Many investment managers are baffled by what asset allocators want, or simply don’t think of them. If you want to raise and retain institutional capital, you succeed when allocators, the gatekeepers of institutional capital, understand your story, trust your process, and see that you match their mandate.

In this article, you’ll learn how allocators think, what they ask, and how to position your firm as a winner.

Why Allocators Matter

Allocators decide which investment firms and strategies to select for billions of dollars in pensions, endowments, foundations, and family offices. Your ability to make their job easier becomes a competitive differentiator. If you manage money for institutions, you sell trust as much as performance.

Allocators compare quantitative data, to be sure. They compare how you think about risk, how you manage your business, and whether you can support their internal narrative to an investment committee.

Many institutional investors say qualitative factors such as team stability, governance, and transparency rank as highly as past performance when selecting managers. Investment managers must know their story and why and how they are different.

Allocation decisions are often made by chief investment officers, portfolio managers, and research analysts.

Within an organization, allocators translate high‑level strategic decisions into manager choices, then monitor performance, operations, risk, reporting, and relationship management. Allocators must ensure defensible outcomes for beneficiaries.

20 Questions Allocators May Ask

Many allocators could ask you the same questions to get to know you, compare you with peers, and explain you to their committees. It’s best to be prepared with short and direct answers. Understanding how to answer these basic questions can help you stand out.

Investment philosophy and process

1. What’s your core belief that drives strategy?

Why it matters: Allocators want to see a philosophy that guides your decisions, so they can judge whether your results are the product of design or luck. They also need to decide if your strategy complements or duplicates what they already own.

How to respond: Instead of making a broad claim like “we are long‑term, fundamental investors,” explain the inefficiency you target and how it shows up in positions and holding periods. Tie your strategy directly to long‑run patterns in your track record.

2. How do you see your strategy fitting within our overall portfolio?

Why it matters: Allocators select managers to play roles, and sometimes to simply sit in a style box. They need to justify how you may improve their diversification profile and performance.

How to respond: Explain the job your strategy can do to help them. Is your strategy best as a core portfolio, an aggressive growth driver, a downside protecter, or a specialist sleeve designed to protect a core portfolio? Show that you understand the kinds of managers they already own and how your strategy will behave next to those holdings in different kinds of markets.

3. How do you source and screen ideas?

Why it matters: Allocators don’t like surprises. They need to know where your ideas come from, what you research and why, and how you avoid style drift or one-off investment selections.

How to respond: Most managers love to talk about their process. Many can go on and on. They may have built their company on the process. While details matter to allocators, so does conciseness.

Many managers struggle to explain their process without wandering or contradicting one another. Start by agreeing internally on a simple, step‑by‑step version of your idea funnel and explain it. Keep your story to a few steps, and make sure your marketing material and prospectus all say the same steps. Your executives, portfolio managers, analysts, and sales team should describe your process with allocators the same way in a few minutes or less.

4. How do you construct the portfolio?

Why it matters: Decision-making allocators must understand how your construction choices affect diversification, concentration, correlation, position sizing, and drawdown potential within their total portfolio mix.

How to respond: Be prepared to spell out your rules on typical position sizes, maximum weights by sector, factor, or theme, and what makes you increase or sell a business from your portfolio.

5. How do you manage liquidity and leverage?

Why it matters: Allocators need to understand how your portfolio could be hurt by margin calls, derivatives, or your inability to sell quickly.

How to respond: For managers where this is applicable, share how much cash you typically hold, and show an example of how you have handled redemptions or margin calls.

6. How do you measure risk?

Why it matters: The allocator team must reconcile your risk views with their own models.

How to respond: Start by describing how you define risk and the metrics and limits you use. Avoid equating risk with standard deviation. Give examples of decisions you changed based on your risk analysis.

7. How do you expect your strategy to behave in different markets?

Why it matters: Allocators need to set expectations for the people they report to. They care less about avoiding all drawdowns and more about knowing when, why, and the extent to which they may occur.

How to respond: Be prepared to explain how your strategy has historically behaved when stocks are booming, when interest rates jump, or in other scenarios. Spell out how much you’ve typically lost in past sell‑offs versus the broad market, and how long it took you to get back to even. Talk about a case where the strategy behaved the way you said it would. Then say what signs would tell you it is not behaving as expected, and what you would do next.

8. What is your sell discipline?

Why it matters: Allocators learn how you operate when they hear real stories about when and why you sell. Case studies reveal your judgment, humility, and ability to learn.

How to respond: Select examples that show your sell process and outcomes. Walk through the rules and steps you take when you decide to sell or trim holdings.

Investment team

9. Who makes final investment decisions?

Why it matters: Investors must know the true decision makers. They also need to understand who is accountable if results fall short of expectations.

