For years, the so-called Yale model of investing has served endowments well. But the coronavirus pandemic has challenged the way universities do business and put pressure on fundraising — all while the market has reached extreme levels of volatility.  

“When we look at that model, it’s obviously served higher education clients over time because it’s paid to take risk, and they do have fairly high spending rates,” said Andy Daly, managing director and investment strategist at SEI Investments Company.  

But, he added, things are changing at universities.  

Recently published data from the Alpha Nasdaq OCIO indexes shows that endowment and foundation OCIO clients lost 6.43 percent on average for the one-year period ending March 31, underperforming a simple 60/40 benchmark.  

And recent research from EnnisKnupp, set to be published in the Journal of Portfolio Management, shows that hedge funds,...

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Zero Hedge made a splashy return to Twitter over the weekend, months after being banned from the website.

The financial news site’s first order of business? Attacking Robinhood, the popular retail investment platform.

#FinTwit was ripe for the takedown: Some retail investors are making major returns using the trading app, despite the market’s volatility.

Zero Hedge tweeted on Saturday that retail investors are moving markets because Robinhood sells its order flow to high-frequency trading firms who “front-run” the trades and increase momentum.

Zero Hedge also pointed out that Robinhood engages in a practice called payment-for-order-flow, sharing a tweet that showed “Robinhood’s financial arrangement with Citadel”.

For all of Boaz Weinstein’s genius, he did not foresee this particular type of mayhem.

Instead, late last year the youthful-looking credit whiz was methodically scanning databases of bonds, swaps, and indexes on the 58th floor of Manhattan’s Art Deco Chrysler Building, where Weinstein’s Saba Capital Management has its offices. 

Among the empty coffee cups and water bottles, the hedge fund manager was noticing anomalies that often spell opportunity in credit markets — the side of the investment universe where Weinstein plies his craft.

Neither he nor his partners had an inkling of the coronavirus pandemic that would eventually tear through the world’s economies, devastate its credit markets, and extinguish more than 400,000 lives.

But what Weinstein saw was, he says, “crazy.” 

Prices for high-yield credit-default swaps, or CDSs, on dicey companies like United Airlines Holdings were cheap — the same as those on...

Investment firm Prescience Point Capital Management, best known for identifying short selling candidates, fired off a report on Wednesday asserting that solar equipment supplier Enphase Energy has engaged in financial fraud and recommended shorting the stock to essentially zero.

“We believe the company’s financial statements filed with the SEC are fiction,” the investment firm insisted in the 55-page report, posted on Prescience Point’s website, asserting its price target is “delisted.” 

The firm had issued its first negative report on Enphase in 2018. In its updated report, Prescience Point called for government bodies to investigate Enphase, for its auditor Deloitte to launch an in-depth investigation of the company’s accounting practices, and for Enphase’s board of directors to establish an independent committee to examine the findings and analyses presented in its report.

In response, shares of Enphase, a supplier of micro...

The United Nations’ Principles for Responsible Investment has plans to update the way signatories report progress in 2021.  

This week the UN PRI announced that it will release in January new reporting requirements for signatories that are more focused on “real-world” outcomes. Alongside this, the PRI shared a new framework for institutions interested in investing with the UN’s sustainable development goals in mind. 

“I think this is another great initiative from UN PRI,” said Aaron Yoon, a researcher at Northwestern University, via email Monday. “However, there has to be a very clear monitoring mechanism that needs to be in place in order for any of this to work.” 

Yoon recently published a paper on the UN PRI that said asset managers who sign the stewardship code fail to show “meaningful improvements” in incorporating environmental, social, and governance factors into their investment...

Private equity firms are increasingly targeting publicly traded technology companies for buyouts, including Thomas Bravo’s deal in early March to buy cybersecurity firm Sophos. As a result, some tech firms may be staying public for a far shorter period of time, according to a new report from data provider PitchBook. 

“Private equity firms are taking public tech companies private sooner than they have historically,” according to PitchBook’s recent report on buyouts of public tech companies. “The median time from IPO until buyout has dwindled since the financial crisis and now sits at around six years.” 

The report analyzed the tech companies that private equity firms have taken private and how they differ from public competitors, including the time between a public offering and a take-private transaction.

“In the years preceding a buyout, the public tech companies that were taken private often saw their valuation drop more...

