The last time I was in Minneapolis, there was a blizzard and I hadn’t quite figured out the Skyway so spent a lot time in the snow. I was glad to be back and thankful summer had arrived.
After touching down in the Twin Cities, I headed out to lunch to catch up with the global manager research team at RBC. Kevin McDevitt, former cover star and good friend of the magazine, heads up the team which oversees roughly $300 billion in assets under management. The team puts together the recommended list, which is used by 2,000 advisors across the country.
A few of the analysts told me about strategies they are focusing on in their asset class at the moment. Mark Steffen, alternative investments analyst, has had a busy 2017 and things don’t like quieting down just yet.
‘Building out our alternatives offerings has been a major focus this year as clients become increasingly concerned with rising rates and equity overvaluations,’ he said.
‘In alternatives, we’re expanding the platform significantly in 2017. We’ve just wrapped up searches in event driven credit, long/short credit, and long / short equity categories. We are in the mid-to-late innings on searches that will provide additional depth in those categories, but also broaden the lineup to include activist equity mandates.’
Rob Weiler, who focuses on the liquid alternative universe, said the strategies had endured a tricky period, but could be an important diversifier, especially in the current climate.
‘While it is no secret that liquid alternatives have faced an uphill battle for years, clients have started to express renewed interest in this segment, as concerns over the inevitable market correction grows,’ he said.
‘With the current bull market in its ninth year, the second longest bull-run in history, we believe that liquid alternatives can help provide the diversification benefits and protection to the downside that investors seek. Long/short equity and multi-strategy alternative solutions have garnered the most attention from clients looking to improve their portfolio’s risk-return profiles.’
Worries about overvaluations and the need to diversify have driven client demand on the fixed income side too, according to Rebecca Kamsin, a former Q&A star and fixed income analyst.
‘I’m seeing an increased need to make sure fixed income portfolios have a diversified set of risk drivers, with balanced exposure to duration, credit, and securitized assets,’ she said.
‘While credit-focused portfolios in particular have done very well recently, stretched valuations have started to highlight the risk of relying on any single risk driver, as diversification is what tends to keep a portfolio afloat over time.’
Meanwhile over on the equities desk, two popular searches were dominating proceedings.
‘We are always looking for new small cap ideas, so our team will likely spend some time in that universe. Additionally, we are re-underwriting our conviction in some of our highest-rated managers, as these mandates tend to be highly active, concentrated portfolios. Finally, we are also continuing to work on broadening out our environmental, social and governance (ESG) offerings,’ said senior analyst Aaron Hanson.
My next meeting of the day was with Carol Schleif at Abbot Downing. Schleif is the deputy chief investment officer for Abbot Downing, the multi-family office of Wells Fargo.
Abbot Downing (the name is derived from the company that crafted the Concord stagecoaches Wells Fargo used to carry cargo, mail, and most important client possessions) was formed five years ago by the integration of several predecessor companies that had been in the ultra-high-net-worth money management business for 30-40 years.
Abbot Downing manages approximately $42 billion of assets for over 600 clients from offices in key cities throughout the country. Schleif maintains a core group of clients, many of whom she’s worked with for nearly 25 years, and through multiple generations. Since our last meeting in January, she has stepped up her efforts to promote the progress of women in asset management both within Abbot Downing and Wells Fargo, an initiative I was very pleased to hear about!
Luckily, my next meeting was with a Merrill Lynch Private Banking and Investment Group (PBIG) based slightly out of won in Wayzata, so I got a chance to see the beautiful lakes of Minnesota.
I met with Scott Vogel at Swenson Jones Associates, an advisor and senior portfolio manager within the PBIG. There are nine people on the team, four advisors and five associates. Vogel and Scott Jones both came over from Abbot Downing in 2012 to merge practices with their third partner, Mike Swenson.
Jones leads the team’s due diligence in alternatives, while Vogel covers the traditional long only assets, in addition to advising clients. Their team has nearly $1 billion in assets under management and works with around 65 families with a typical net worth of $20 million. For the manager research process, in order to buy a fund, the strategy has to be on Merrill’s platform of roughly 2,000 funds. I spoke to Vogel about the team’s alternative allocations. They continue to have exposure to liquid alternatives in addition to traditional limited partnership structures. He said despite the launch of many liquid alt funds, only a handful of managers have attractive offerings in this space.
For ESG, the team is starting to see increased interest, but has yet to allocate meaningfully to this space. Vogel believes that future demand will be driven by many of their second generation clients as they continue to inherit wealth. In terms of active or passive, the team continues to have a sizable passive allocation, especially in domestic equity, and does not expect that to change. Vogel and his team have been using smart beta funds for a while and keep a continue to monitor growing market, with new launches rife.
Before heading back home to New York, I stopped in to meet with Jeff Rueber at Securian. Reuber is on the due diligence team, which consists of four members, who are responsible for investment management due diligence for the retirement services. They select and monitor the investment options available to retirement plan clients under the Securian Signature Series, which consists of 150 investment options. The platform has around $16.5 billion in assets under management.
On my way to the airport, I got a quick picture in front of the U.S. Bank stadium where the Super Bowl will take place for next year!
Check in next week for my trip to OH-IO!
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 Ohio!