscores the need for operational efficiency. Independent RIAs are more likely than others to modulate portfolio allocations more frequently than other channels and prefer publicly registered vehicles with mandated liquidity provisions such as Interval Funds as such fund structure becomes a priority.

4. Banks and IBDs Consider More Variables

While still valuing performance, Banks and IBDs showed a narrower dispersion across criteria and similar preferences. A notable difference is the greater focus on fees and existing relationships amongst IBDs. The tighter dispersion suggests these channels may represent more complex approval processes or layered gatekeeping.

Conclusion

The manager selection process differs meaningfully by distribution channel, and so should your approach to these channels.

Many managers still rely on a uniform pitchbook or presentation, assuming what works for one gatekeeper will work for all. Overlooking these distinctions undermines engagement and can sideline even the most compelling offerings. First impressions are critical. Know your audience.

Future research in this series will quantify just how selective the process is:  Only 30-40% of funds make it to the review/due diligence. Approval rates for new offerings are only 4.9% among National RIAs and 6.6% at Banks. When priorities are misaligned, the odds get even steeper.

Adapting presentations to reflect a channel’s specific concerns, whether structure, operational alignment, or asset class fit, is not about altering the investment. It’s about an emphasis on the primary attributes that are likely decision points of your audience.