In search of yield, asset owners are increasingly turning to co-investments — where they invest in companies alongside private equity firms or hedge funds — and direct deals in the hopes of higher returns. But experts warn investors that these complex transactions pose their own challenges. 

These deals not only benefit asset owners, but also investment managers, according to Jennifer Post, a partner at law firm Thompson Coburn. They can attract institutional capital into their funds by offering a chance to invest directly. “This allows them to leverage their capital base so they can lead bigger deals, gain market share, and can build a track record of increasing assets under management,” said Post.  

Although these investments du jour promise big returns, investors must be careful to make sure they have enough capacity to handle their unique structure, according to legal experts. 

“With these arrangements come...

Crude fell sharply in July as OPEC+ reached an agreement to phase out last year’s production cuts just as the Delta COVID-19 variant is sparking suspicions that demand could once again dry upCME Group’s new Micro WTI Crude Oil futures offer a smaller, more precise instrument for managing oil price exposure during periods of increased volatility.

In the second half of 2021, financial services employees, including private equity and hedge funds, should expect “meaningful” year-end incentive compensation, according to a new report from Johnson Associates, a compensation consulting firm. 

China’s crackdown on education companies is the latest bad news for Teng Yue Partners, the hedge fund founded by Bill Hwang protege Tao Li. Hwang, a Tiger cub, was head of Archegos Capital Management, the family office that imploded in late March. 

Teng Yue fell 21 percent in July and is now down 30 percent for the year, according to an investor. 

The latest losses occurred after Chinese regulators announced last month that they would ban education firms from making profits, raising capital, or going public.

Teng Yue is an investor in two stocks that were hit hard by the news: Chinese for-profit educators Gaotu Techedu and TAL Education Group.

During times of global turbulence, like the kind induced by the Covid-19 pandemic, cryptocurrencies may provide much-needed diversification to investment portfolios, according to a paper from researchers at the University of Bath. 

The researchers came to this conclusion after aggregating popular cryptocurrencies into nine equally-weighted portfolios based on the type of algorithm used in the blockchain of each currency, a methodology that gave them room to consider 553 cryptocurrencies in total. These categories included proof-of-work coins — popular mineable coins like Bitcoin and Ethereum — and proof-of-stake coins, a more energy-efficient alternative to PoW coins. 

Seven of the nine categories of cryptocurrencies offered diversification benefits to investors, including PoW and PoS coins, according to co-authors Xinyu Huang, Weihao Han, David Newton, Emmanouil Platanakis, Dimitrios Stafylas, and Charles Sutcliffe.

For the...

The global asset management industry is emerging from the pandemic performing far better than most people expected. Whether or not their success is attributable to the years of planning the top firms have done to face down pre-Covid headwinds like declining fees, asset managers have done everything from developing lower cost products to reach new clients to implementing cost-cutting technologies to better compete during the Covid-19 pandemic, according to Cerulli Associates’ annual global markets report.

In fact, since 2020, managers have dealt effectively with existing challenges, like fee compression, macroeconomic uncertainties, international relations, and a volatile regulatory environment. On top of that, they’ve managed pandemic-induced hurdles, including market volatility, low interest rates, inflation, and changing work environments. Overall market growth and the expanding middle class, which is becoming much more financially literate, in...

To some, Donna Snider’s timing would seem ill-fated. 

The Hackensack Meridian Health chief investment officer began her new job — building the healthcare institution’s investment office — on March 23, 2020. 

The S&P 500 had bottomed out as the coronavirus pandemic went global. While corporate offices shut down, hospitals, including HMH’s New Jersey-based network, were inundated with patients. 

“Not only was it the market low, but the United States had shut down in terms of businesses,” Snider told Institutional Investor.  

In September 2004, Eugene Ross stumbled on a Wall Street fraud of such far-reaching proportions, the U.S. Securities and Exchange Commission is still recovering funds from it to this day. 

Yet, in July, the SEC handed down a final order dismissing Ross’s role in uncovering and reporting two of the biggest fraudsters of the dotcom era and denying him any claim to a whistleblower award. The decision, rather than showing a just process that rewards whistleblowers who face retaliation and extreme hardship in acting to protect investors, reveals just how far the agency seems willing to go to deploy legal strategies and gamesmanship to reject whistleblower awards.

Ross never intended to become a whistleblower. When he discovered the fraud, he was overseeing the management of hundreds of millions of dollars for the now-defunct Bear Stearns. One of his clients, Lily Cates, the mother of the Hollywood actress and Fast Times at Ridgemont High...

China’s crackdown on highflying technology companies that trade in the U.S. is creating a feast for short sellers. 

Short sellers of U.S.-listed Hong Kong and Chinese stocks are up almost $8 billion this year, with the bulk of that earned in July, according to a new report from S3 Partners, which tracks the business.

Almost one quarter of those gains came from one stock: Jack Ma’s Alibaba Group, the internet giant.

From July 1 to July 27, short sellers booked $1.99 billion in marked-to-market gains in Alibaba, net of financing costs, according to the report. That was a nearly 20 percent gain. Over the entire year, short sellers have made $1.34 billion shorting Alibaba for a 13 percent gain, the report said.

