Corporate leaders around the world have been forced to make tough decisions as they attempt to lead their companies through the global coronavirus pandemic. These are the European executives that most impressed investors during the early days of the crisis, according to Institutional Investor’s 2020 All-Europe Executive Team.

C-suites at Nestle, Unilever, and Allianz were among the top-ranking executives in the sixteenth annual survey, which asks investors and analysts to rate the region’s CEOs, CFOs, investor relations professionals, and IR programs. Executives at these three firms ranked first in their sectors in all four categories, while also earning top marks for their analyst days and environmental, social, and governance practices.

The food producer, consumer goods company, and insurer were among 12 companies that swept their sectors across the four main categories in this year’s ranking. Others included Biotech firm Lonza Group, which...

Nearly every investment team in this country is having conversations about diversity. 

To foster active dialogue, one approach is rooting the conversation within values that everyone on the team already shares. Successful teams can be successful for many reasons, but perhaps the most critical ingredient is the handful of shared core values and norms that help everyone feel part of the group. That’s what provides individuals the safety to contribute to achieving the organization’s mission.

This isn’t rocket science. The importance of shared values and psychological safety has been written aboutplenty. But too often in the investment field, the unwritten approach to maintaining shared values is to look for so-called “cultural fit” — people who may look, sound, and think the same as those who have populated teams before. 

In my experience at the Hewlett Foundation, embracing diversity as a core value of how our investment team...

Ben Meng’s resignation as chief investment officer hasn’t stopped out-of-state Congressmen from questioning the California Public Employees’ Retirement System’s ties to China. For at least one of these Congressmen, though, their own state pension fund is likewise heavily invested in Chinese companies.

Back in February, Indiana Rep. Jim Banks began a series of attacks against CalPERS on Twitter, critiquing its investments in Chinese companies as well as Meng’s role in the retirement system.  

Banks’ tweets on the subject continued through last month following Meng’s August 5 resignation. He said that “new leadership” would be “an opportunity for CalPERS to divest from the PLA,” or China’s People’s Liberation Army, which represents China’s communist party.

More recently, on August 19, Sen. Rick Scott from Florida sent a letter to CalPERS chief executive officer Marcie Frost urging the retirement system to “to review its policies...

Pensions entered the Covid-19 pandemic significantly exposed to corporate credit risk, relying on a traditional investment strategy that may be heading for failure, according to JPMorgan Chase & Co.’s asset management group. 

They’ve been hedging the volatility of their pension liabilities by taking on “a very concentrated exposure to corporate credit,” Jared Gross, the head of institutional portfolio strategy at J.P. Morgan Asset Management, said in a phone interview. Largely holding corporate bonds at risk of being downgraded to junk in the downturn, plus Treasuries with historically low yields, won’t work well for ensuring workers receive the pension benefits they’re owed, according to Gross.

“If a classic fixed-income portfolio is yielding 2 percent, that’s not going to get the job done,” he said. “You have a concentrated exposure in investment-grade corporate credit, which is both relatively low-yielding today and likely to be...

Private equity firms that invest internationally are overpaying for their portfolio companies, new research shows.

In a study of over 1,000 global private equity transactions, German researchers discovered that cross-border buyout deals tend to have “significantly higher” valuation multiples than domestic deals.

“When PE firms operate across borders, they face several obstacles that threaten buyout pricing,” wrote authors Benjamin Hammer, Nils Janssen, and Bernhard Schwetzler of Germany’s HHL Leipzig Graduate School of Management. “Most importantly, information production is poor due to lack of local ties and non-familiarity with the local business environment.”

According to the authors, this informational disadvantage can hurt foreign private equity firms in a number of ways, including limiting the pool of buyout targets — “thus reducing the chance to find targets that are available at attractive prices.” Communication barriers and...

New research is firing up the debate about whether endowments would be better off with or without the billions they have locked up in private equity and other alternative investments. 

Hossein Kazemi — a professor of finance at Isenberg School at the University of Massachusetts Amherst and a senior advisor to the CAIA Association — argued in a paper jointly produced with CAIA that previous studies showing that endowments have been beaten by a simple portfolio of stocks and bonds used improper benchmarks to reach their conclusions and don’t account for cash in the portfolio. 

Once these significant adjustments are made, Kazemi argued, the results are very different. Endowment returns outpace the results of a portfolio invested in 60 percent stocks and 40 percent bonds Kazemi said in an interview with Institutional Investor. 

