• UBS Plans Long-Short Fund With ESG Strategy Link https://t.co/iH65P2xx0V
    Institutional Investor Mon 09 Dec 2019 22:45

    UBS Group’s multistrategy hedge fund business is planning to launch a long-short fund to make bets tied to environmental, social and governance criteria, according to the unit’s chief investment officer.

    Kevin Russell, CIO of UBS O’Connor, said Monday on the sidelines of the bank’s asset management outlook event in New York that his group is hiring an investment team for the long-short fund. During the lunch, Russell spoke generally about O’Connor’s ESG strategy, saying the hedge fund unit is now focused on bets based on environmental factors.

    O’Connor’s ESG team will consider areas such as the carbon footprint of companies and regulatory reform when creating short positions, according to Russell. He said the group will use investment insights beyond what’s widely available from third-party providers of ESG data. 

    In June, UBS Asset Management released a survey that found large investors believe ignoring ESG criteria when...

  • The Truth About Private Equity Fund Size Link https://t.co/tlIzWycMwr
    Institutional Investor Mon 09 Dec 2019 22:15

    As the end of the year approaches, institutional investors in private markets are wrapping up work on the last few funds we need to invest in to hit our targeted annual commitment levels. 

    You see, private equity is sort of like a treadmill. Money is always going out and coming back. Just to just keep your allocation the same, you have to keep committing new capital to more funds. In other words, like a treadmill, you have to keep running just to stay in the same place. 

    And if you want to actually increase your allocation to private equity – like 47 percent of institutions this year – then you have to run even faster, committing even more capital to more funds to increase exposure to the asset class. As a result of this demand, fund raising has been robust. Private equity managers have returned to market to raise new funds faster than ever before, and they’re seeking bigger funds, too, giving their investors what they are asking...

  • Leonard Green Raises Nearly $15 Billion for Private Equity Funds Link https://t.co/Z8qy8vxL24
    Institutional Investor Mon 09 Dec 2019 21:49

    Yet another private equity firm has announced a fundraise in the tens of billions of dollars.  

    Leonard Green & Partners announced Monday that it had raised a total of $14.75 billion across two funds in seven months.   

    The Los Angeles-based private equity firm said it raised $12 billion for Green Equity Investors VIII, its eighth flagship private equity fund. The size of this fund eclipsed the firm’s prior flagship fund, which closed at $9.6 billion, per the announcement. The fund will target deals between $400 million and $1 billion, according to a person familiar with the matter. 

    The remaining $2.75 billion was raised for Leonard Green’s first middle-market fund, Jade Equity Investors. Jade Equity will target investments between $50 million and $250 million, according to a source familiar with the matter. The firm began fundraising for both vehicles in May 2019, the source said.

    The mega fundraise...

  • Blackstone-Owned Asset Manager To Buy Credit Shop Link https://t.co/WMCTiFjvSr
    Institutional Investor Mon 09 Dec 2019 21:39

    First Eagle Investment Management, which has about $99 billion in assets, is buying THL Credit Advisors, which includes publicly traded fixed income and a middle-market direct lending business.

    THL Credit was founded in 2007 as the credit affiliate of private equity firm Thomas H. Lee Partners.

    “We believe the combined platform represents a compelling value proposition for a broad spectrum of investors and other credit market participants,” said First Eagle president and CEO Mehdi Mahmud in a statement.

    There is no shortage of M&A activity in alternative credit, one of the most popular investment categories in recent years. Among other deals, BlackRock acquired private credit manager Tennenbaum Capital Partners earlier this year.

    [II Deep Dive: M&A Might Not Fix the Industry’s Problems, but Asset Manager Mergers Are Barreling Ahead]

    Once the transaction with $17 billion THL is finalized, First Eagle will have about...

  • Former Fed Chairman Paul Volcker Dies at 92 Link https://t.co/N8hLhYhHAX
    Institutional Investor Mon 09 Dec 2019 21:09

    Paul Volcker, an economist who guided decades of American economic policy — including waging war on inflation as chairman of the U.S. Federal Reserve — has died at age 92.

    He passed away on Sunday, December 8, according to a statement from his public policy group, the Volcker Alliance.