The City of San Jose Retirement System posted its highest returns in decades thanks to timely rebalancing amid the coronavirus pandemic.  

The pension fund, which is split into two, returned 29.46 percent for its Federated City Employees’ Retirement System and 26.49 percent for its Police and Fire Department Retirement Plan, according to its chief investment officer, Prabhu Palani.

Palani joined the city’s pension funds as CIO in 2018, having spent the earlier part of his career in portfolio management. Since then, the plan has gone from the 99th percentile of performance relative to peers to the top quartile, Palani said.  

Going into 2020, the fund had roughly a quarter of its assets allocated to fixed income.  

The ways that asset managers approach investment stewardship are evolving alongside the rest of the industry, according to a report from Accenture Asset Management. 

Stewardship refers to engagement with public companies to promote corporate governance practices that align with shareholder values and promote long-term value creation for minority and majority owners. According to the report, 80 percent of asset managers believe stewardship models provide opportunities to create value and deliver strong performance for shareholders. 

But asset managers are experiencing challenges with their current strategies for shareholder engagement. Among the survey respondents, which consisted of executives at 50 asset managers and alternatives firms in North America, the majority said their top four challenges were data standardization, research and analysis, corporate interaction, and access to data. 

“This is an area that hasn’t...

Longtime recruiter Debra Brown has retired from her position at Russell Reynolds Associates after celebrating her twenty-fifth anniversary at the firm.  

Brown has been with the consulting firm since 1996, most recently working as a managing director for its asset and wealth management recruiting business. She is known within the allocator community as one of the top recruiters for chief investment officer talent.  

Brown said via email that she has worked through a transition plan with her team over the past 12 to 18 months and is “confident and optimistic that our team will not miss a beat!” Her retirement went into effect on July 30.  

Brown began her career in the finance industry at American Express as a financial analyst after obtaining her MBA from New York University’s Stern School of Business.  

Following turmoil over accounting problems and alleged sexual harassment by its former administrator, the Arizona Public Safety Personnel Retirement System’s new leadership has spent the past two years turning the organization around.  

The fund’s new chief administrator, Mike Townsend, had joined in December 2019, just before a January 2020 audit revealed that staff turnover, database changes, and a lack of written policies and procedures led to the fund misreporting certain investments and overstating net appreciation in fair value and fees.  

Townsend has spent the past year and a half determined to improve the pension’s funded status, reputation, and internal accounting procedures. Meanwhile, his counterpart, chief investment officer Mark Steed, has been changing how the fund allocates assets and improving how his team operates.  

One of Townsend’s first initiatives was to travel the state to educate...

In the U.K, major public pension funds and consulting firms have joined together in a coalition for greater diversity and inclusion in manager selection.  

The Asset Owner Diversity Charter, spearheaded by Brunel Pension Partnership, is backed by 17 organizations representing £1.08 trillion ($1.5 trillion) in assets under management. The charter mandates that participants incorporate diversity questions into their manager selection processes, monitor selected managers for diversity and inclusion on an ongoing basis, and lead and collaborate in this area to encourage broader industry change.

Institutions who signed the charter — including £30 billion pension manager RPMI Railpen, the £15 billion West Midlands Pension Fund, and the £3 billion Church of England Pension Board — are expected to implement its proposed commitments within 12 months of signing. 

This includes asking current and prospective managers to complete...

Citron Research founder Andrew Left saw China Evergrande Group’s woes coming — almost a decade ago.

The world’s most indebted real estate firm, Evergrande has been one of the biggest casualties of China’s recent market rout: Its stock and bonds have tanked, its debt has been downgraded, and banks are refusing to lend it more money.

But instead of being heralded for his foresight, Left ended up being busted by Hong Kong’s securities regulator for claiming, in a 2012 report, that the company engaged in aggressive accounting and was actually insolvent. 

“They deemed my report to be reckless. That was the word they used: reckless and negligent for spreading false information,” Left told Institutional Investor.

The groundwork has been laid for a construction cycle whose scale and ambition has not been seen for decades.  

The Biden administration’s bipartisan deal with senators on $579 billion in new infrastructure spending, if passed by Congress, is a generational opportunity, and one that could increase spending even beyond that amount, by attracting capital from long-term institutional investors to help revitalize America’s infrastructure. 

Long-term institutional partners can play a key role in building, renewing, and operating infrastructure in the U.S. Private partnerships with government can reduce the strain on public finances, accelerate job creation, foster innovation, inject new expertise into projects, spur productivity gains, and advance the transition to a greener U.S. economy. 

Social license to build and operate infrastructure and sustainable investing is also at a high-water mark, and many leading long-term...

Laura Pollock’s Third Street Partners launched its lift-out business 18 months ago, just before the pandemic began.   

“The pandemic has created an opportunity for individuals to reflect on what do they want their career to look like,” Pollock told Institutional Investor. With that comes opportunity for an executive search firm like Third Street. 

