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The 10 Steps to Writing a Pitch Book for Institutional Investors

Speak confidently to the gatekeepers of large pools of assets.
  1. Define - Define pitch book (pitchbook, pitch deck).
  2. Context - Use it in a sentence.
  3. Video - See the video.
  4. Script - Read the first part of the transcript.
  5. Quiz - Test your knowledge.
Paul Alan Davis, CFA, August 10, 2016
Updated: December 16, 2018
How you create the pitch deck depends on your audience. Here the focus is on the management of public liquid securities like stocks, but the pitchbook template can be used for a variety of audiences.

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Pitch Book for Investors (Pitch Deck)

Advanced

Pitch Book is a presentation document, typically created in PowerPoint, that highlights the key aspects of an investment management firm and is used to raise assets from institutional investors. Firms such as hedge funds, mutual funds and asset management firms typically follow a template because reviewers are accustomed to reviewing many documents. Sections typically include: strategy, team, process, past returns, comparisons and disclosures.

Synonyms: pitchbook, pitch deck

In a Sentence

Bev:  I didn't found this firm to sit and watch robo-advisors commoditize relationships.
Ann:  We better create a pitch book for institutions then, or we're dead like dinosaurs.

Video

This video can be accessed in a new window/App , at the YouTube Channel or from below.

The 10 Steps to Writing a Pitch Book for Institutional Investors (54:43)

Video Script

Unlike other scripts in this Glossary, this one includes the first two sections: Introduction and Know Your Audience. This provides a roadmap for the rest of the presentation.

The entire video at 55 minutes is very comprehensive. Please reach out with questions or if you would like help with your investor pitch deck.

Introduction

Welcome to: 10 Steps to Writing a Pitch Book for Institutional Investors, by FactorPad. My name is Paul and I'll be your guide.

The goal is to provide the structure for a presentation to Institutional Investors, so you can confidently speak to the gatekeepers of large pools of assets. This works whether you are presenting a mutual fund, separately managed account or a hedge fund.

We'll start with the investment strategy and firm background. Then for the process part, we'll walk through a very basic stock selection model built with a hypothetical backtest, instead of one with live money. We'll pick it apart like an Institutional Investor would, analyze its performance, and then we'll draw some conclusions and wrap up. Ok, we have a lot to do, so let's get started.

Step 1: Know Your Audience

Here is a simplified depiction of the marketplace I find helpful to zero in on the audience. Think about it this way. Individuals entrust their money to Professionals, and Professionals bundle that and allocate it to Institutions. This is super-simplified, of course, but offers a good starting point.

Here's another way to think about it: sophistication level, low to high. That's basic. And why? Because of the learning curve. It takes time to master the investment business as gains come slowly at first, then with certifications, tests and advanced coursework, knowledge levels pick up until they are refined and mastered.

I'm not telling you anything new here. There's playing the guitar in front of your family, a gig at a local bar, or in front of a stadium of adoring fans, right?

And then fees? Ballpark annual numbers here, but they generally hold true; a low just above zero, to well over 2%.

Let's look at the players in the Professional category, Registered Investent Advisors and a few others. The top three generally are compensated with fees and the bottom three with commissions. This might be where you are now and let's look at where you are headed.

This is the largest target audience we're setting out to impress. And how will we do that? Let's start by covering what those in this group know, almost universally.

First, strategies. For the most part mutual funds, SMAs and hedge funds fit in one of several dozen strategies defined by Morninstar, or other third-party databases. You can't come up with a product that won't be pigeonholed into a strategy.

Next, the team. Well, you may be impressed with your 16 PhD's on staff, but Institutions have seen academics blow up funds, so you'll need to pitch more than just credentials here.

Next is the process. Institutions have seen everything, bottom-up, top-down, global macro, quant, systematized, subjective, technical, and we'll walk through an example of how to describe a process to this audience.

Institutions will require you have a benchmark so they can keep tabs on you from a risk and return standpoint.

And speaking of comparisons, what is your peer group and who keeps tabs on it? Mutual funds are covered by Lipper, and eVestment covers pension investments. And for your hedge fund, there are dozens of databases.

Next, returns. How you present returns is vital, and we'll cover suggestions. No longer will you be able to present data for one point-in-time. Institutions want more. And while a track record of real money is best, and preferably one that's been live for 5 or 10 years, many times a hypothetical track record is all you have, so here we'll look at the more difficult example, a hypothetical.

And perhaps the greatest differentiator between Professionals and Institutions is the ability to reliably measure and manage risk. This is an opportunity to rise above your competition so we will spend time here.

Next, disclosures. How you handle legal disclosures may be glossed over at the Individual level, but Institutions do this for a living and they will read the fine print.

And that takes us to our last point, due diligence. Institutions have the resources to specialize. Their jobs depend on their success in evaluating managers. They cut right through salesy, image-filled presentations and focus on the quality of their recommendations.

Okay, now that we know our audience, let's move on to Step 2.

(Please watch the video for the remainder of the presentation)

Quiz

Click box for answer.

The standard pitch book contains how many pages. | 1-5, or 6-10, or 11-15, or 16-20?

11-15

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