    Volcker worked for the U.S. government for almost 30 years, culminating in two terms as chairman of the board of governors of the Federal Reserve System, a position he held from 1979 to 1987. He would later go on to serve as chair of President Barack Obama’s Economic Recovery Advisory Board from 2009 to 2011, when he helped introduce the bank-curbing Volcker Rule as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    Volcker began his career in monetary policy in 1952 as an economist at the Federal Reserve Bank of New York. He later worked in the U.S. Treasury Department under presidents John F. Kennedy, Lyndon Johnson, and Richard...

  • Special Report: The New Way to De-Risk Link Sponsored by Northern Trust Asset Management https://t.co/PGJEP2zDm3
    Institutional Investor Mon 09 Dec 2019 15:49

    Investors can be forgiven if they see cause for concern in return forecasts these days, and if they feel less than confident about meeting their objectives. That anxiety can be fed by  an expected increase in volatility – and it can be argued we’ve already reached a significant inflection point in that regard – that leaves investors facing the prospect of de-risking their portfolios using rather dated approaches. 

    “There are a lot of things pushing volatility,” says the CIO of a U.S. state teacher retirement fund. “We have great fundamentals, but things are starting to shake a little bit, and we are more concerned about it than we’d like to be – and we think that volatility is likely to go up. We built volatility into our strategy at a normal or mean level, and right now we’re on the higher end of normal.” 

    The State of Play

    When investors look to the horizon today and anticipate increased uncertainty, they see numerous sources...

  • Allocators Say This Rising Star Is the ‘Next CIO’ Link https://t.co/JUy8e3r70N
    Institutional Investor Fri 06 Dec 2019 22:56

    After competing live against six of his peers, Caltech managing director Doug MacBean has been crowned the “Next CIO.”

    MacBean, who is responsible for the California Institute of Technology endowment’s public and alternative investments, was the winning contestant chosen by chief investment officers and peers at the third annual Institutional Investor Masterclass, held Tuesday in New York. The competitors were selected from nominations made by their bosses and peers in the industry.

    Seven up-and-coming allocators took rapid-fire questions from Institutional Investor’s deputy editor Leanna Orr and last year’s Next CIO winner, Phillip Titolo, head of private investments at MassMutual. Questions ranged from how to deliver bad news to an investment committee to what allocators do on airplanes.

    The audience voted on the competitor they found the most impressive, and an award was presented to MacBean at the Allocators’ Choice Awards on...

  • Morningstar: It’s Time to Disrupt Index Providers Link https://t.co/dinjSXbJdr
    Institutional Investor Fri 06 Dec 2019 21:36

    There’s plenty of money to be made in index funds — especially for the providers of the actual indexes. That’s according to mutual fund information provider Morningstar, which argues in a new paper that the highly lucrative business of licensing generic equity benchmarks to asset managers is ripe for disruption. Morningstar

  • RT @JohnWaggoner: Smart Beta Managers Are Boasting ‘Utterly Implausible’ Returns, Research Affiliates Says Link via @iim…
    Institutional Investor Fri 06 Dec 2019 20:56

    Some smart beta managers are advertising historical returns that are “too good to be true,” according to a new paper from Research Affiliates.

    The smart beta shop argued that rival factor strategy providers are using backtests to claim that their strategies have delivered annualized excess returns as high as 4 percent over the last ten years without underperforming during any calendar year — results that are unrealistic, according to head of client strategies John West and senior researcher Alex Pickard, who authored the paper.

    “The confluence of shorter time horizons, increased competition, and recent underperformance may well have led to smart beta backtests ‘jumping the shark,’ that is, reporting utterly implausible return outcomes,” they wrote. As West and Pickard noted, such performance claims “definitely get attention” – but they do not accurately reflect the behavior of factor-based strategies.

    Using Morningstar’s mutual fund...

  • RT @mdc: "More Allocators Said They Would Consider Investing With Managers Entangled In Sexual Harassment Allegations." lol https://t.co/TZ…
    Institutional Investor Fri 06 Dec 2019 20:56
  • AQR: Active Fixed-Income Strategies Don’t Deliver Much ‘True Alpha’ Link https://t.co/mjwijbCh4W
    Institutional Investor Fri 06 Dec 2019 19:41

    Active fixed income strategies tend to beat their benchmarks — but much of that excess return just comes from passive exposures to traditional risk premia, according to researchers at AQR Capital Management.