Managers who choose stocks based on characteristics like value, size, and profitability are struggling. New research claims the problem is all about implementation — and that a simple formula can solve it. 

“There is an increasing awareness of factor implementation. It’s an issue of some factors [value and small size] not having done well, managers not paying attention to how factors interact, and using rules of thumb to make decisions,” said Steven Thorley, a finance professor at Brigham Young University. Thorley, alongside co-authors were Roger Clarke and Harindra de Silva, analyzed the best way to combine investment factors like value and momentum for a new paper, “Risk Management and Optimal Combination of Equity Market Factors.” The paper is expected to be published Wednesday in the third quarter 2020 issue of the Financial Analysts Journal. 

According to the study, a portfolio constructed using what’s called forecast risk...

Investors had been demonstrating an increased desire for alternative investments for years prior to the onset of the Covid-19 pandemic, yet the outlook for high-priced hedge funds to deliver serious alpha in the long bull market was not brilliant. However, the seemingly sudden onset of market dislocation, economic crisis, and wild volatility swings brought about by the pandemic created a prime environment for hedge funds to shine. Whether they were ready to seize the moment depended to some degree on their operational efficiency.

“In volatile markets like we had in March, you just didn’t know where liquidity was going or the direction the markets were headed. You weren’t sure how the Fed was going to respond to Covid-19 in terms of some of their fund structures, for example,” says Peter Sanchez, Executive Vice President, Head of Alternative Fund and Omnium Business Services, Northern Trust. “All of that uncertainty led to large trading volumes. Hedge...

Earlier this month, Morgan Stanley’s chief executive officer James Gorman shared a plan on LinkedIn to improve diversity at the bank. It included promotions for certain Black employees, the creation of an “Institute of Inclusion” and a $5 million donation to the NAACP.  

On Tuesday, less than two weeks later, the firm’s former diversity head, Marilyn Booker, filed a lawsuit against Morgan Stanley alleging racial discrimination. The suit was filed on behalf of herself and her former Black female colleagues in the U.S. District Court in the Eastern District of New York.

Booker is suing Morgan Stanley, her former supervisor Barry Krouk, and Gorman for alleged discrimination and retaliation in violation of the Civil Rights Act of 1866, alleged discrimination and retaliation in violation of the New York State Human Rights Law, and alleged violations of both the Equal Pay Act and the New York Equal Pay Law. Booker has also...

Collateralized loan obligations are under stress, and institutional investors will be absorbing their pain in the downturn, according to JPMorgan Chase & Co.’s asset management unit.

Downgrades of risky corporate loans held by U.S. CLOs have accelerated since the first quarter as they have “significant” exposure to sectors sensitive to the coronavirus pandemic, David Lebovitz, J.P. Morgan Asset Management’s global market strategist, said Tuesday by phone. Eighteen percent of CLO assets are in vulnerable industries, including transportation, services, retail, gaming, lodging and leisure, a JPMorgan report shows.

“There is going to be some pain,” he said.

But in his view, the banks, which largely invest in the safest portion of the CLO structure, will hold up fine. “Who’s going to be hurt by this? It’s going to be asset managers. It’s going to be investors.”

Historically low interest rates before the downturn left...

Outsourced chief investment officer clients are struggling to outperform benchmarks, even as an increasing number of institutions are embracing the model.  

“They had a pretty tough quarter, at least on average,” said Brad Alford, founder of Alpha Capital Management. His search consulting firm has partnered with Nasdaq to aggregate data for the Alpha Nasdaq OCIO Index, which released quarterly returns late Monday.  

The news comes as the asset allocation industry is experiencing a sort of upheaval. Industry insiders say they’ve seen an uptick in OCIO searches, while in-house allocators at institutions like Inova Health System, Mercy health system, and Children's Hospitals Minnesota have been laid off or furloughed.  

The results from the OCIO index show that for the one-, three-, five-, and ten-year periods ending March 31, the AlphaNasdaq OCIO broad market index underperformed a 60/40 portfolio made...

New coronavirus cases are mounting in parts of the U.S. — and institutional investors are growing anxious, according to this week’s II Fear Index.

