Talented Managers Deeply Aligned – What Investors Really Want

While each of these investor missteps are simple enough to identify, avoiding them is a different challenge altogether. In practice, the common incentive structures for investment managers are set by relatively few investors who control large blocks of capital. These investors are typically institutional and governed by a board with a vastly different set of incentives than those of individual investors. These board members must demonstrate that they are diligent in selecting and reviewing managers on a regular basis and that they are judicious in how these managers are compensated. The constraints given to these board members lead directly to the misalignment with individual investors highlighted in part three.

As investors, we must find talented managers capable of achieving alpha and then compensate them in a manner that closely aligns with our goals. These common pitfalls, and the investment ecosystem built around them, are some of what led us as investors to create Tempus. As we sought managers who were deeply aligned with our investment perspective and found few options available, we knew we needed to create a better way. With Tempus, we’ve developed a model that measures risk and returns consistent with our medium to long-term investment horizon. Our model allows us to be patient but consistent, deploying capital opportunistically without attempting to time the market. Our compensation structure is simple and fair, compensating the manager while preserving more of the upside from risks taken for the investors whose capital was at risk.

Perhaps the ultimate alignment between Tempus and our investors is that each of the partners of Tempus are investors first, committing to 10% of the purchase price of each property and then making those properties available at the same price and terms to partners who wish to join alongside. This commitment provides investors who have similar investment objectives with ultimate confidence that their investment manager’s incentives are deeply aligned with their goals.

We hope you enjoyed learning more about investment performance from this series, and we will see you at the next blog!

Dan Andrews
CEO