    Instead of delivering “true alpha,” active fixed income managers have been mostly “repackaging” traditional risk factors such as duration, corporate credit, emerging markets, and volatility risks, found researchers Jordan Brooks, Tony Gould, and Scott Richardson. Brooks and Richardson are AQR principals who serve as co-heads of fixed income, while Gould is a managing director at the factor investing firm.

    Fixed income alpha “may be merely an illusion,” the trio wrote in a recent paper on the findings, noting that they detected “little evidence” of manager skill in active fixed income. “The repackaging of traditional risk premia appears to be a pervasive phenomenon in active management, and investors should be wary of paying active...

  • Quant Mutual Funds Lag Stocks This Year, Bank of America Says Link https://t.co/ds3yUELwn3
    Institutional Investor Fri 06 Dec 2019 19:31

    Most quantitative mutual funds are failing to beat benchmarks as U.S. stocks are on track for their best annual performance since 2013, according to research from Bank of America Corp.

    Large-cap quant funds lagged the Russell 1000 index by an average 3.2 percentage points this year through November, Bank of America equity and quant strategists said in a research report this month. Only 11 percent of quant funds performed better than the benchmark.

    Quant funds, which use computers for stock picking, are struggling to outperform this year, a situation shared with actively managed mutual funds investing in U.S. companies, according to the report. It’s been a great year for the stock market, with the Standard & Poor’s 500 stock index on its way to the best performance since 2013 following a 27.6 percent gain through November. 

    The Russell 1000 index, meanwhile, gained 27.7 percent during the first 11 months of this year, exceeding...

  • RT @cerulli_assoc: "Asset owners have stepped up their scrutiny of outsourced-chief investment officers, putting their own OCIO providers u…
    Institutional Investor Fri 06 Dec 2019 16:36
  • RT @AliciaMcElhaney: my latest piece for Institutional Investor: more allocators would consider investing with firms with sexual harassment…
    Institutional Investor Fri 06 Dec 2019 16:36
  • DaVita’s shares have jumped in 2019. That’s good news for Warren Buffett’s Berkshire Hathaway. For short-seller Jim Chanos, not so much. Link https://t.co/PUFXudsHU2
    Institutional Investor Thu 05 Dec 2019 23:40

    When former hedge fund manager Ted Weschler joined Warren Buffett’s Berkshire Hathaway, he brought with him knowledge of DaVita, a kidney dialysis provider. Between the September 2011 announcement of his hiring and his early 2012 start date, the company appeared in Berkshire’s portfolio.

    It has become one of the latest known targets of prominent short-seller Jim Chanos, a man who makes a living betting against companies.

    So far this year, Chanos is on the losing side of the bet. DaVita’s market value climbed to $9.4 billion on December 3, with its shares soaring 40 percent since the end of 2018. The stock’s rise includes a 21 percent jump since Chanos, the founder of Kynikos Associates, first spoke publicly about his wager against the company on September 19 at the Delivering Alpha conference in New York. 

    There, Chanos pointed to what he alleged to be a massive insurance scam. According to Chanos, DaVita uses its relationship...

  • More Allocators Said They Would Consider Investing With Managers Entangled In Sexual Harassment Allegations. Here’s Why. Link https://t.co/z1ElcAzgzx
    Institutional Investor Thu 05 Dec 2019 19:50

    An increasing percentage of allocators are considering investing with investment managers who have had issues with sexual harassment, according to the Investment Management Due Diligence Association.

    The group’s second annual survey on sexual harassment in the asset management industry comes roughly two years after the #MeToo movement began, leading to a growing number of people, particularly women, publicly sharing their experiences of sexual harassment and assault in the workplace.  

    According to the IMDDA, 9 percent of survey respondents said they would still consider investing with a fund manager who has had issues with sexual harassment. This is an increase from 4 percent in 2018, the group said. 

    “It’s a bit of desperation to get that alpha,” Andrew Borowiec, executive director at IMDDA, said by phone Wednesday. “That’s the driving force. What these firms need to realize is by not conducting due diligence as they...

  • Apollo Eyes Expansion in Japan, Where Pension Funds Are Piling Into Alternatives Link https://t.co/HufO9jpJlC
    Institutional Investor Thu 05 Dec 2019 19:20

    Alternative investment firm Apollo Global Management plans to build out a private equity business in Japan, a country where historically conservative pension funds are increasingly shifting capital into alternatives.

