Before jetting off to Beantown, I had time to meet Jeff Sutton (below), head of the consulting group at Oppenheimer Asset Management (OAM).
Based in New York’s Financial District, the consulting group oversees around $11.6 billion in fee-based advisory assets, consisting primarily of third-party managers and mutual funds. Of that total, $560 million comes from a number of multi-manager discretionary portfolios, for which Sutton is lead portfolio manager. He manages 10 analysts, who assist with asset allocation, manager selection, due diligence and portfolio construction.
Sutton said that he felt the fund industry has become commoditized, making it all the more important to emphasize the small, emerging active managers on his platform. This approach has developed into what OAM calls its Discovered Managers Initiative.
There are currently about 22 discovered manager separately managed account (SMA) strategies on the platform, representing approximately $1.9 billion in assets – close to 30% of OAM’s SMA assets. The team also finds discovered managers via mutual funds, as many small firms launch their own funds or are selected by large fund houses to act as a subadvisor. There are 29 discovered manager mutual funds on the platform, but there is plenty of cross-over with the discovered managers on the SMA strategies. Finding a discovered manager available as both an SMA strategy and a mutual fund is ideal for Sutton, as it enables OAM to use them in different capacities.
Sutton said that when compared to the wires and broker-dealers, OAM’s smaller size means that it can access smaller firms without representing too significant a percentage of the manager’s assets under management.
OAM is now looking to ramp up its environmental, social and governance (ESG) efforts. Sutton and his team are searching for managers who employ ESG analysis through bottom-up, fundamental work. They prefer this to focusing on managers or exchange-traded funds (ETFs) that use ESG restrictions via top-down screens, or managers who run fossil-fuel free mandates, which typically sacrifice returns. The ESG efforts will launch on OAM’s platform this fall.
After meeting Sutton I jumped on a plane from the construction site that is LaGuardia. Landing in Boston, I headed straight to my meeting with Doug Butler at Rockland Trust (below).
Butler manages the research team at the $3.1 billion bank trust and is also a co-portfolio manager at Bright Rock Capital Management, a subsidiary of Rockland Trust. Butler has four dedicated research analysts on his team and works with eight portfolio managers, who are mostly client-facing and handle secondary research. The team covers roughly 130 funds on its recommended list, which is then used by the institutional and trust advisors and retail advisors.
With a number of searches currently underway, Butler is particularly busy at the moment – despite having broken his arm a week before our meeting. ‘We will be doing a number of global searches for international value, global high yield, international Reits and global infrastructure in the coming months,’ he said. ‘We've also recently increased our exposure to catastrophe bonds in the wake of the two large hurricanes.’
Butler's choice of catastrophe bond fund is the Stone Ridge Reinsurance Risk fund. 'It presented what we are always looking for: a solid return stream that is uncorrelated with the other components of our portfolio,’ he said.
My next meeting was with Shannon Saccocia at Boston Private Wealth (below).
Saccocia is head of asset allocation and portfolio strategy at the $7.2 billion RIA. Her time is split between setting the investment strategy for the firm and performing manager due diligence. She is part of a three-person team involved in the manager selection across all asset classes. Alongside the firm’s proprietary products, the team works with 12 to 15 external managers. There is low turnover among these managers, but the firm is actively looking for new names and allocation switches.
‘This includes a slight shift to US large-cap equities from US small cap due to the weakening US dollar, delayed tax cuts and an inevitable increase in wage costs,’ Saccocia said.
She remains optimistic about international equities and is adding exposure to managers positioned to benefit from strong franchises domiciled outside the US. In alternatives, she is researching non-correlated strategies with return streams diversified against traditional markets.
My final meeting was right around the corner, so I had chance to grab a delicious lobster roll in the Seaport District before heading over.
At Atlantic Trust, I caught up with John Tennaro, Kyle Leavitt and Dan Criscuolo. All three are members of the manager research team for the $31 billion RIA, with Criscuolo and Leavitt focusing on alternatives. In July the firm acquired Geneva Advisors, a Chicago-based private bank managing roughly $40 billion in assets. Atlantic Trust’s AUM will soon increase as a result. Tennaro and the team cover 60 strategies on their external manager platform, which is used by the firm’s 75 advisors.
The team has just added a real assets strategy to its platform. The firm is Versus Capital, based in Colorado, which offers two interval funds, for real estate and real assets.
‘Interval funds are not suitable for all asset classes, but for those asset classes where you want to establish some private investments to go along with the public side, we think it’s valuable,’ Tennaro said. Pictured below, left to right: Kyle Leavitt, Dan Criscuolo, me and John Tennaro.
West Coast Retreat
Citywire’s Due Diligence Retreat will be held at the Four Seasons Beverly Hills on October 19 and 20. The event will bring together heads of research and due diligence from RIAs, family offices, broker-dealers, wirehouses and subadvisor selection teams at asset management and insurance firms. Over the two days, you will hear from leading p ortfolio managers and network with your peers. If you would like to register please email firstname.lastname@example.org or give me a ring at 646-532-6301.
My name is Amelia Garland and I am a relationship manager at Citywire. My aim is simple: to get to know the professional buyers across the US and engage with heads of manager research and due diligence, directors of investments and anyone who selects third-party products for their platform.
I am constantly on the road, if you would like me to pay you a visit, please don’t hesitate to get in touch at email@example.com or give me a ring at 646-532-6301. Don’t forget to tweet @GarlandGoesWest if you would like me to visit your city.
Next stop, west coast!