I felt right at home as I touched down in the city where this page first began: good old San Francisco. My first meeting of the trip was with a familiar face: Keith Parker at the Wells Fargo Investment Institute.
Parker is a senior investment analyst on the fixed income team covering muni bond strategies. The team puts together a list of strategies that is then used by broker-dealer Wells Fargo Advisors, Wells Fargo Private Bank, family office Abbot Downing and pension service Institutional Retirement and Trust. There are more than 80 muni-bond strategies on the recommended list.
Parker has been searching for a private placement fund to provide diversification for the ultra-high-net-worth clients at Abbot Downing, who have an average of $50 million each in investible assets. His team has also hired new analysts to assist with searches and the coverage of fixed income strategies in response to the Department of Labor’s fiduciary rule.
Lastly, the team has added a fixed income environmental, social, governance (ESG) strategy in both mutual fund and separately managed account (SMA) format. The mutual fund is managed by Columbia Threadneedle, which has teamed up with Sustainalytics to assist with the ESG component, and the SMA is managed by Breckinridge Capital Advisors. The two offerings have taken in more than $2.7 million in flows so far – not bad given they were only added at the beginning of the summer.
After quickly popping in to say hello to Parker’s colleague Sam Kirkland, an On The Road alum, I headed off to San Mateo for lunch with Ryan Kinkade and John Levy at Franklin Templeton. (Above, left to right: Levy, Benjamin Franklin, me and Kinkade).
Kinkade and Levy are both on the manager research team on the multi-asset solutions group. Levy oversees the team as director of manager research and is a manager on several portfolios. Kinkade, who featured on our Q&A page a couple of issues back, is a senior research analyst focusing on fixed income, equity and alternative investment mutual funds and mandates. He also manages a team of research associates.
The manager research team supports roughly $31 billion in assets from portfolios investing in strategies on the multi-asset solutions platform. A comprehensive qualitative and quantitative approach to the roughly 300 funds and exchange-traded funds (ETFs) that the team covers helps Kinkade and Levy gain a deep understanding of the people and processes behind each strategy, the fund performances and risk profiles, and the organizations and operations supporting each fund.
Levy is currently considering new ways to use technology to make the team’s manager research process more efficient and effective, having seen innovations such as robo-advice and purely quantitative fund research models enter the marketplace. Lately the team’s research focus has been funds that can diversify existing fixed income exposures and those that offer high quality income generation. To this end, Kinkade has been looking at fixed income alternatives, reviewing a Canadian private credit manager that specializes in supply chain finance. He is also interested in emerging market debt, to complement the existing managers they have at Franklin.
After sitting in traffic for almost two hours from San Mateo to Walnut Creek, I finally arrived at my last meeting of the day with Chad Perbeck (left) and Jack Chee (right) at Litman Gregory Asset Management.
Perbeck, who kindly waited for me for an hour, is a senior research consultant helping institutional and financial intermediary clients navigate both the firm’s investment research offerings and the independent business landscape. Chee serves as a portfolio manager and senior research analyst for the firm, which has $7.3 billion in assets under management. He is also part of the core research analyst team, responsible for asset class research, manager due diligence, and portfolio construction and oversight.
Litman Gregory has three business lines, its core being wealth management, in which researchers and advisors select managers for model portfolios for high-net-worth, ultrahigh-net-worth and non-profit institutional clients. The wealth management team was an early adopter of models and the firm has track records for its in-house portfolios going back to the 1990s.
The second line is Litman Gregory Fund Advisors, which runs a range of subadvised strategies – the Litman Gregory Masters funds – and is responsible for subadvisor due diligence and selection. Chee is a co-manager on the firm’s domestic large- and small-cap offerings.
The third line is Litman Gregory Portfolio Strategies, which offers outsourced investment management solutions to 4,500 advisors through four platforms. The firm also publishes its investment research, client communications and portfolio guidance for other investment professionals through a web-based subscription service, AdvisorIntelligence. Its predecessor, the NoLoad Fund Analyst monthly newsletter, was in circulation from 1989 to 2014. Perbeck helps to oversee the day-to-day operations of this part of the business.
The manager research team currently has six members. Each analyst is a generalist but some have specific asset class expertise too. In theory, the team runs five core model portfolios that are managed based on clients’ risk appetite, but in practice, with variations and real-world implementation considerations, it oversees more than 150 model portfolios. The list of recommended funds, which it uses to populate models, features roughly 70 funds across all asset classes.
Chee said it can take the team a year to add a manager to the list. ‘Every fund manager will tell you that they have “a disciplined and repeatable” approach. We don’t just accept that. Our job is to understand how managers think and how they make decisions,’ he said. ‘Inevitably, every manager will underperform for some period of time, sometimes meaningfully. Unless you are precise about the aspects of the process that have led to a manager’s success, and the disciplines of their investment process, when underperformance occurs you are left guessing whether to stick with the fund or sell.
