A recent global survey1 of asset managers asked about the strategic priorities for their businesses, and how they plan to go about achieving them. With controlling costs emerging as the top strategic priority in the survey (87%), it’s no surprise that an increasing number of managers are looking to outsource what historically have been internal functions. As the pressure on managers to seek efficiencies has increased, the outsourced services available to them have become more sophisticated and holistic. Today, managers are increasingly aware that functions across their entire office can be effectively outsourced, allowing them to focus on what they do best – create alpha. And COVID-19 has driven home the idea that, at the very least, outsourcing should be part of managing the risk around operational resiliency.

The survey cited above was conducted by Northern Trust, and three leaders of the firm’s Global Fund Services (GFS) collaborated on the...

In the years leading up to the 2008 financial crisis, a large asset manager kept a database on current, past, and prospective hedge fund managers — grading them on, among other characteristics, their transparency (or lack thereof).

Over a decade later, the hedge fund industry may be about to get a whole lot less transparent — and researchers argue that this data should raise alarms about secretive managers.

These researchers are Sergiy Gorovyy, Patrick Kelly, and Olga Kuzmina, the authors of a new paper, “Does Secrecy Signal Skill? Characteristics and Performance of Secretive Hedge Funds.” Using a proprietary database originating from what the authors describe as “one of the largest” fund of funds in the U.S., they analyze 192 hedge funds during the period between April 2006 and March 2009, looking at how the most secretive managers compared to those that were more transparent.

“What the paper can shed a light on is, is there reason to...

A new study shows that investors have every right to fear that the remarkable rebound in equity markets since March is from extraordinary government actions, not a return to economic health.

StyleAnalytics, a quantitative research firm, evaluated the behavior of factors and subfactors in the second quarter, including value, yield, and growth. The firm found that factors, or stock characteristics, were not behaving like they have historically during enduring market recoveries. StyleAnalytics’ findings give pessimistic investors evidence that they’re correct to worry and that the rally may not have long-term legs. 

The study “suggests the post-Covid [outbreak] market rally is not as much an expression of ‘getting back to normal’ as it is an expression of ‘the government stimulus is helping us get through this mess’.” Less a recovery and more a lifeline,” according to the two authors of the research, Damian Handzy, chief commercial officer,...

The Texas Teachers Retirement System’s most recent quarter was a tale of two markets, according to investment chief Jase Auby.

Speaking at the retirement system’s investment committee meeting on Thursday, Auby said that the pension fund’s public equity portfolio struggled during the first three months of the year — but private investments, particularly direct and co-investments, bolstered returns.

Still, as Auby had projected in March, the $148 billion retirement system lost 8.3 percent of its value during the first quarter, meeting presentation documents show.  

According to a report from TRS’s investment consultant Aon, the underperformance was driven by active management within the retirement system’s public equities portfolio, as well as underperformance by its stable value and risk parity investments.  

“We were 100 percent active management and it does make sense for us to begin to diversify away...

Clarence Herbst, a prominent donor to and alumnus of the University of Colorado, has sued the school’s foundation over its investment strategy and so-called “abysmal” returns. 

But the UC Foundation — which holds nearly $2 billion for the public university — has outperformed most of its peers over short and long-term horizons, according to the mainstream NACUBO benchmark. 

Herbst is a longtime and vocal advocate of passive investing. He has donated about $5 million to his alma mater and received various honors and officials designations from the university, including the chairmanship of its investment committee in the 1990s. 

“He has carried this banner for decades,” said Jack Finlaw, president and CEO of the foundation, in a Monday phone interview with Institutional Investor. Finlaw sounded somewhat weary at the accusations Herbst leveled, including that the endowment’s board had violated its fiduciary duty by opting for...

Early on February 1, 2017, Lawrence Minicone and Zachary Squire officially launched Tekmerion Capital Management, a small systematic macro investment firm backed by former Goldman Sachs partner and Fortress Investment Group principal Michael Novogratz.

Two days later, at 4:25 p.m., a senior client advisor at their former employer, Bridgewater Associates, pressed send on an email to the firm’s in-house counsel. 

The subject line: “New Competitor.” 

The email contained an attachment — a pitch book from the newly-launched hedge fund — which one of Bridgewater’s clients had sent to that advisor “in confidence,” according to the email. The advisor wrote that they were forwarding the email in case it “wasn’t on [their] radar” that “another ex-Bridgewater employee is setting up a systematic macro hedge fund.” 

Minutes later, head of investment analytics Kevin Brennan and co-chief investment officer Greg Jensen were looped...