How to respond: Yes, you can say you have a highly collaborative team that learns from each other. But also say how traders, researchers, analysts, and portfolio managers work together, and what happens when they disagree.

10. How do you hire, develop, and retain investment talent?

Why it matters: Confidence can increase when allocators see many motivated, skilled professionals who have worked together for many years. High turnover can mean there’s something wrong with your culture or business plan.

How to respond: You can talk about the credentials of your talented people. They all have exemplary work experience and matriculated from the finest of universities. But so what? How does that differentiate your people? Better to tell stories of why your people have chosen what they do, and what motivates them now.

As to how you develop and keep great talent, explain how you mentor, and how your culture is great. Describe succession plans, cross‑training, and partnership track.

11. Who owns the firm, and do you invest alongside your clients?

Why it matters: Allocators want to know you are on the same side of the table they are. They worry about firms whose executives have no skin in the game.

How to respond:  Say who owns the firm, who has control, and how key people are rewarded over the long term. Describe how much money the investment team has in the strategies personally, and co‑investment requirements, if any. Explain how bonuses and equity are tied to following the process and delivering long‑term results, or other factors.

12. How do you keep the investment team learning?

Why it matters: Allocators want to see that you seek to improve.

How to respond: Explain how you share lessons from investment wins and mistakes, and highlight any post‑mortems you’ve done.

Operations and compliance

13. How do you handle business continuity and cybersecurity?

Why it matters: Operational failures can damage your reputation, and by extension, the allocators who have chosen you. Allocators need confidence that your operations can support their trust.

How to respond: Instead of saying “our ops are robust,” describe your business continuity plans, backup plans, and cybersecurity controls. Do the same with how you manage your vendors.

14. How is your compliance structured?

Why it matters: The firms’ allocators must treat compliance as a top priority. Being open about past compliance issues, even minor ones, and how you addressed them, can build trust.

How to respond: Explain whether your compliance is in‑house or outsourced, who the chief compliance officer reports to, and how long you’ve worked with your legal and compliance team. Describe your code of ethics, monitoring program, and staff training. Outline how you identify and solve potential issues, and how you inform clients.

15. How much customization will you do?

Why it matters: Decision-makers may have unique constraints about ESG, benchmarks, or liquidity. They need to know where you can adapt and where you cannot.

How to respond: Avoid promising “we can customize anything,” which can worry allocators. Set limits on what you are willing to customize and what you will not change.

16. How do you handle onboarding new clients?

Why it matters: Allocators worry about what may happen when you bring in new people.

How to respond: Explain how you bring a new institutional client on board. Describe typical timelines, who leads the transition, and how you coordinate with custodians and prior managers.

Reporting and communication

17. What does your reporting look like?

Why it matters: Allocators need accurate, transparent, and timely data to brief their board of directors and regulators.

How to respond: Describe what your reporting looks like. Say, for example, that your clients receive a monthly (or quarterly) report with full holdings, performance versus benchmarks, attribution analysis, risk by sector, factor, or theme.

18. How do you communicate when markets go down?

Why it matters: When markets are volatile or mostly negative, not communicating can damage trust more than short‑term losses. Allocators need to know that you are doing what you said you would do, and that you have a handle on risk, positioning, liquidity, and other key issues.

How to respond: Say what happens during a drawdown, like how soon they can expect a call or note, and how often you’ll update them if market volatility persists. Don’t merely say, “we’ll be proactive.”

19. What technology do you use and why?

Why it matters: Investors look for managers who use technology that helps sharpen their human insight. They may not care to hear a list of vendors you use.

How to respond: Describe how your tools fit into research, trading, risk, and reporting, and how they talk to each other. Explain how you check data quality, and avoid reliance on black boxes.

20. What is your investment capacity?

Why it matters: Allocators want to know you will adhere to your investment objective and protect clients. They don’t want to see you stretch your strategy to collect more fees.

How to respond: We’ve had some clients who were surprised by this question. Be prepared to discuss the maximum size your strategy can effectively manage within a reasonable range, and how you got there.

Also, be ready to explain when you would stop taking new money: the point at which you would first slow or pause new inflows (a “soft close”) and the point at which you would fully close the strategy. Describe how you would communicate your decisions and how you would make sure existing clients can maintain or add to their positions even as you limit access for new investors.

In Summary: What Allocators Want

How do investment managers win an allocator’s confidence? Have a great story and tell it well. Be prepared, knowledgeable, brief, transparent, and make the allocator’s job easier.

Schedule a complimentary strategy session with Dan Sondhelm, CEO of Sondhelm Partners, to learn how to win more allocations.

Frank Serebrin is the Content Marketing Director for Sondhelm Partners. He leads strategic and creative content and marketing services for our asset management and wealth management clients.