‘What differentiates Litman Gregory’s approach is that by truly understanding the reasons for success, you can be surgical about testing whether that “edge” persists or is breaking down.’
The team is currently focused on several initiatives, including how to provide an ESG solution to its clients where needed, new research on private and liquid alternative strategies, ongoing monitoring of existing asset allocations, and gradually searching for that next high conviction opportunity for its model portfolios. Leaving Litman Gregory thoroughly informed about its diligence process, I hijacked a cable car (below) and headed to the airport, ready to jet off to San Diego!
Even though I had no time to hit the beaches in La Jolla, I did have the chance to meet with Marci Bair (below, center), president of Bair Financial Planning and vice president of The Wealth Consulting Group, with a total of $1 billion in assets under management.
Bair Financial joined The Wealth Consulting Group’s RIA three years ago when the group moved over from MetLife just before Mass Mutual acquired the retail advisor business, MetLife Premier Client Group. At the time, ahead of the introduction of the fiduciary rule, the team at Bair wanted to move away from an insurance-owned broker-dealer model toward independence.
The Wealth Consulting Group started off with 20 advisors and has now grown to 85. It has offices across the US, from Hawaii to New York. Bair and her team specialize in working with female chief executives, LGBT families and progressive business-owners. Due to the nature of their clientele, more than 70% are invested in ESG strategies. The Wealth Consulting Group investment committee has 12 members, of which Victor Orozco, Marlo Stil and Bair specialize in ESG investing. Bair Financial Planning offers clients six different models, two of which are ESG-focused. There is a $500,000 minimum to work with the firm, but it does accept a lower amount if the client is a referral. The main ESG funds that the firm uses in its portfolios are from asset managers that have been in the sustainable space for a long time, such as Parnassus, Trillium, PAX and Calvert. At the moment, the team is looking for ESG solutions in the fixed income universe.
Los Angeles was calling my name and so I set off on a blissfully traffic-free drive from San Diego to Hollywood. My first meeting of the day was right where I belong – in my humble opinion – on the Avenue of the Stars. I caught up with Aaron Jett, head of global equity manager research at the $8.2 billion RIA, Bel Air Investment Advisors. The investment manager research team has five members – Jett (below), Carl Ludwigson, Barnaby Audsley, Alexander Tung and Arun Bharath, who is chief investment officer. For their recommended list, they work with 17 equity managers, eight hedge fund managers and five fixed income managers, but the vast majority of their fixed income exposure is managed inhouse. Their client base is nationwide but concentrated in California.
Jett said it was a constant effort for the research team to find fresh ideas for their clients in the private pipeline, especially in private debt and private real estate. The committee has also been weighing the costs and benefits of removing some beta from the portfolios and replacing it with alpha-oriented hedge funds, uncorrelated quantitative strategies or traditional defensive muni bonds.
My next meeting was another long car ride away, this time down to Newport Beach where I met up with former cover star Matt Babcock at Pacific Life (below).
Babcock is the firm’s director of manager research, responsible for finding new managers to add to Pacific Life’s variable annuity and mutual fund platforms. Babcock and his team select external portfolio managers for the firm’s $7.2 billion mutual fund platform and $45 billion variable annuity platform. The two platforms pull from a list of 57 strategies, which are subadvised by 28 different asset managers.
This year, Babcock has made a few subadvisor changes to his multi-asset funds and is looking to expand his manager research team with a new hire for the start of the year. Pacific Life recently filed for two new multi-asset funds, which are set to launch in January.
Luckily, my next meeting with Purus Wealth Management was also in Newport Beach so I was right on time for Bonnie (below, far right) and Mark Larsen (below, far left).
Taking their team of six with them, the duo left the broker-dealer world in 2015 to start Purus, as they felt they were limited when it came to serving their clients. Purus now has $215 million in assets under management and is continuing to grow. The firm runs 12 models but customizes each client portfolio slightly based on a client’s specific needs. The team uses a blend of mutual funds and ETFs but is definitely biased towards active management, they said.
Like Babcock, they are also looking for an investment analyst to join their team, so any analysts in the Newport area should definitely reach out to Purus and Pacific Life!
Before jetting back to the East Coast I popped in to catch up with an old gatekeeper in a new role. We know Manisha Singh (below) from her days as a senior due diligence analyst at the broker-dealer Ameriprise, but she became a portfolio manager at AIG’s asset management organization at the beginning of June. Singh is now a co-portfolio manager with Doug Loeffler in the asset allocation team, co-managing a series of 12 funds of funds, with a total of $17 billion in assets under management.
Singh’s underlying funds are both single-manager and multi-manager, as well as index funds. The manager research team at AIG picks the managers which Singh and Loeffler then use in their asset allocation portfolios. About 41 different subadvisors are utilized to manage several of the underlying funds.