For pension managers these days, decision making is about managing a glide path that doesn't become a fiery crash. In appealing to such clients, consultants shouldn't think of themselves as sales people selling particular products in separate boxes.
Guest columnists from Tesseract Asset Management look at investor behavior and risk management.
NACUBO President and CEO John D. Walda and his Commonfund Institute counterpart John S. Griswold said in a statement, “the data concerning alternative strategies will bear watching as more colleges and universities report their FY2013 results.”
Guest columnist firm Tesseract on charting proper risk management in rapidly changing seas.
Two institutional investors challenged the legality of a forum selection bylaw favoring the management of Chevron Corp. They have lost this battle in the Delaware courts. How significant is that loss?
Numbers indicate that specialist advisory firms manage nearly twice as many assets as the industry average. As Cerulli Associates observes in a recent issue of The Cerulli Edge, this "validates the strategy."
The hedge portion of a liability-driven portfolio can be dominated by long-duration fixed income instruments. One of the points of a new Cerulli report is that by offering those, asset managers can get a valuable 'in' with the sponsors of DB plans, to whom LDI appeals.
Guest columnist Diane Harrison looks at the U.S. JOBS Act for what it is...and isn't.
Comparing the 2011 and 2012 data, some correlations that seemed clear in the former year either disappeared entirely, or become a good deal blurrier, in the 2012 data.
The David Swensen inspired "Endowment Model" came under heavy criticism in 2009-10. More recently, opinion has mellowed, and now comes a project, the Portfolio Whiteboard Project, in which the participants view Swensen in a spirit as collegial as it is critical.
Guest columnist David Friedman looks at social media as a strategy for reaching the ultra-high-net-worth market.
Cerulli reminds us that risk-on/risk-off environments now alternate with dizzying speed. Even within the course of 2013 there has been a swing from cautious optimism to just-plain cautious.
All that dry powder on the sidelines means good news and bad for PE GPs: first, that there is room for a lot of new demand for their services (the good news); second, that investors remain hesitant – they have deliberately kept that powder in the horn and many will likely continue to do so (the bad news).
Guest columnist Charles Skorina looks at sustainable investing and asks the question: Is it sustainable?
Commonfund doesn't seem to have its heart in the project of defending hedge funds specifically as winners of alpha. Rather, its new white paper offers other, non-alpha, defense of the hedge fund as an institution.
An opinion by Chief Judge Lynch, of the 1st Circuit Court of Appeals, should have private equity managers in that Circuit reviewing their portfolios, and thinking in a more expansive way about their potential ERISA liabilities for companies they control.
Guest columnist Charles Skorina looks at pension funds and fees and finds....
Pension fund managers and insurers have long been less than thrilled by the idea of risking their assets in long-term, illiquid, infrastructure projects. EDHEC-Risk makes the case that their wariness, though not irrational, may be excessive.
A new white paper from the Commonfund Institute tells us that the growth of the Outsourced CIO model, especially for non-profits, is a consequence of the increasing complexity of the investment environment.
In east Asia, savings rates have long been high and constant, and cannot plausibly be expected to get much higher. Indeed, they may in certain respects be too high. Thus, progress in addressing the pension/demographic crunch has to come on the asset management side.
Charles Skorina looks at compensation at the big endowments.
Eighty-nine percent of the respondents in a newly released Natixis survey of institutions said they expect they will be able to meet their future obligations. But they aren't as optimistic about the fate of individuals in their own countries who are now trying to save for retirement.
Part II of a new SEI report on hedge funds and adapting to survival.
The respondents in the Commonfund survey have changed their view of the most pressing tail risks from last year to this. A year ago, 32 percent of the respondents saw an EU crisis as the most significant risk going forward. No longer.
The obvious reason for the allocation preferences of healthcare endowments is that they believe they need to remain very liquid. Jarvis, in this white paper, points out that the liquidity preference comes at a cost in performance.
Guest columnist Don Steinbrugge looks at hedge fund fees.
Charles Kennedy of Oilprice.com looks at how Japanese banks are investing in solar energy.
For the alternative-investment industry the takeaway from the NACUBO-Commonfund Study this year may be that there is a long-term trend among endowments toward increased allocations to alternative strategies, and that this trend continues. The overall such allocation increased by one percentage point from 2011 to 2012: to 54 percent.
The great political problem (what economists these days call a 'public choice' problem) is that politicians worldwide have every incentive to defer or avoid decisions about pension reform, however urgent or necessary that reform. Investors should be aware, and be wary.
The bottom line of EDHEC's study is that there is no need to create new public sector liabilities to get private sector institutions to invest in infrastructure.