Multiple studies — including one by Richard Ennis, retired chairman of consultant EnnisKnupp, and...

Exclusivity is like fiat currency: It only works if everyone believes it’s real. 

For decades that wasn’t a problem for Seth Klarman’s $29.5 billion Baupost Group. The only way to get money into its famed hedge funds was to already have some invested, and everyone knew it. Even for that coterie, Klarman would periodically slide some of their capital back, a potent reminder that Baupost didn’t need more — or your — money. 

But doubts have begun to percolate within the elite investor class, an investigation by Institutional Investor reveals. 

“We’re walking away,” says one capital allocator. It’s not clear whether or not Baupost knows this yet. The firm declined to comment for the story.

“Seth is running Baupost more like a wealthy person might run their personal money than like the aggressive hedge fund manager that he’s been over the years,” the investor says. “He has pretty considerable net worth and all of his...

Steve Cohen’s Point72 Ventures is getting into the health care game.  

The venture firm announced Tuesday that it has created a new investment team focused specifically on health care. The firm hired Scott Barclay, previously a partner at Data Collective Venture Capital, to lead the group.  

Hedge fund firms like Deerfield Management and Renaissance Capital have been raking in returns after investing in health care companies, Institutional Investor has previously reported.  

There are major profits to be made in the health care industry, particularly during the pandemic, but Point72 Ventures is positioning this launch as an altruistic one.  

“The current health care system is broken, particularly in the United States,” said Matthew Granade, managing partner at Point72 Ventures, in a statement. “We believe that these problems will be solved by technical founders who are dedicated to...

Exclusivity is like fiat currency: It only works if everyone believes it’s real. 

For decades that wasn’t a problem for Seth Klarman’s $29.5 billion Baupost Group. The only way to get money into its famed hedge funds was to already have some invested, and everyone knew it. Even for that coterie, Klarman would periodically slide some of their capital back, a potent reminder that Baupost didn’t need more — or your — money. 

But doubts have begun to percolate within the elite investor class, an investigation by Institutional Investor reveals. 

“We’re walking away,” says one capital allocator. It’s not clear whether or not Baupost knows this yet. The firm declined to comment for the story.

“Seth is running Baupost more like a wealthy person might run their personal money than like the aggressive hedge fund manager that he’s been over the years,” the investor says. “He has pretty considerable net worth and all of his...

Exclusivity is like fiat currency: It only works if everyone believes it’s real. 

For decades that wasn’t a problem for Seth Klarman’s $29.5 billion Baupost Group. The only way to get money into its famed hedge funds was to already have some invested, and everyone knew it. Even for that coterie, Klarman would periodically slide some of their capital back, a potent reminder that Baupost didn’t need more — or your — money. 

But doubts have begun to percolate within the elite investor class, an investigation by Institutional Investor reveals. 

“We’re walking away,” says one capital allocator. It’s not clear whether or not Baupost knows this yet. The firm declined to comment for the story.

“Seth is running Baupost more like a wealthy person might run their personal money than like the aggressive hedge fund manager that he’s been over the years,” the investor says. “He has pretty considerable net worth and all of his...

The remixing of the Dow Jones Industrial Average should signal the need to make room for technology themes in portfolios, even for investors who prefer other indexes, according to UBS Global.

“The shuffle highlights the importance of diversification in ensuring that investors are well exposed to the winners in a post-Covid-19 world,” UBS’s chief investment office said in a research note dated August 31. The bank pointed to renewable energy, technology disruption, 5G networks, and health-care tech as winning themes over the long term. 

The changing landscape for investors was underscored by oil giant ExxonMobil Corp. — the oldest member of the Dow index — getting booted from the Dow index to prepare for Apple’s recently announced four-to-one stock split that took effect in trading Monday. Most professional investors use the Standard & Poor’s 500 as their go-to benchmark. The basket of stocks has been trading around record highs...

Exclusivity is like fiat currency: It only works if everyone believes it’s real. 

For decades that wasn’t a problem for Seth Klarman’s $29.5 billion Baupost Group. The only way to get money into its famed hedge funds was to already have some invested, and everyone knew it. Even for that coterie, Klarman would periodically slide some of their capital back, a potent reminder that Baupost didn’t need more — or your — money. 

But doubts have begun to percolate within the elite investor class, an investigation by Institutional Investor reveals. 

“We’re walking away,” says one capital allocator. It’s not clear whether or not Baupost knows this yet. The firm declined to comment for the story.

