After a quick Amtrak into Philadelphia, I started my day meeting with Patrick St. Denis, director of investments responsible for manager research at RIA and investment managers Sprouting Rock.
He selects 40 Act liquid alternative strategies in separately managed account (SMA) portfolios.
Spouting Rock has been an active allocator within the liquid alternative 40 Act space since mid-2013 and has been researching and performing due diligence on such funds for even longer.
The firm’s ongoing due diligence efforts can be captured by investors through its Absolute Return and Alternative Income portfolios.
These strategies are multi-manager SMA offerings constructed from the firm’s best ideas and manager selection.
St. Denis (pictured above) said an SMA offering for multi-manager exposure was more appropriate than a 40 Act structure as it allowed for more flexibility, customization and kept the overall cost lower at below 200 basis points including underlying fund fees.
For St. Denis, the active passive debate is exhausted but he is interested to see how new multi-manager funds are combining the two.
‘I am not sure I would call it a trend just yet, but a few multi-alternative mutual funds and some global allocation mutual funds have begun to blend the two, creating what we believe to be a better approach over the long term for investors: attempting to capture the upside of equity markets, and limiting or protecting on the downside using options or risk managing with cash/treasuries. After all, that is the goal, right?’
One manager St. Denis likes is Convex Capital Management, which he met in 2014, and has since engaged as a subadvisor to Spouting Rock’s asset management strategy.
The Convex strategies blend proprietary macroeconomic research and tactical asset allocation with market risk assessment and discretionary risk management. ‘This combination,’ St. Denis said, ‘is the future for asset management; a risk-managed approach to participating in strong equity markets of countries with supportive fundamentals while avoiding stagnant or troubled countries, all while being watchful of geopolitical events and possible tail risks.’
My next stop on the Philadelphia flyer was at broker-dealer Janney Montgomery Scott to meet with David Gross. Gross is an investment analyst in the wealth management product and research group (pictured above) responsible for covering international, global and emerging market equity products. As part of this, he is tasked with the identification, as well as the initial and ongoing due diligence, of mutual funds, exchange-traded funds and separate account managers within his coverage area, while maintaining the firm’s recommended list.
Despite the increased volatility in global markets since the election, Gross is not letting short-term turbulence influence manager selection. He is staying committed to finding managers who can outperform over a full market cycle, he said.
I ended my day at the SEI's massive Oaks campus, where I met with Stephen Beinhacker (pictured above), global head of manager research. Beinhacker oversees a team of 19 equity, fixed income and multi-asset analysts responsible for over $110 billion in assets across SEI’s multi-manager mutual funds and separate accounts.
He said last year the team had a great performance across fixed income, as many of its managers had short duration positioning, so with yield backing up in the fourth quarter, they finished on a strong note.
Meanwhile, international managers generally had good returns, while managers with a quality focus struggled. The difficult place for outperformance were US large caps and small caps, with the exception of deeper style value managers, as they were able to ride the shift in the market and rally in the last quarter.
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.
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 firstname.lastname@example.org or give me a ring at 646 532 6301.
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