    Apollo announced Thursday it had hired Tetsuji Okamato as partner and head of Japan, a newly created role at the firm. Okamato, previously a managing director at Bain Capital, will “play a lead role in building Apollo’s private equity business in Japan, including originating and executing deals and identifying cross-platform opportunities,” according to the firm’s statement. Okamato will report to Steve Martinez, senior partner and head of Asia Pacific.

    In a joint statement, Apollo co-presidents Scott Kleinman and James Zelter said the appointment reflected the “importance we place on Japan and the opportunities we see in the wider region for growth and diversification.”

    At Bain Capital, Okamato served as a member of the...

  • Despite a whistleblower, public warnings, and lawsuits, shorting kidney dialysis company DaVita has been an unmitigated disaster for Jim Chanos and other short sellers in 2019. Link https://t.co/o1tIrJU9xk
    Institutional Investor Thu 05 Dec 2019 17:35

    When former hedge fund manager Ted Weschler joined Warren Buffett’s Berkshire Hathaway, he brought with him knowledge of DaVita, a kidney dialysis provider. Between the September 2011 announcement of his hiring and his early 2012 start date, the company appeared in Berkshire’s portfolio.

    It has become one of the latest known targets of prominent short-seller Jim Chanos, a man who makes a living betting against companies.

    So far this year, Chanos is on the losing side of the bet. DaVita’s market value climbed to $9.4 billion on December 3, with its shares soaring 40 percent since the end of 2018. The stock’s rise includes a 21 percent jump since Chanos, the founder of Kynikos Associates, first spoke publicly about his wager against the company on September 19 at the Delivering Alpha conference in New York. 

    There, Chanos pointed to what he alleged to be a massive insurance scam. According to Chanos, DaVita uses its relationship...

  • BlackRock Fires Mark Wiseman for Failing to Disclose Romantic Relationship With Colleague Link https://t.co/6AmiYpa9mR
    Institutional Investor Thu 05 Dec 2019 17:00

    BlackRock has terminated Mark Wiseman, global head of active equities and chairman of the firm’s alternatives business, for failing to disclose a romantic relationship with a colleague.

    Wiseman, who was a serious contender to someday succeed Fink, headed strategy for alternatives, one of BlackRock’s top priorities. Wiseman had joined BlackRock in 2016 after heading the Canada Pension Plan Investment Board. 

    “I am leaving BlackRock because in recent months I engaged in a consensual relationship with one of our colleagues without reporting it as required by BlackRock’s Relationships at Work Policy,” wrote Wiseman in an email to some of his BlackRock colleagues. “I regret my mistake and I accept responsibility for my actions.”

    In a memo sent Thursday to all employees, Larry Fink, chairman and CEO, and Rob Kapito, BlackRock’s president, condemned those actions.

    “Our culture has always been one of BlackRock’s greatest...

  • DaVita provides life-extending dialysis treatment to more than 200,000 patients. But is it gaming the system through questionable donations to the American Kidney Fund? Link https://t.co/CSL5yf2QGc
    Institutional Investor Thu 05 Dec 2019 15:05

    When former hedge fund manager Ted Weschler joined Warren Buffett’s Berkshire Hathaway, he brought with him knowledge of DaVita, a kidney dialysis provider. Between the September 2011 announcement of his hiring and his early 2012 start date, the company appeared in Berkshire’s portfolio.

    It has become one of the latest known targets of prominent short-seller Jim Chanos, a man who makes a living betting against companies.

    So far this year, Chanos is on the losing side of the bet. DaVita’s market value climbed to $9.4 billion on December 3, with its shares soaring 40 percent since the end of 2018. The stock’s rise includes a 21 percent jump since Chanos, the founder of Kynikos Associates, first spoke publicly about his wager against the company on September 19 at the Delivering Alpha conference in New York. 

    There, Chanos pointed to what he alleged to be a massive insurance scam. According to Chanos, DaVita uses its relationship...

  • Who Says You Can’t Trust ESG Data? One of the Biggest Names in ESG. Link https://t.co/ONivZheFPv
    Institutional Investor Thu 05 Dec 2019 15:05

    The sheer volume of data available tracking companies’ environmental, social and governance standings has exploded in recent years. But the ESG conclusions that can be drawn from the information are still limited, according to a white paper published Thursday by Generation Investment Management.

    “Today’s ESG data has real limitations,” wrote the paper’s authors. “The risk is that it puts the spotlight on what is available, rather than what is most important.”  

