What I Learned About Institutional Investors from Sitting Across From Them on a Roadshow

Third essay in the “What I Learned From Sitting Across From…” series. Founders universally imagine institutional investors as smart money, sophisticated buyers who evaluate fundamentals and price accordingly. The reality that only shows up when you are standing at the podium is that institutional investors are a spectrum, and the CEO’s job is to read the room while the room is reading you. · Juan Vegarra

Every founder who has never done a roadshow imagines institutional investors as one thing. Every CEO who has done a roadshow knows they are five different things sitting in the same room. The gap between those two mental models is the gap between founders who allocate their capital markets time well and founders who allocate it poorly, which is one of the most consequential resource allocation decisions a CEO makes.

I spent several years running institutional roadshows for Vena Resources, a public mining company listed on the Toronto Stock Exchange. The TSX institutional universe is different from the NYSE and NASDAQ universes in ways that matter, but the underlying dynamics of who is actually in the room and why they are asking their questions transfer across exchanges. What I learned in the meeting rooms taught me things I could not have learned from the pitch coaching that most CEOs receive before their first roadshow.

Who is actually in the room

The specific insight that reshapes how you run a roadshow is that not everyone at the table is buying for the same reason. On any given day of a roadshow, you meet with something like eight to twelve institutional investors. Those investors typically fall into five categories, and each category asks different questions for different reasons.

The academic literature on institutional investor behavior distinguishes these categories with more precision than most CEO pitch coaching does. Bushee’s canonical 1998 and 2001 papers classified institutional investors into three groups based on their actual trading behavior rather than their nominal label: dedicated investors with concentrated portfolios and low turnover, quasi-indexers with diversified portfolios and low turnover, and transient investors with diversified portfolios and high turnover.^[1] The classification matters because trading behavior predicts governance behavior, monitoring intensity, and eventual voting behavior in ways that nominal fund labels do not. A fund called “Growth Opportunities” can be dedicated, quasi-indexer, or transient depending on how it actually trades, and the CEO who is trying to read the room is reading trading behavior whether they know it or not.

Long-only funds evaluating a 12 to 36 month holding period. These are the investors most founders imagine when they think of institutional buyers. They read your investor materials in advance, ask questions that reveal they understand the fundamentals, and are looking for evidence that supports a durable position. Their questions tend to be about capital allocation, competitive dynamics, and the specific catalysts that will drive value creation over their holding period.

Hedge funds running long-short strategies. These investors are often the sharpest analysts in the room and ask the sharpest questions, but they may be building either a long or short position depending on what they hear. Their questions probe for specific numbers, timing details, and internal inconsistencies. A hedge fund analyst who spends most of the meeting asking about working capital and cash conversion is not necessarily going long. They may be building a short thesis around the same numbers.

Index funds and passive vehicles. These investors are not evaluating your company at all. They are executing a mandate that requires them to hold a specific weight of your stock regardless of fundamentals. Meetings with passive investors are often courtesy meetings arranged by the sell-side broker. Founders sometimes misread these as validation of the story. They are not validation. They are calendar filler. As of year-end 2024, passively managed US funds ended the year at $13.29 trillion, surpassing actively managed funds for the first time, and passive equity vehicles now own more than 20 percent of the S&P 500.^[2] An academic study by Chinco and Sammon that measures rebalancing behavior estimates the true passive-ownership share of the US stock market at roughly 33.5 percent as of 2021, roughly double what conventional fund-level measurement suggests.^[3] Founders who see BlackRock, Vanguard, or State Street in their top ten shareholders are almost always seeing quasi-indexer ownership rather than active conviction.

Momentum and thematic funds. These investors are executing strategies tied to sector rotation, thematic exposure, or price action. They hold positions for weeks to months, not years. Their questions tend to be about upcoming catalysts, near-term newsflow, and specific dates. Their positions are typically not durable, but they can generate significant near-term volume and price movement.

Activist or stake-building investors. These are the rarest category and the most dangerous to misread. An activist building a position early rarely announces their intent in the first meeting. Their questions are often quiet, general, and interested in governance rather than operations. Founders who read these meetings as low-conviction interest sometimes discover twelve months later that the same investor now owns 8 percent of the company and has specific demands about board composition. The activist typology and its tactical continuum is documented extensively in the Harvard Law School Forum on Corporate Governance’s ongoing series on shareholder activism.^[4] The specific pattern where activist positions build quietly over multiple quarters before the disclosure threshold triggers is well-established in the practitioner literature, and it is the pattern founders systematically miss because it looks in real time like ordinary informational interest.

How to tell them apart in real time

The specific skill the CEO develops on the road is reading which category the investor across the table falls into, while running the meeting itself. The tells are subtle and mostly non-verbal.

Long-only investors typically arrive prepared, ask questions that build on prior questions in the meeting, and take notes in a specific pattern that suggests they are constructing a position paper for their investment committee. Hedge fund analysts arrive equally prepared but ask questions that go deep on specific numbers rather than broad on strategy. When they detect an inconsistency or a soft answer, they return to it later in the meeting with a more probing version. Index fund representatives ask questions that reveal they have not read the materials carefully and are meeting mostly for compliance reasons. Momentum fund analysts ask about the next quarter and the next catalyst without much interest in what happens after. Activists ask governance and capital allocation questions in a mild register that feels friendly but is testing specific things.