Early on February 1, 2017, Lawrence Minicone and Zachary Squire officially launched Tekmerion Capital Management, a small systematic macro investment firm backed by former Goldman Sachs partner and Fortress Investment Group principal Michael Novogratz.

Two days later, at 4:25 p.m., a senior client advisor at their former employer, Bridgewater Associates, pressed send on an email to the firm’s in-house counsel. 

The subject line: “New Competitor.” 

The email contained an attachment — a pitch book from the newly-launched hedge fund — which one of Bridgewater’s clients had sent to that advisor “in confidence,” according to the email. The advisor wrote that they were forwarding the email in case it “wasn’t on [their] radar” that “another ex-Bridgewater employee is setting up a systematic macro hedge fund.” 

Minutes later, head of investment analytics Kevin Brennan and co-chief investment officer Greg Jensen were looped...

Headhunters wish more investment professionals knew about career coaching. 

“I’m always interested in top-notch talent, but being a career guide for someone who’s not looking to move? That’s not what we do,” says one elite recruiter. 

Another finds that coached candidates outperform in interviews, especially if they left their last job on delicate terms. Otherwise, professionals too often show up still reeling or healing. 

“Even if through no fault of their own, there’s often a lot of anger, fear, or insecurity that comes out unconsciously through conversation,” says the recruiter, who has placed legions of asset management executives. “And I tell people, ‘You’re not ready right now. You need to talk to a coach and constructively move beyond whatever happened. Know how to talk about it.’” 

Feedback from a third party tends to help everyone in their personal presentation, coaches and recruiters say. Laurie...

Headhunters wish more investment professionals knew about career coaching. 

“I’m always interested in top-notch talent, but being a career guide for someone who’s not looking to move? That’s not what we do,” says one elite recruiter. 

Another finds that coached candidates outperform in interviews, especially if they left their last job on delicate terms. Otherwise, professionals too often show up still reeling or healing. 

“Even if through no fault of their own, there’s often a lot of anger, fear, or insecurity that comes out unconsciously through conversation,” says the recruiter, who has placed legions of asset management executives. “And I tell people, ‘You’re not ready right now. You need to talk to a coach and constructively move beyond whatever happened. Know how to talk about it.’” 

Feedback from a third party tends to help everyone in their personal presentation, coaches and recruiters say. Laurie...

Headhunters wish more investment professionals knew about career coaching. 

“I’m always interested in top-notch talent, but being a career guide for someone who’s not looking to move? That’s not what we do,” says one elite recruiter. 

Another finds that coached candidates outperform in interviews, especially if they left their last job on delicate terms. Otherwise, professionals too often show up still reeling or healing. 

“Even if through no fault of their own, there’s often a lot of anger, fear, or insecurity that comes out unconsciously through conversation,” says the recruiter, who has placed legions of asset management executives. “And I tell people, ‘You’re not ready right now. You need to talk to a coach and constructively move beyond whatever happened. Know how to talk about it.’” 

Feedback from a third party tends to help everyone in their personal presentation, coaches and recruiters say. Laurie...

Ross McLellan was hungover the morning he was arrested for securities fraud.

It was April 5, 2016. The night before, Villanova had beaten North Carolina in the NCAA basketball title game. McLellan “had a few cocktails watching it” before going to bed at 1:00 a.m. Up early the next morning, he donned jeans and a Vineyard Vines long-sleeve before driving his twins to their preschool in Hingham, Massachusetts, a commuter town about ten miles southeast of the city of Boston. He then proceeded to the office of Harbor Analytics, the company he had founded after being fired from financial giant State Street in 2011. McLellan parked his SUV behind the office, located in a converted house, and went inside.

“It’s a typical Boston morning,” he remembers. “It’s 34 degrees, and my office is right near the water in Hingham Harbor, so it’s whipping 30 knots, freezing.” He had a 9:00 a.m. meeting at a coffee shop only a quarter-mile away, but decided to...

Ross McLellan was hungover the morning he was arrested for securities fraud.

It was April 5, 2016. The night before, Villanova had beaten North Carolina in the NCAA basketball title game. McLellan “had a few cocktails watching it” before going to bed at 1:00 a.m. Up early the next morning, he donned jeans and a Vineyard Vines long-sleeve before driving his twins to their preschool in Hingham, Massachusetts, a commuter town about ten miles southeast of the city of Boston. He then proceeded to the office of Harbor Analytics, the company he had founded after being fired from financial giant State Street in 2011. McLellan parked his SUV behind the office, located in a converted house, and went inside.

“It’s a typical Boston morning,” he remembers. “It’s 34 degrees, and my office is right near the water in Hingham Harbor, so it’s whipping 30 knots, freezing.” He had a 9:00 a.m. meeting at a coffee shop only a quarter-mile away, but decided to...

