For those of you guys on the principal side, and probably brokerage as well, how do you approach investing in deals outside of your shop?
For context, I've sourced a deal that doesn't fit my shop's typical target profile and we are most likely going to pass on it within the next week. It's an asset class that we acquire, but the overall deal profile is too stabilized for our return criteria as a group. It's still a good opportunity and I'd love to syndicate/source it out through my personal network.
The personal vs "work" investments conversation seems to be viewed as pretty taboo across the industry. Just looking for advice/warnings/stories from people with experience from similar situations.
When it comes to investing in outside deals, especially those that don't align with your firm's criteria, there are a few key points to consider based on the most helpful WSO content:
Understand Your Firm's Policies: Many firms have strict policies regarding personal investments, especially in deals related to the firm's industry. Ensure you are fully aware of any non-compete clauses, conflict-of-interest policies, or disclosure requirements. Transparency is critical to avoid jeopardizing your professional standing.
Maintain Professional Boundaries: While it's tempting to syndicate or source deals through your personal network, be cautious about how you approach this. Avoid using your firm's resources, contacts, or reputation to promote the deal unless explicitly permitted.
Leverage Your Personal Network: If your firm passes on the deal and you have the green light to pursue it personally, focus on your personal connections. Mentioning in casual conversations that you’re working on deals with a few investors can help you build interest without crossing professional boundaries.
Be Nimble and Independent: As highlighted in WSO discussions, side deals often require a different approach. You’ll need to rely on your own judgment, resources, and network. This can be an opportunity to showcase your ability to operate independently and make sound investment decisions.
Project Good Judgment: The investing business is all about judgment, and projecting good judgment in every aspect of your life is essential. Poor decisions in non-work-related domains can have professional repercussions, so ensure your actions align with industry standards and ethical practices.
Seek Advice from Trusted Mentors: If you're unsure about the etiquette or potential pitfalls, reach out to mentors or colleagues who have navigated similar situations. Their insights can help you avoid common mistakes and approach the deal with confidence.
By adhering to these principles, you can navigate the complexities of personal investments while maintaining your professional integrity.
Sources: Networking as a woman - my experience and questions, Network (In)to The Sell-side - How to Source Job Leads and Charm the Interviewer, Q&A: Buyside women, Q&A: Commercial Real Estate, Networking 101 – 8 tips from a “non-target” school student
bump, am in a similar position
”The personal vs "work" investments conversation seems to be viewed as pretty taboo across the industry. Just looking for advice/warnings/stories from people with experience from similar situations.”
Not sure how to quote original posts anymore (this site’s formatting gets worse with every new iteration), but this is not my experience. Or at least not exactly.
When I worked at a multifamily development shop, at least half of the office, if not more, did deals on their own at some level: retail outparcels, land plays, townhomes, etc. If anything, it was looked highly upon, because by doing your own deals, you were a “real developer.” You “got it.” You were being entrepreneurial with your money.
Now the one caveat of course is that none of us were doing our own 300-unit wrap apartment deals on the side (only the owners had that kind of money anyhow) so we were not direct competitors, but if your bosses specifically pass on a deal because it does not fit your company’s criteria, and you want to own the deal yourself, you are now stepping into “big boy business” and need to act accordingly.
Sit down with the bosses and talk to them about it. Don’t ask for permission or look for gold stars or headpats—you aren’t an underling in this specific conversation—tell them directly what you are thinking and ask if the company would have a problem with it. See what they say.
I’ve seen people get a check out of this from said boss, an “I’ll help stake you” type of investment where they expect to do nothing except if you need someone with grey hair in the room and want to collect a return for it. Rich people love being benefactors.
I’ve also seen people be told that the company does have a problem with it, in which case you need to ask yourself if this company does not value your individual success enough and trust you enough to keep personal projects on personal time and company projects on company time, are they really worth continuing to enrich with your labor? And then while you’re looking for a new day job, you buy that shit under a LLC of a LLC anyhow because fuck them.
This is what I was looking for. Appreciate the response. I had the same thoughts about a potential denial after IC gives it an official pass, but we’ll see. Hoping for the best.
I'm not sure I agree with the idea that outside investing is "taboo." Most places I've worked have at least tacitly accepted it.
The big no-no's are cannibalizing a deal your firm might well have done themselves, or spending so much time on your side deal(s) that it begins to impact your work product and availability. For your situation, you are bringing your firm a deal which they are passing on, so there is no risk of the former. And you'll just have to manage the latter as well as possible.
I actually think it can be accretive to let employees own or work on outside deals. There is no better learning experience than having your own money on the line and being the final say for both decision making and responsibility. If someone can port those lessons into managing my assets/money/reputation, that's nothing but a win for me, and at little to no cost.
Ask for forgiveness not permission
Don't disclose. How could they find out?
Have you not been around long enough to know how the company feels about it? Anyway, since they're passing on the deal I would assume there won't be an issue, but I would suggest disclosing it if you decide to go through with it. I knew someone who was fired for side dealing. There was probably some other reasons to fire him but he was a higher up at the company.
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