Asked whether governments should prioritize public health or the economy, 55 percent voted for public health — an 8 percent increase from last week, when a majority of respondents cited the economy. Concern for public health had waned in the last few weeks, but that trend appears to be reversing as businesses reopen and infections multiply.

Zero Hedge made a splashy return to Twitter over the weekend, months after being banned from the website.

The financial news site’s first order of business? Attacking Robinhood, the popular retail investment platform.

#FinTwit was ripe for the takedown: Some retail investors are making major returns using the trading app, despite the market’s volatility.

Zero Hedge tweeted on Saturday that retail investors are moving markets because Robinhood sells its order flow to high-frequency trading firms who “front-run” the trades and increase momentum.

Zero Hedge also pointed out that Robinhood engages in a practice called payment-for-order-flow, sharing a tweet that showed “Robinhood’s financial arrangement with Citadel”.

Between trade tensions with the U.S. and protests in Hong Kong, last year was tumultuous for for Asia. But all of that paled in comparison to the coronavirus that would sweep through the continent — and go on to infect the rest of the world.

“For those of us that are Hong Kong-based, the protests led pretty much straight into the pandemic,” said Martin Yule, head of research for Asia Pacific at UBS. “At times, Hong Kong felt like the eye of the storm. Rising geopolitical tensions were definitely the defining macro force at the end of 2019, but Covid pushed these concerns into the background pretty quickly.”

Six months since Covid-19 was first discovered in China, countries in the region are now loosening lockdown restrictions. And many Asian equity markets are rebounding, partly on the back of the large stimulus packages in the United States and Europe. 

“The biggest surprise of 2020 thus far has been the speed of the market...

Energy companies are defaulting at a pace not seen in three years, with the bankruptcy filing Monday of Extraction Oil & Gas being the latest sign of industry pain in the Covid-19 pandemic.

The energy default rate now stands at 11.2 percent — the highest since April 2017 — and will rise to about 17 percent by the end of this year, Eric Rosenthal, senior director with Fitch Ratings, estimated in an emailed statement Monday. “Imminent bankruptcies from California Resources and Chesapeake would lift the rate above 14 percent.”

The energy sector is driving U.S. default rates as oil producers, hit hard by the pandemic, struggle to meet their debt obligations, according to Fitch. Crude prices have plunged as energy demand collapsed in the crisis, falling from levels that had never fully recovered from the oil bust in 2014.

“After months of liability management and careful analysis of our strategic options, we determined that a voluntary...

Zero Hedge made a splashy return to Twitter over the weekend, months after being banned from the website.

The financial news site’s first order of business? Attacking Robinhood, the popular retail investment platform.

#FinTwit was ripe for the takedown: Some retail investors are making major returns using the trading app, despite the market’s volatility.

Zero Hedge tweeted on Saturday that retail investors are moving markets because Robinhood sells its order flow to high-frequency trading firms who “front-run” the trades and increase momentum.

Zero Hedge also pointed out that Robinhood engages in a practice called payment-for-order-flow, sharing a tweet that showed “Robinhood’s financial arrangement with Citadel”.

The first tweet was shared more than 2,000 times by other Twitter users, including billionaire investor Chamath Palihapitiya, who claimed that the arrangement will “f--- over” retail...

The global coronavirus pandemic has ground economies around the world to a halt — and the slowdown is having a major impact on private equity exits, according to a new report from global consulting firm McKinsey & Co. 

“With a couple of exceptions — such as structured transactions and deals signed before the crisis — traditional PE exits have slowed significantly since mid-March of this year,” wrote McKinsey partners Alastair Green, Ari Oxman, and Laurens Seghers in the report. “Announced PE exits dropped almost 70 percent globally in May 2020 versus May 2019.” 

Several factors have contributed to the slowdown, according to the authors, who interviewed more than 40 sponsors, investment bankers, and CEOs from March to May, mostly based in Europe and the United States. Valuations have suddenly shifted, with businesses facing tanking demand as a result of the crisis — which has also laid bare new weaknesses in many portfolio...

As he sat down to write, Northern Trust Asset Management’s Shundrawn Thomas knew it was time. And his timing could not have been any more poignant.

In “Breaking the Silence,” an open letter that has generated both internal and external praise since it was published on June 1, the Chicago-based African-American president of a firm with more than $900 billion under management wrote of a decades-old encounter with police in a Chicago suburb. 