As the pandemic was unfolding earlier this year, the world’s wealthiest families began doubting that private equity investments could beat gains from stocks, according to a new report from UBS Group.

The Swiss bank probed global family offices worth an average $1.6 billion during the three weeks from February 19 to March 13 as stocks were plummeting on Covid-19 fears — and again in May as they were rebounding in the pandemic. Fifty-one percent of wealthy families said in May that they expected private equity to outperform public investments, down from 73 percent in early March.

“At the height of the crisis when liquidity was everything, family offices’ immediate reaction was to view private equity with greater caution,” UBS said in the report. “After economies locked down, family offices’ expectations for returns declined.”

Private equity has been a favored alternative investment of family offices, with a majority viewing it as an...

Ross McLellan was hungover the morning he was arrested for securities fraud.

It was April 5, 2016. The night before, Villanova had beaten North Carolina in the NCAA basketball title game. McLellan “had a few cocktails watching it” before going to bed at 1:00 a.m. Up early the next morning, he donned jeans and a Vineyard Vines long-sleeve before driving his twins to their preschool in Hingham, Massachusetts, a commuter town about ten miles southeast of the city of Boston. He then proceeded to the office of Harbor Analytics, the company he had founded after being fired from financial giant State Street in 2011. McLellan parked his SUV behind the office, located in a converted house, and went inside.

“It’s a typical Boston morning,” he remembers. “It’s 34 degrees, and my office is right near the water in Hingham Harbor, so it’s whipping 30 knots, freezing.” He had a 9:00 a.m. meeting at a coffee shop only a quarter-mile away, but decided to...

As universities ready themselves for a semester defined by the coronavirus, their endowment staff are considering ways to offer up support without increasing their spending rate.  

According to consulting firm NEPC’s Kristin Reynolds, some university funds are looking at lending money to their schools.  

“When we talk to our university clients, instead of increasing the spending rate, they could loan their schools money for a period of time, recoup that money when cash flows improve at the university, and focus their endowment on long term investing,” said Reynolds, who co-leads NEPC’s endowment and foundations practice. 

This fall, universities and their endowments will likely experience declines in both enrollment rates and donations. A June report from Fitch Ratings showed that annual enrollment at universities could fall by between 5 percent and 20 percent. This cash crunch means that university endowments...

Boston-based asset manager GMO has announced new additions to its leadership team, including two new hires from QMA, the quantitative unit of PGIM.

GMO said Wednesday that Roy Henriksson, QMA’s chief investment officer, has been tapped for the newly created role of head of investment risk and trading. According to the statement, Henriksson will “provide risk oversight across all GMO investment and trading activities while also contributing to GMO’s quantitative research efforts.”

QMA had announced earlier this week that Henriksson would leave the firm in October. George Patterson, currently co-head of quantitative equities, will succeed him as CIO, the quant firm said Monday.

QMA chief executive Andrew Dyson said in a statement that the firm “found it necessary to restructure” its portfolio management team based on QMA’s investment performance over the last two-and-a-half years, which Dyson called “an outlier versus our 25-year history...

Ross McLellan was hungover the morning he was arrested for securities fraud.

It was April 5, 2016. The night before, Villanova had beaten North Carolina in the NCAA basketball title game. McLellan “had a few cocktails watching it” before going to bed at 1:00 a.m. Up early the next morning, he donned jeans and a Vineyard Vines long-sleeve before driving his twins to their preschool in Hingham, Massachusetts, a commuter town about ten miles southeast of the city of Boston. He then proceeded to the office of Harbor Analytics, the company he had founded after being fired from financial giant State Street in 2011. McLellan parked his SUV behind the office, located in a converted house, and went inside.

“It’s a typical Boston morning,” he remembers. “It’s 34 degrees, and my office is right near the water in Hingham Harbor, so it’s whipping 30 knots, freezing.” He had a 9:00 a.m. meeting at a coffee shop only a quarter-mile away, but decided to...

Bridgewater Associates has fired back against former employees’ claims that an arbitration panel found it “manufactured false evidence.” 

Bridgewater, the world’s largest hedge fund firm, argued in a Tuesday court filing that it shouldn’t have to pay those former employees’ legal fees, which total $1.99 million — despite the arbitration panel’s ruling, which required the firm to pay up. 

Those fees are central to an arbitration between Bridgewater and two former employees, Lawrence Minicone and Zachary Squire, who launched their own investment firm, Tekmerion Capital Management, nearly four years after leaving the firm.  

The arbitration spilled into public view this month after a lawyer for Minicone and Squire filed a court document in early July seeking to “confirm arbitration award in favor” of the two, awarding the two $1.99 million to cover legal fees.  

