Jumping on the Amtrak express, I swiftly arrived in Philadelphia to begin a long day of meetings. Starting the day at Brinker Capital, I met Amy Magnotta and Jeff Raupp, senior investment managers at the $18.5 billion RIA. Magnotta and Raupp manage six model portfolios at Brinker, which are structured based upon different risk levels.
For Magnotta and Raupp, one of the major concerns is the proliferation of new liquid alternative funds and the fact that most of them are not achieving their stated objectives. They are, however, comfortable using smart beta exchange-traded funds (ETFs) as satellite positions.
Heading back downtown, I caught up with Scott Lavelle, director of investment advisor research at PNC.
For Scott’s team, the big issue of the day is fee compression. In today’s market, it’s hard for active managers to justify the fees, especially if they’re not outperforming the benchmark, he believes.
Scott’s emphasis at the moment is on finding high-conviction managers who are different enough from the benchmark to justify their fees.
I took a quick Uber back to the ’burbs to the outsourced CIO Mill Creek Capital, meeting with Sam McFall, head of investments at the $5 billion firm. Sam does not believe it is appropriate to be 100% passive.
‘If I was just tracking the index, I wouldn’t be doing my job,’ he said. Liquid alternatives for McFall’s team were a hot topic two years ago; however, most of them have underperformed, he said.
In the environmental, social and corporate governance (ESG) space, he asks the million dollar question: Are the millennials willing to give up returns for the sake of investing in a socially responsible way?
The next day, I traveled through suburbia once again, meeting Jared Weiner at Veritable, a $13 billion multi-family office that serves more than 200 families across the country. Weiner, a partner and director of research at the firm, works with more than 20 external managers.
Discussing trends in the market, Weiner agreed with Magnotta and Raupp at Brinker, stating that most liquid alternatives managers had suffered disappointing performance.
With regards to ESG, he always makes sure to ask the client what their end goal is, as there are so many different ways to invest sustainably.
My last meeting of the trip was at Pitcairn, a $4 billion multi-family office. I met RJ Smolenski, the director of research and Ashley Ruhling, an investment information manager.
Pitcairn was a single family office for 60 years until 1990 when it began to attract friends of the family.
For factor-based investing, it has some exposure to smart beta. However, Smolenski believes the approach works better in some asset classes than others.
He also believes hedge funds will eventually disappear due to fee compression in the industry.
With clients spanning four generations at Pitcairn, you might expect rising interest in ESG investing, but they are still not seeing money there yet.
My name is Amelia Garland and I am a relationship manager at Citywire. My aim is simple: to get to know professional buyers across the US and engage with heads of manager due diligence, directors of investments and anyone who selects third-party products for their platform.
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