Its lift-out business involves facilitating an entire investment team’s next career move. Third Street acts as a “professional matchmaker,” as Pollock puts it, finding teams that would be good fits for existing asset managers — or that would do well if they spun out on their own.   

Pollock started Third Street in 2013 after spending years at industry recruiting stalwarts Russell Reynolds and David Barrett Partners. In September, Pollock hired an M&A expert, John Forsythe, to aid her in building out the lift-out business.

The recent launch of Micro Bitcoin futures follows the success of the larger contract, which has grown tenfold in less than five yearsDespite recent decline, ether continues to grow as a percentage of crypto market share, confirming that there is room for more than one dominant coin

Virtus Investment Partners has acquired Stone Harbor Investment Partners, a fixed-income manager with $15.4 billion in assets under management, as an affiliate manager. 

Virtus will acquire all of Stone Harbor, but the latter will “maintain autonomy over its investment processes, brand, and culture” as a “boutique” affiliate, according to a statement. The announcement did not disclose the terms of the acquisition, but the deal is predicted to close by the end of the year, depending on approval from the Stone Harbor Funds board and shareholders. 

The Stone Harbor deal is one of three ongoing acquisitions for Virtus in 2021. Currently, the firm has nine official investment partners, including Kayne Anderson Rudnick, Sustainable Growth Advisors and Newfleet Asset Management. 

The firm’s model allows affiliates to “retain their investment philosophy, culture, and brand,” said Rick Smirl, executive vice president and chief...

After spending nearly five years as one of the Conrad N. Hilton Foundation’s chief investment officers, Yatin Patel is moving on.  

Patel, who worked alongside Michael Buchman as co-CIOs since 2016, has left the $6.7 billion foundation to “pursue other career opportunities,” according to a spokesperson. Patel did not return a LinkedIn message seeking comment.  

“We are grateful to Yatin for his extraordinary contributions over the past 13 years, as a staff member and an officer of the foundation, and we wish him the very best of luck in this next phase of his professional life,” the spokesperson said via email.  

Prior to joining the foundation in 2008, Patel had worked on Barclay’s corporate development team and on Lazard‘s financial institutions team, according to his LinkedIn profile. He obtained his MBA from the UCLA Anderson School of Management. 

The W.K. Kellogg Foundation has hired a director of investments only months after its new chief investment officer, Carlos Rangel, took the helm.  

Shanelle Brown joined the Battle Creek, Michigan, foundation as its director of investments on June 21, according to an announcement published on Monday.  

At the $8.3 billion foundation, she will oversee investment strategy and portfolio and investment management, with a focus on public equities.  

“We are thrilled to have Shanelle as part of the foundation's investments team,” Rangel said. “She comes to us with significant expertise and a demonstrated commitment to diversity, equity, and inclusion in our field.” 

The global economy has recovered from the pandemic sooner than most expected, with diversified investors benefiting from financial markets. But with growth now expected to be at its peak, U.S. asset managers, in particular, must now grapple with new concerns surrounding interest rates, inflation, and valuations.

According to Nuveen’s mid-year outlook released Monday, “a booming economy brings with it new opportunities — and risks.” While asset growth improved from 2020, yields are still “frustratingly” low, which means returns may be fewer and far between in the second half of 2021. Moving into the second half of the year, the asset manager recommended clients consider differentiating between short- and long-term inflation risks and diversifying income and asset classes. 

“Both the level of output and its first derivative (growth) remain quite strong. It’s the second derivative — the change in the rate of growth — that has started to...

Mediolanum International Funds, with €50 billion ($59.7 billion) in assets, has forged partnerships with Pzena Investment Management, Mondrian Investment Partners, and Atlas Infrastructure. As part of the deals, Mediolanum, the asset management arm of Mediolanum Banking Group in Italy, is investing €500 million in three boutique managers’ funds, with almost half going into Pzena.

Furio Pietribiasi, CEO of Mediolanum International Funds, told Institutional Investor that the firm will help distribute all three firms’ strategies in Europe. New York-based Pzena, whose business is primarily in the United States, will be able to extend its reach to clients in Italy, Spain, and Germany, he said. 

The addition of the boutiques to Mediolanum’s multi-manager platform will also help distinguish its offerings from competitors at a time when pressure is rising on active management in Europe. The bar for investors to take on active strategies is...

Middle-market private equity firms have bounced back from Covid-19 pandemic-related lows, with dealmaking, exit activity, and fundraising showing signs of continued strength.  

In PitchBook’s U.S. PE middle-market report published Wednesday, author and PitchBook analyst Rebecca Springer cited “robust” dealmaking in the first quarter of 2021 as one element of the sector’s success. According to the report, deal count and value in the first quarter of 2021 “easily exceeded” numbers in the first quarter of 2020. In 2021, U.S. PE firms closed 776 deals and spent a total of $119.5 billion, an amount the report deems the “second highest quarterly deal value figure” since the fourth quarter of 2020. PitchBook credits the successful dealmaking to increased vaccinations, the Federal Reserve, and an “ample supply” of cheap debt. 

“In Q4 2020, we saw a backlog from the pandemic, so deals that would’ve been done earlier but were...