How Gatekeepers Harm Information Flow

Abstract

We have talked about several different approaches to governance, and as you have seen, we favor some and dislike some. As part of all of the approaches to governance, we find a particular mindset creeping in, that of the Gatekeeper. This always includes (or at least so often that we think it’s always) the consultant, but can include the CFO or whoever is the responsible party at the fund. While it makes sense to have a filter that reduces the workload of the investment committee, a gatekeeper is someone who thinks it is their job to keep away all the investment managers and ideas from the investment committee rather than just filter out the truly unreasonable. They are a de facto “pre-decision” maker—one who the investment manager must convince, convert or compensate.