According to Bridgewater, the arbitration...

Retired bond king Bill Gross is back to share his opinions about those other publicly traded securities: stocks.

Gross on Tuesday published a new investment outlook — his second since retiring from Janus Henderson Investors in early 2019. This time, the former fund manager had some thoughts on growth stocks and why they have done, in his words “so fabulously well.”

After a self-described “rant” about CNBC’s interviewees (“They kiss derriere,” Gross complained), the retired investor moved on to the stock market, focusing on explaining the performance of the “Fab Five,” a group of high-flying tech stocks including Amazon and Apple.

“Of course, there’s the reopening of much of global economies, and the hope for a vaccine, or if not, that Covid-19 will just fade away,” Gross wrote. “But there’s another likely explanation that centers on interest rates — real interest rates that have come down, down over recent years and are still reaching...

The highest portion of fund managers ever believe U.S. technology stocks are the most crowded trade, as investor sentiment remains cautious amid the pandemic, according to Bank of America Corp.’s latest monthly survey.

A majority of fund managers believe the stock market is overvalued, with a record 74 percent citing tech as the most crowded position, Bank of America investment strategists said in a report Tuesday. The strategists suggested shorting tech stocks “given positioning and stretched performance.”

The U.S. stock market has rebounded this year even as investors lack conviction that the economy will see a strong and lasting recovery amid the Covid-19 pandemic, the survey shows. While 72 percent of fund managers are expecting stronger economic growth, just 14 percent anticipate a “V”-shaped recovery while almost a third believe it will follow the shape of a “W.”

The strategists predicted that stock prices this summer will be both...

Paycheck Protection Program money has flowed to private equity-backed companies in the oil and gas industry amid the pandemic, according to data from the Small Business Administration. 

Several companies owned by Energy Spectrum Capital were approved for PPP loans, including Azure Midstream Energy, Bluewing Midstream, Caliche Development Partners, Santa Fe Midstream, and Taproot Energy Partners, data released last week by the SBA show. Taproot reportedly borrowed in the range of $150,000 to $350,000, while the others were approved for loans ranging from $350,000 to $1 million, according to the data. 

Thomas Whitener, Energy Spectrum president and founding partner, did not return phone calls seeking comment on the PPP loans. James Spann, the Dallas-based firm’s chief compliance officer and founding partner, did not respond to phone calls and an email seeking comment. 

The U.S. government created the Paycheck Protection...

The California State Teachers’ Retirement System unveiled a plan to cut investment costs over the next ten years, and one key will be managing more investments in-house. 

CalSTRS published the plan online ahead of its upcoming board meeting Wednesday. The $226.8 billion pension fund’s investment committee still has to approve and accept the proposal before it could go into effect. 

“To borrow a phrase from the global pandemic, ‘our goal is to bend the cost curve,’” according to the introduction.  

CalSTRS’ senior team believes that it may be possible not just stabilize the costs of managing its investments but reduce them, even as the portfolio is expected to grow “significantly” over the next decade. Assets under management could grow to $348 billion in fiscal year 2028 and 2029, based on actuarial estimates. During that same time period, annual investment portfolio costs, which include CalSTRS’ support...

A secondaries investor and public pension fund are publishing what they say is the first methodology for calculating the dollar value of excess returns generated by private market investments.

The new measure, called excess value, was developed by Landmark Partners and the Public Employees Retirement Association of New Mexico. It is intended to help investors distinguish between returns generated by the market — so-called beta — and the dollar value of profits created by a private markets manager. But in addition to helping investors better understand and analyze the performance of private funds, the method may shake up fees and compensation.

According to the paper, which is forthcoming, one of the reasons behind developing the metric was to “enable investors and fund managers to develop compensation agreements that, unlike traditional carried interest, distinguish between profits attributable to market returns and profits that represent...

In January 2017, Lawrence Minicone and Zachary Squire launched Tekmerion Capital Management, a systematic macro investment firm. Their former employer, Bridgewater Associates, was not happy about it and sought to settle its complaints via a private arbitration proceeding. But what was meant to be a private matter has now been thrust into public view, owing to a new court filing.  

Months after Tekmerion launched, Bridgewater sought to take the firm to arbitration for the “misappropriation of trade secrets, breaches of contract, and unfair competition,” court documents show. Arbitration —  a process for settling disputes outside of court, with a neutral party mediating — is meant to prevent such disputes from becoming public. But that's exactly what happened last week because of a dispute over legal fees. Here’s how it happened.

Both Minicone and Squire worked as investment associates at Bridgewater — Minicone for nearly five...