As a few people have noted, mandate / LP concerns are a constraint for many managers... https://twitter.com/shortsightedcap/status/1317834480271429633

This is absolutely correct... if you’ve been hired to do X, and X stops working... your hands are tied.

You can’t adapt without alienating your LPs. But if performance underwhelms, you’re probably getting redeemed.

And, if you do decide to pivot, investors have to re-underwrite their allocation to your new strategy.

Like why are you best suited to executing on XYZ new approach?

Such constraints add a ton of organizational risk (assuming you’ve built your org around a certain sector / factor / style box).

To be clear, there’s nothing wrong with this! You can build a very successful business just by being in the right place at the right time.

If investors want [exposure], and you provide [exposure], you’re fulfilling a client demand.

As I’ve said before, I believe *most* asset managers are momentum based organizations. If you start getting redemptions, you’ll start seeing brain drain, decrease investment spending to maintain profits, etc. A death spiral.

I respect funds that have successfully sold LPs on a process sufficiently adaptable that they can survive a regime shift.

(And are mentally flexible enough to execute accordingly)

The downside is that it’s harder to raise money in the first place... Your mandate is wider. An LP is trusting your judgement (vs their allocation decisions). The potential tracking error is higher (probably, depending on how you manage the fund).