If you are managing the portfolio of an institution that invests in hedge funds, you might want to ensure that some sizable portion of the HF-allocated assets go to funds managed by women-led firms. In this, you will have company.
Charles Skorina looks at the pension fund situation and what's changed over the years and what hasn't...
Away from the bleak headlines, the funds of hedge funds industry is quietly reinventing itself.
Only a sliver of investors (2 percent) believe that regulation is effective in preventing the next crisis. Indeed, even the number of those who are neutral on that point is smallish, because a full 85 percent see regulations as ineffective for this purpose, though skepticism is not quite so intense on the matter of the value of regulations in protecting investor interests.
Ineichen, the author of AIMA's updated roadmap to hedge funds, addresses some of the hot-button issues of investor/management interaction, including fees, leverage, and style drift. Although investors are naturally inclined to see style drift as a bad thing, they should be cautious about demanding that managers stay within a tightly-defined core area of expertise.
Shane Brett looks at the future of global pensions and what he sees isn't pretty.
Among the endowments for institutions of higher learning tracked by NACUBO-Commonfund, the allocation to alternative investments [defined to include hedge funds, private equity, global venture capital, and private equity real estate investments] has been on the rise for a decade now, especially among the larger cohorts. The preliminary data for 2012 indicates that this trend continues. It also indicates that these endowments on average are losing money on their portfolios.
The Skorina Report: Corporate pension performance: Some great investors no one noticed…and some surprising losersOct 25th, 2012 | Filed under: Institutional Investing, Today's Post
Charles Skorina looks at corporate pension funds and finds....
Recent suggested reforms in an EC white paper on pensions all sound reasonable enough, but they don't speak to the issue of the practices of pension fund managers. The demographic challenges in the Eurozone and the debate it has set off should surely call forth bigger Big Picture thinking than this.
Richard Weil, the CEO of Janus, offered introductory remarks for a panel discussion on the day of the first Presidential debate. “We’re more and more … disconcerted by messages we hear from the press” pressing politics – domestic and international – onto the attention of investors, asking: “what happens if Europe melts down” or if there is a hard landing in China, etc. The panel would discuss both of those issues. But the panelists' thoughts would keep returning to America.
Institutional investors and consultants are by now very sensitive to the fact of fat tail risk, and are no longer confident that diversification among traditional asset classes is a sufficient approach to the management of this risk. Portfolio changes now underway reflect this heightened sensitivity.
Charles J. French, CAIA, discusses the intricacies of negotiating finals with Christopher Van Dyke, CAIA, CFA, Advisor, Arnerich Massena, Inc. (CVD); Kweku Obed, CAIA, CFA, Principal, Mercer Investment Consulting, Inc. (KO); and Thomas H. Dodd, CAIA, CFA, FSA, President, Stratford Advisory Group (TD).
Acceptance of the higher levels of volatility as a fact of life means that careful ongoing attention to risk has become the means of operations. In the United States specifically, 31 percent of institutions say that they monitor their risk budget daily to keep the overall amount of risk in the portfolio under check: more than half (53 percent) say that they do such monitoring on a weekly or monthly basis.
It is good that the stuffy old healthcare organizational folks stuck with fixed income investments!, because those investments did better than any other asset class as a component of their FY2011 returns. Fixed income returned 5.4 percent. The more exciting field of international equities was the big loser, with a -10.9 percent return.
In a study of its own portfolio the Kauffman Foundation found that only twenty of 100 venture funds “beat a public-market equivalent by more than 3 percent annually”.
Mark Casella, leader of the U.S. alternatives group at PwC, explains that no manager "ever wants to put gates up or to announce a suspension," and talks about how the contract provisions that provide for such powers have been modified of late. This is part of the broader issue of the alignment of interests.
Charles Skorina talks to Srini Pulavarti about the role of the outsourced CIO for endowments.
The survey also asked that the asset managers state where their total assets are invested, using four geographical categories: Europe; Central/North America; Asia Pacific; Other. Commodity funds were easily the most heavily invested in C/NA, to the extent of 94 percent of their portfolios. Private equity funds are 61 percent invested in C/NA, and PE FoFs also have the majority of their portfolios there, at 54 percent.
Charles Skorina looks at the state of institutional assets.
In the introduction to their report, the authors quote one of their interviewees, a leader at a European pension fund, who said: “To me, investing is about going back to the basics. Why do I want to be in this asset class? Why do I want this product? Where does it fit in my portfolio?” Much of the report is structured as a discussion of two distinct shifts in the answers that have been given and are being given to those old queries.