“Seth is running Baupost more like a wealthy person might run their personal money than like the aggressive hedge fund manager that he’s been over the years,” the investor says. “He has pretty considerable net worth and all of his...

Exclusivity is like fiat currency: It only works if everyone believes it’s real. 

For decades that wasn’t a problem for Seth Klarman’s $29.5 billion Baupost Group. The only way to get money into its famed hedge funds was to already have some invested, and everyone knew it. Even for that coterie, Klarman would periodically slide some of their capital back, a potent reminder that Baupost didn’t need more — or your — money. 

But doubts have begun to percolate within the elite investor class, an investigation by Institutional Investor reveals. 

“We’re walking away,” says one capital allocator. It’s not clear whether or not Baupost knows this yet. The firm declined to comment for the story.

“Seth is running Baupost more like a wealthy person might run their personal money than like the aggressive hedge fund manager that he’s been over the years,” the investor says. “He has pretty considerable net worth and all of his...

The case between Bridgewater Associates and two of the founders of Tekmerion Capital Management, a small investment firm, has been resolved.  

On Friday the two filed a “stipulation of discontinuance” with the New York State Supreme Court, seeking to permanently dismiss the case.  

This will likely end a years-long arbitration process between Bridgewater and Tekmerion’s founders, Lawrence Minicone and Zachary Squire, two former Bridgewater employees. The parties were at odds over Bridgewater’s concerns that Minicone and Squire had breached the confidentiality agreements laid out in their original employment contracts.  

“The court proceedings have been discontinued and the parties have resolved their dispute,” a spokesperson for Bridgewater said via email. Minicone and Squire’s lawyer did not immediately respond to an email seeking comment Monday. 

Here’s how the lengthy dispute played...

The email, formal and foreboding, landed at 9:38 a.m. on Monday, March 2. 

“Can you please call me when you have a second to talk?” the Bridgewater Associates employee asked. 

The call, the email’s recipient knew, would not be good: Karen Karniol-Tambour, the hedge fund’s head of investment research, was scheduled to be a lunchtime speaker at an investment conference at Washington, D.C.’s Watergate Hotel just over 24 hours later. But at that moment, on March 2, a man in Westchester County — a mere 30 miles from Bridgewater’s two main campuses in Westport, Connecticut — was undergoing treatment as the first Eastern Seaboard case of Covid-19 with an unknown origin. Karniol-Tambour wasn’t going to make it, the conference organizer feared.

Bridgewater had been on high alert all weekend. The firm’s health security “posture” was the subject of ongoing discussions. Already, anyone who had traveled to certain areas — including the...

Short-term investors are widely seen as bad for they companies they invest in, because they are likely to focus on immediate changes in stock value — potentially at the expense of the company’s long-term profitability. But new research suggests that there may be times when a short-term focus can actually help companies perform better over the long run.

The study, expected to be published in the scholarly journal Management Science, found that companies with more short-horizon investors — who trade stocks regularly — adapted more quickly when their competitive environments changed “radically.”

“Under these circumstances, firms and economies with disproportionately more short-term investors may appear more dynamic and avoid stagnation, indicating that short-horizon investors perform an important function in the economy,” wrote authors Mariassunta Giannetti  (Stockholm School of Economics) and Xiaoyun Yu (Indiana University).

For...

The email, formal and foreboding, landed at 9:38 a.m. on Monday, March 2. 

“Can you please call me when you have a second to talk?” the Bridgewater Associates employee asked. 

The call, the email’s recipient knew, would not be good: Karen Karniol-Tambour, the hedge fund’s head of investment research, was scheduled to be a lunchtime speaker at an investment conference at Washington, D.C.’s Watergate Hotel just over 24 hours later. But at that moment, on March 2, a man in Westchester County — a mere 30 miles from Bridgewater’s two main campuses in Westport, Connecticut — was undergoing treatment as the first Eastern Seaboard case of Covid-19 with an unknown origin. Karniol-Tambour wasn’t going to make it, the conference organizer feared.

Bridgewater had been on high alert all weekend. The firm’s health security “posture” was the subject of ongoing discussions. Already, anyone who had traveled to certain areas — including the...

When David Barse stepped down as longtime chief executive officer of mutual fund firm Third Avenue Management in December 2015, he had at least two years before he could make his next move in asset management due to a noncompete agreement. Shortly before his departure, he says Third Point was suffering from risky bets made by a high-yield bond fund, and its value-oriented stock funds had been struggling to beat benchmarks since the 2008 financial crisis.