    Generation, the sustainable manager founded by Al Gore and David Blood, argues in the paper that the data that’s now available can be vastly improved using some readily available tools such as machine learning. 

    “We need better data that connects with the scale and urgency of the problems we face,” said Felix Preston, the firm’s director of research, in an interview. 

    Generation, which uses ESG data sources as one part of its fundamental investment...

  • RT @CJAtheCIO: Carnegie Corp. Chief Kim Lew Named CIO of the Year Link via @iimag Kim Lew is one of the few CIO’s I seek…
    Institutional Investor Thu 05 Dec 2019 14:45

    Asset owners have chosen Kim Lew, chief investment officer of the Carnegie Corp. of New York, as the CIO of the Year.

    The honor, bestowed at Institutional Investor’s third annual Allocators’ Choice Awards, was voted on by allocators at pension funds, endowments, foundations, sovereign wealth funds, and the like. Lew was chosen from a group of twelve CIOs nominated by their peers for all-around excellence in portfolio construction, risk management, asset allocation, manager selection, board relations, and talent development.

    Last year’s Lifetime Achievement honoree Roz Hewsenian presented the award to Lew on Tuesday night during an awards dinner at the Mandarin Oriental in New York.

    Other investment organizations honored over the course of the evening included Cornell University, which won Turnaround of the Year for CIO Kenneth Miranda’s rehabilitation of the school’s lagging Ivy League endowment, and Chicago Teachers’ Pension Fund,...

  • RT @OliverFochler: The Great Hedge Fund Retreat | Institutional Investor Link via @iimag
    Institutional Investor Thu 05 Dec 2019 14:45

    Hedge funds have been suffering indirectly from the Volcker Rule, regulation put in place after the 2008 financial crisis, according to researchers from the University of Manchester in England.

    Asset flows to hedge funds have declined and their “flow-performance sensitivity” has risen since the regulation was implemented, University of Manchester’s Michael Bowe, Olga Kolokolova, and Lijie Yu wrote in a recent paper. They found hedge funds have become less willing “to take on liquidity risk,” shifting their “market-making activities from illiquid to liquid stocks.”

    The Volcker Rule, a provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, is one of the “most prominent and far-reaching financial regulations of recent times,” according to the researchers. The rule, which banned proprietary trading by banks, has led to the unintended consequence of drying up liquidity in the market, the paper said.

    “Facing a...

  • Smart Beta Managers Are Boasting ‘Utterly Implausible’ Returns, Research Affiliates Says Link https://t.co/6omGepUZv3
    Institutional Investor Wed 04 Dec 2019 22:09

    Some smart beta managers are advertising historical returns that are “too good to be true,” according to a new paper from Research Affiliates.

    The smart beta shop argued that rival factor strategy providers are using backtests to claim that their strategies have delivered annualized excess returns as high as 4 percent over the last ten years without underperforming during any calendar year — results that are unrealistic, according to head of client strategies John West and senior researcher Alex Pickard, who authored the paper.

    “The confluence of shorter time horizons, increased competition, and recent underperformance may well have led to smart beta backtests ‘jumping the shark,’ that is, reporting utterly implausible return outcomes,” they wrote. As West and Pickard noted, such performance claims “definitely get attention” – but they do not accurately reflect the behavior of factor-based strategies.

    Using Morningstar’s mutual fund...

  • Berkshire Hathaway Bet Big on Dialysis Giant DaVita. Jim Chanos Thinks It’s a Scam. Link https://t.co/hxNxrgrCCj
    Institutional Investor Wed 04 Dec 2019 20:49

    When former hedge fund manager Ted Weschler joined Warren Buffett’s Berkshire Hathaway, he brought with him knowledge of DaVita, a kidney dialysis provider. Between the September 2011 announcement of his hiring and his early 2012 start date, the company appeared in Berkshire’s portfolio.

    It has become one of the latest known targets of prominent short-seller Jim Chanos, a man who makes a living betting against companies.

    So far this year, Chanos is on the losing side of the bet. DaVita’s market value climbed to $9.4 billion on December 3, with its shares soaring 40 percent since the end of 2018. The stock’s rise includes a 21 percent jump since Chanos, the founder of Kynikos Associates, first spoke publicly about his wager against the company on September 19 at the Delivering Alpha conference in New York. 

    There, Chanos pointed to what he alleged to be a massive insurance scam. According to Chanos, DaVita uses its relationship...

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