I spent a week in Boston meeting professional buyers at various institutions. I met with nine firms ranging from subadvisor selection teams at asset management groups, PBIGs at Merrill Lynch, global private banks, turnkey asset management programs (Tamps) and registered investment advisors (RIAs). They gave me their latest thoughts on investment trends and the industry.
I started the day off at Columbia Threadneedle, meeting with the head of subadvisor selection. Columbia has 36 individual subadvised partners managing assets of $45 billion of assets. The team has doubled in size over the past year following a change in leadership. Columbia uses Mercer for input in the manager research process, as it likes see if a manager has been rated by an institutional consultant. A big focus for the research team at the moment is liquid alternatives.
Later, I caught up with Tim Clift, chief investment officer at Envestnet. With over $200 billion in assets, Envestnet is one of the nation’s largest Tamps. He touched on one of the hot investment topics, robo-advisors. ‘Clients want more control of their investments and now there is a digital solution.’
However, he believes clients are at risk if they only have minimal interaction with advisors. He suggested there should be a ‘hybrid of the two’ where you can easily transition from robo-advice to a human advisor to manage your portfolio. The firm’s chief executive, Jud Bergman, believes the automation allows advisors to focus on what they do best: sophisticated financial planning.
The next day, I started off at one of the largest Merrill PBIG’s, The Sharma Group. I met with Brian Stanton, an analyst on the team that manages $8 billion. As the client base is predominantly Indian, they have a global perspective, investing in emerging markets and Indian strategies. They conduct a lot of their own research, running their own proprietary models for the clients, where they use a blend of active and passive investments. They are active management enthusiasts, only using a limited number of passive funds. In the alternative space, they are struggling to find a manager producing the kind of returns they are after.
That day I went big on PBIGs and met with Frank Arabia at The McCauley McGuirk Group, which manages $1.8 billion working with 60 families across the country. The analysts work with in-house models of 10 managers or less. Five years ago, the group was primarily active, now it is much more flexible about allocating to passive vehicles. We discussed trends in the industry, including the Department of Labor's fiduciary rule and its impact on the individual retirement account market.
I took a break from the PBIGs for my last meeting of the day with Lisa Sampson, an analyst at BNY Mellon Wealth Management. She is an environmental, social and governance (ESG) specialist working in a team of three. She builds ESG models for clients, researching funds to see if the portfolio has more than 50% in sustainable investments.
‘ESG should just be called ES, as corporate governance should always be key factor in a company you are investing with,’ Sampson said.
When working with the advisors, she has to ask what clients mean when they say they want to invest sustainably, as there are many different approaches to ESG investing, from screening out sin stocks, to religious-based funds or funds for women. ‘There are clients out there who want to make a difference in the world with their investing,’ she said.
The next morning, I started my day at Fidelity Strategic Advisers, meeting with the head of manager research and a US equity analyst on the team.
Fidelity Strategic Advisers has $220 billion in assets under management with 30 analysts. The group is fully part of Fidelity, providing tailored solutions to clients. It offers a range of products and is heavily model-orie nted. It populates the models with external and internal funds.
My last meeting in Boston was with TwinFocus Capital, a multi-family RIA. I met with Andrew Pettersen, an analyst at the $4 billion shop. TwinFocus’s investor base is mainly portfolio managers in Boston, as the city is the hub for asset management groups. There is a balanced approach at TwinFocus with a lot of equity exposure in the clients’ portfolios, however the team there is always looking for niche investment opportunities.
Pettersen said the firm was investing in managed futures, via hedge funds or 40 Act fund depending on client size. He also told me about the life settlement investment used in some hedge funds, whereby investors purchase second-hand life insurance policies and shoulder the premiums in the hope they will be outweighed by the death benefits. Investing in morbidity is definitely a lot different than investing with a focus on ESG!
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, give me a ring at 646 532 6301 or tweet to @GarlandGoesWest.