“I was facing this constant war that I was losing to the passive strategies that were both outperforming and gathering assets,” Barse said in a phone interview. In his view, active fund management became all too difficult post-crisis. “It’s too hard to do,” he said. “It’s really hard to pick winners, and it’s really, really hard to do that consistently.”

Last year Barse moved into the world of passive investing with the creation of his firm XOUT Capital. He concluded it’s probably easier —...

Citibank's lawsuits seem to be working: one asset manager that received its “mistaken” loan payment from the bank has returned the money.  

On Thursday, the court dropped Citi’s complaint against Highland Capital Management after Highland repaid Citi $243,580.  

Highland’s decision to pay its relatively small cut of the $900 million Citi accidentally repaid lenders to personal care company Revlon comes exactly a week after Citi filed its suit against the firm. The lawsuit — and three others — stem from 2016 loans to Revlon.

Citi was the administrative agent on those loans, facilitating payments between Revlon and the lenders. The bank repaid the loan in full earlier this month, but only some of the lenders have returned their cut of the money.

Here's why: Over the past year, Revlon allegedly transferred intellectual property that was collateral for the loans to a second loan. The 2016 lenders took action,...

The email, formal and foreboding, landed at 9:38 a.m. on Monday, March 2. 

“Can you please call me when you have a second to talk?” the Bridgewater Associates employee asked. 

The call, the email’s recipient knew, would not be good: Karen Karniol-Tambour, the hedge fund’s head of investment research, was scheduled to be a lunchtime speaker at an investment conference at Washington, D.C.’s Watergate Hotel just over 24 hours later. But at that moment, on March 2, a man in Westchester County — a mere 30 miles from Bridgewater’s two main campuses in Westport, Connecticut — was undergoing treatment as the first Eastern Seaboard case of Covid-19 with an unknown origin. Karniol-Tambour wasn’t going to make it, the conference organizer feared.

Bridgewater had been on high alert all weekend. The firm’s health security “posture” was the subject of ongoing discussions. Already, anyone who had traveled to certain areas — including the...

The Securities and Exchange Commission announced Wednesday it has amended its rules to allow more individual investors to make bets in private markets — but not without dissent.

Commissioners Allison Herren Lee, who was sworn into office last year, and Caroline Crenshaw, sworn in this month, objected to the SEC’s expanded definition of a so-called accredited investor, or an individual or entity that can invest in unregistered securities.

“The accredited investor definition is the single most important investor protection in the private market,” they said in a joint statement Wednesday. “With its actions today, the Commission continues a steady expansion of the private market, affording issuers of unregistered securities access to more and more investors without due regard for the risks they face.”

The new policy fails to protect vulnerable investors — particularly seniors — from the heightened risks of locking up their capital in...

Texas’s largest nonprofit health system has lost its chief investment officer Chris Halaska to a Houston wealth manager.

Halaska, now 42, was among the country’s youngest institutional CIOs when he took over at the Memorial Hermann Health System eight years ago. He oversaw close to $4 billion when he left August 14, and put the portfolio into the hands of his former team. 

Senior director Kris Chikelue is now leading the investment group, Halaska told Institutional Investor Wednesday. The outgoing CIO had suggested to the board that Chikelue succeed him, rather than Memorial Hermann hiring recruiters and opening the role to outsiders. 

“I encouraged them not to do a search given the strength of the internal team,” Halaska said. “Disruption is frequently not the best thing for an investment portfolio that has a long-term time horizon.”

A Memorial Hermann spokesperson did not comment on the leadership changes by...

Want to choose a hedge fund that will outperform? Stay away from the most in-demand strategies, according to a new study.

Academic researchers found that in the five years after hedge funds launch, the strategies that were unpopular when the funds were raised outperformed the hottest strategies by 3 percent annually on a risk-adjusted basis.  

This is because it’s harder to convince allocators to invest in strategies that they don’t see as attractive, according to researchers Charles Cao at Pennsylvania State University, Grant Farnsworth at Texas Christian University, and Hong Zhang at Tsinghua University’s PBC School of Finance.  

To make up for choosing strategies that are out of favor, unpopular hedge funds must demonstrate more skill — and better returns — before they can successfully lure investors, the trio argued.

The researchers used monthly hedge fund and return data from Lipper TASS, Hedge Fund...