The specific mistake I made early in my roadshow career was treating every meeting as equally important. The correct calibration is that the two or three long-only funds with genuine interest are worth ten times the time you spend on any other meeting. The hedge funds require honest, specific answers because they will detect anything otherwise and will build the short thesis around the detection. The index funds require little effort because the meetings do not change their positions. The momentum funds require honest disclosure but limited relationship investment. The activists require careful reading because the meeting is not about the meeting.

The smartest analyst is usually asking about working capital

A specific pattern I learned to notice is that the analyst who asks the most probing question in the meeting is usually asking about working capital. Not revenue. Not gross margin. Not competitive position. The working capital question, in whatever specific form it takes, is the question that reveals whether the analyst has done real diligence on the operating model or is running the standard checklist.

The reason is structural. Revenue and gross margin are reported in the earnings release and discussed extensively in the earnings call. Every analyst has access to those numbers. Working capital dynamics, especially the cash conversion cycle and the specific dynamics between accounts receivable and accounts payable, are visible only to analysts who have modeled the operating dynamics carefully. When a hedge fund analyst asks a specific question about your days sales outstanding trend across the last three quarters, or about the seasonality in your inventory levels, they are not making conversation. They are telling you they have modeled the business at a level of granularity most investors have not.

The CEO who recognizes this can allocate their meeting response accordingly. The working capital question deserves the most careful, specific, and honest answer of any question in the meeting. If the answer is soft or evasive, the analyst reads it as a signal about either the operating discipline or the disclosure practice of the company. Neither reading is favorable.

What the CEO seat teaches you about long-term relationships

The other specific thing the CEO seat teaches you about institutional investors is which ones are worth building durable relationships with. The answer is not the largest positions. The answer is the analysts whose questions get sharper over the course of multiple meetings.

Over a two-year period at Vena, I met with the same 40 or so institutional investors multiple times. Roughly a quarter of them asked substantially the same questions in every meeting, regardless of what had happened in the intervening months. Those were the transactional relationships. Roughly another quarter asked questions that grew more specific and more penetrating over time, as they built a durable understanding of the business. Those were the relationships worth investing in. The remaining half fell somewhere in between.

The transactional relationships were not bad relationships. They were just not durable ones. Investors who asked the same questions repeatedly were essentially re-underwriting from scratch each time they considered a position. The durable relationships were investors who were building a compounding understanding of the business, which meant their positions were held with conviction and their sell decisions were made carefully. Those are the shareholders every public company CEO wants on the register. Empirical work by Cremers and colleagues on stock duration confirms what the CEO seat suggests intuitively: firms with higher ownership by long-horizon, low-turnover institutions exhibit different governance dynamics, different information environments, and different innovation outcomes than firms whose ownership is concentrated in transient, high-turnover institutions.^[5]

The specific implication is that the CEO’s roadshow time allocation should favor the durable relationships over the transactional ones, even when the transactional relationships represent larger current positions. Long-term shareholder base composition is one of the most consequential things a CEO can influence, and the influence is exercised in specific meetings with specific investors whose questions signal what kind of shareholder they will be.

What the meme-stock era clarified

The 2020 and 2021 retail-driven meme-stock episodes clarified something that had always been true but was hard to see: the correlation between what an institutional investor owns and what an institutional investor believes is much weaker than founders assume. Institutional positions get built for reasons that have nothing to do with the fundamentals of your company. Rate environments, sector rotations, thematic mandates, index inclusions, factor exposures.

The mistake founders make is reading a large institutional position as endorsement of the story. Sometimes it is. Often it is not. A CEO who sees a top-ten shareholder from a major asset manager and assumes the manager believes in the company may discover that the position is held because the company was added to a specific index the manager tracks. That is not a vote of confidence. That is passive execution of a mandate. When the index composition changes, the position disappears without regard for how the fundamentals have evolved. Brookings work on institutional short-termism has documented the specific gap between what institutional investors say about long-term value creation and how they actually vote and trade during activist campaigns.^[6] The stated position and the revealed position are rarely the same, and CEOs who calibrate to the stated position underestimate the actual behavior of their shareholder base.

The specific implication is that the CEO needs to understand the composition of their shareholder register at a granular level, and needs to know which positions are held with conviction and which are held mechanically. That understanding informs how the CEO allocates their capital markets communication, how they handle earnings-call Q&A, and how they respond to activist approaches when they arrive.

What I would tell my earlier self

If I could go back to my first roadshow, I would spend less time preparing my presentation and more time preparing my read of the room. The presentation matters less than founders think it does. What matters more is your capacity to identify which investor in each meeting is the one whose position will actually matter to the company over the next several years, and to allocate your attention accordingly.

The other thing I would tell my earlier self is that the meeting where the analyst asks the sharpest question is usually the meeting where you should invest the most time in the follow-up. The sharpness of the question tells you the analyst has done real work. Analysts who do real work are the ones whose positions eventually get large and stay durable. Meeting them where they are, honestly and specifically, is how you build the long-term shareholder base every CEO wants.

That is what I learned from sitting across from institutional investors for years. It is not what the pitch coaching prepares CEOs for. It is what the room actually teaches you, if you are paying attention.

Juan Vegarra is the author of An Outsider’s Playbook (2026). He was Chairman and CEO of Vena Resources through its listing and multiple institutional capital raises. More essays · Free toolkits · Advisory · Write me