How do you align the interests of a tax-exempt investor and a taxable investment manager? Bringing them together into the same room to let them network and engage in interesting conversations certainly isn’t the way. (You might be able to break down some of the normal barriers to open communication, but you have done nothing to alter the nature of the relationship dynamics that drive investment outcomes.)

The way in which most investors attempt to align the interests of their investment managers with their own is by insisting their managers have “skin in the game” and by employing various incentive compensation arrangements. (If you’re not doing one or more of those things, you’re most likely not aligning their interests.)

The problem, as I have noted in this column before, is that the potential outcomes each faces when joining in a transaction together are almost always going to be quite different.

Now, it should go without saying that, when