“It was profiling, pure and simple,” he wrote of the incident in which an officer unholstered his firearm after pulling him over for no other reason than Thomas being a black man in a white neighborhood. Unfortunately, this wasn’t an isolated incident; he has suffered numerous similar indignities throughout his life. In the wake of the recent killings across the United States of three African-Americans in separate incidents that have generated worldwide protests demanding an end to racial inequities,...

A major Washington, D.C.-area hospital system has disbanded its investment group, laying off the chief investment officer and three others as part of a vast cull to reduce costs, records show.

Just a year ago, Inova Health System had lured the team of senior Cambridge Associates investment consultants to quit and come in-house at Inova. They set out to build an institutional-quality operation to run Inova’s portfolio, worth $5.6 billion at its recent peak.

CIO Laura Pinsky, managing director Craig Beach, and investment director Jason Copelas lost their jobs as of last month, along with executive assistant and 30-year Inova veteran Denise Osborne, according to digital records and informed sources.

“In April, Inova made the difficult decision to eliminate 427 non-clinical positions across the organization,” the nonprofit said Friday in an email to Institutional Investor, without specifically referencing the investment team. “Each...

Outspoken AQR Capital Management co-founder Cliff Asness is not one for holding his tongue. Following the murder of George Floyd more than two weeks ago, he penned a 549-word email to the firm’s 800 employees supporting the Black Lives Matter movement that Institutional Investor has obtained.

“The phrase ‘Black Lives Matter’ does not mean ‘matter more’ rather it is meant to raise awareness that to society today they still don’t matter enough. We must all change that,” he wrote.

Asness, who calls himself a “life-long libertarian,” also took aim at the state, which he finds “abhorrent, ” as he decried the police action of “wantonly taking the life of a citizen. The state, with its incredible power, must be held to the highest standard and we have just seen its lowest action.”

Here is the full text of the memo, titled “A personal note during trying times,” which was sent June 2 with an importance noted “high.”

University and college endowments pioneered the use of alternative investments — and now they may be suffering for it.

“For funds with alts allocations of up to about 40 percent of total assets, the story is the same as for the public funds,” according to Richard Ennis, retired chairman of consultant EnnisKnupp. “(1) Alts detract from performance and (2) the more you have, the worse you do.” 

In a new paper published Wednesday, Ennis said that endowments ranging in size from less than $25 million all the way up to $1 billion lost about 20 basis points in alpha for every 10 percent of assets invested in alternatives over the 11-year period ending June 30, 2019. “A 40 percent alts allocation results in a penalty of 79 bps,” he wrote. 

Endowments larger than $1 billion did better over the same time period — but still underperformed benchmarks as a whole.

”There is arguably an indication of skill among at least some of the...

On May 30, BlackRock chief executive officer Larry Fink wrote a letter to his colleagues, writing that he was “appalled” by the murders of Ahmaud Arbery and George Floyd. 

“Many of us are struggling with these events,” Fink wrote in the letter. “For our employees suffering pain from these tragedies, I want you to know that the firm’s leadership stands with you, and we are listening.” 

Less than two weeks after Fink shared this letter on LinkedIn, Color of Change, a nonprofit racial justice organization, is calling on him to stop supporting the New York City Police Foundation. 

The New York City Police Foundation provides financial support to the New York Police Department, paying for training, equipment, and rewards for anonymous tips that lead to arrests and indictments of violent felons. In 2017, 2018, and 2019, Fink was a co-chair for the foundation’s annual gala, its website shows.  

“It's not enough...

As he sat down to write, Northern Trust Asset Management’s Shundrawn Thomas knew it was time. And his timing could not have been any more poignant.

In “Breaking the Silence,” an open letter that has generated both internal and external praise since it was published on June 1, the Chicago-based African-American president of a firm with more than $900 billion under management wrote of a decades-old encounter with police in a Chicago suburb. 

“It was profiling, pure and simple,” he wrote of the incident in which an officer unholstered his firearm after pulling him over for no other reason than Thomas’s being a black man in a white neighborhood. Unfortunately, this wasn’t an isolated incident; he has suffered numerous similar indignities throughout his life. In the wake of the recent killings across the United States of three African-Americans in separate incidents that have generated worldwide protests demanding an end to racial...