Investment Memo

A written document setting out the case for and against an investment, the key assumptions, and the reasoning behind the decision, prepared before money moves.

Example

A five-page memo covering the thesis, the evidence, the bear case, the terms and what would have to be true.

Important

It is a thinking tool first. Its greatest value is often at review two years later, when it is the only honest record of why the decision was made.

Related terms

  • Investment Committee (IC) — The group that reviews and approves or rejects investment proposals, typically in a fund or institutional investor.
  • Bear Case — The most plausible version of how an investment goes badly, argued seriously rather than as a token risk section.
  • Decision journal — A written record of why a decision was made, written at the time it was made, and never edited afterwards.

Lessons that explain it

  • A memo is a thinking tool before it is a selling document — Two versions of the same memo can describe the same deal and do opposite jobs - one is written to get to yes, the other is written to find out whether yes is correct. (9 min)
  • Four sections decide the vote; the rest is context — A memo can run to fifteen pages and still be decided on four of them - the thesis, the bear case, the return math and the terms. Everything else is background that makes the reader feel informed without changing the answer. (11 min)
  • The memo is worth more at the two-year review than on the day you wrote it — A memo's real value is not in getting a deal approved. It is in being specific enough, on the day it was written, that reading it again later tells you something you could not otherwise have known. (10 min)
  • Amend, date and keep the original - never quietly rewrite — A memo is a record of reasoning at a moment. When facts change, add a dated amendment rather than editing the original, so the evolution of your thinking stays visible and reviewable. (10 min)

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