New trend: the management funds
I predict that there will be a new trend soon. It is what I would call management funds. My idea is that as as a result of the crisis, banks, hedge funds, governments end up owning and having to manage businesses and have no clue of how to do it, very able managers will be in short supply. Managers will then say. “Ok, I will manage your business, but don´t pay me a salary. Now it´s my chance to get 20% of the upside”.
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Posted on General | 1:45 pm
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Posted by Philipp - December 8, 2008 2:37 pm - #
Hi Martin,
I couldn’t agree more. I also believe that people with a broader skill set will be in demand. Just approaching investments from a financial engineering perspective will not be enough. A thorough understanding of consumer and brand dynamics as well as operations – in combination with finance skills – is the way forward.
Always enjoy reading your blog!
Saludos,
Philipp
Posted by Mariano - December 8, 2008 2:53 pm - #
Martin, I hope you’re right, as that’d be a great exit option for us management consultants!
Posted by Martin - December 8, 2008 3:12 pm - #
We have been doing that in Argentina and Uruguay for a while now, with 2 rules: working with real assets (forestry, vineyards, construction) and with no debt, all fully funded by investors.
Business is going on as scheduled, the model of healthy, conservative projects without debt is standing up to the tests it was conceived for: the trees are growing, vines being planted, buildings built and sold within budgeted parameters (somewhat slower, but OK). Life is going on, without value destruction.
Posted by Julien - December 8, 2008 4:59 pm - #
I had preceisely the same kind of feeling this morning, for VCs : not more carried interest. I am expected that they lose the carried interest vbut get a higher percentage of the fund’s benefit.
Posted by Steve - December 9, 2008 12:47 am - #
In response to Mariano, is it a realistic option to have consultants manage businesses (other than consulting firms)?
It seems to me like putting mechanics to race formula 1 cars . . .
Posted by LAG - December 9, 2008 8:32 am - #
Indeed. This is something that has great potential.
@Julien – you’re assuming the VC’s have operating experience. Which in most cases is zero to none.
Posted by jpistrui - December 9, 2008 9:37 am - #
Martin,
Your proposition is an interesting one. However, my experience suggests that the type of manager you identify is in short supply. Most managers fall into one of the following three categories; manage the effeciency agenda, manage the turn around agenda, and manage the growth agenda. It is the latter group which will be needed in the near term, and most of the managers with those capabilities are building there own companies and will unlikely be to engage in the relationship with a “management fund” type organization.
Joseph
Posted by Matias Paterlini - December 9, 2008 6:39 pm - #
Well, I would Ask half of the salary and a 10% of the upside… But as we say in Argentina I want the pig, the 20, and the sausage Making Machine…
Matias
Posted by Nair, Kris - December 16, 2008 4:52 am - #
Bang on!
I’m doing it with a firm doing business in Europre and Americas. The ‘Outsourced CEO’ way
No salary + 25%