Charles Skorina & Company

● RETAINED EXECUTIVE SEARCH ●

Our Clients: Boards, Asset & Wealth Managers, Family Offices
We recruit CEOs and CIOs, advise on performance and pay, M&A consulting

LATEST NEWSLETTER

“We’ve long felt that the only value of stock forecasters is to make fortune tellers look good.”  — Warren Buffett

Howard Marks sent out a memo last week – The Illusion of Knowledge – in which he ponders the value of economic forecasts. He concludes that they aren’t worth much to anyone but the forecasters.

As recruiters evaluating senior investment talent we wrestle with a comparable conundrum, how can we make informed judgements about candidates and their success in the future when our knowledge and intuition is based on the past?

Don’t get us wrong, we meet exceptional clients and candidates almost every day – smart successful families, board members, and professional investors at the top of their game.

But interviewing chief investment officers and up-and-comers is a bit like camping with Garrison Keillor at Lake Wobegon, “where all the women are strong, all the men are good-looking, and all the children are above average.”  We have yet to meet a candidate who hasn’t produced top quartile results.

Almost everyone is convinced they can pick superior managers and investments while the other guy rolls snake eyes. Active management is for heroes, indexing for geezers.

In our interviews for institutional and family office clients we often hear the comment that public markets are nearly impossible to beat, yet in the next breath they tell us their endowment or foundation team has consistently beaten public market benchmarks using active managers.

While we are impressed by their conviction, we wonder about their claims.

We’re in good company. Mr. Marks has also questioned the track records of active managers, at least those who place bets on macro trends.  So he sourced a few Hedge Fund Research (HFR) performance metrics for guidance.  This is what he found.

And remember, these are arguably some of the smartest guys and dolls on the Street.

HFs vs. S&P 5-year annualized return*

12.80% – S&P 500 Index

  5.20% – HFRI Hedge Fund Index* 

  5.00% – HFRI Macro (Total) Index

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HFs vs. S&P 10-year annualized return*

13.80% – S&P 500 Index         

  5.10% – HFRI Hedge Fund Index*

  2.80% – HFRI Macro (Total) Index

*Performance through July 31, 2022. The broad hedge fund index shown is the Fund Weighted Composite Index.

You can’t beat Art History

The chart above focuses solely on hedge fund performance.  Large endowments on the other hand, with AUM over one billion dollars, hold on average well over one hundred active managers across the investment spectrum, with some managing close to three-hundred funds (asset managers, commingled funds, and partnership interests, NACUBO Study 2019).

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NEWS AND COMMENTARY

Family Office Chief Investment Officers: One in a Million

I made my money the old-fashioned way. I was very nice to a wealthy relative right before he died

— Malcolm Forbes

Everyone is chasing family money these days. Andreesen Horowitz, west coast venture capital powerhouse, is the latest institutional investor to create a wealth management arm. Their hook of course is quite tempting, you let us manage your money and there just might be room for you in our next venture fund.

They recently hired Michel Del Buono, formerly of Jordon Park, Makena, and Scion Capital as the new chief investment officer. (Remember Scion Capital and its prescient founder Michael Burry, played by Christian Bale in The Big Short?). Clever devils.

For those family offices able to access the top VC firms, the returns can be impressive. Family portfolios produced an internal rate of return of 24 percent in 2021 according to a survey by Silicon Valley Bank.

Family wealth, that pot of gold

The asset management business is diverse, powerful, and exceptionally profitable. No wonder so many banks, brokers, OCIOs, and RIAs, are clamoring for a piece.

Boston Consulting Group’s Global Asset Management Report 2021 estimated $45 trillion in US institutional and retail assets under management at the end of 2020 with revenues as a share of average AUM at 23.7 bps. That’s well over one-hundred billion dollars.

Taken as a whole, S&P Global IQ calls financials the most profitable of eleven sectors they follow, with a 25.3 percent profit margin in 2021. Energy firms ranked near the bottom by the way at 8.3 percent, though you wouldn’t know it from the howls coming out of Washington.

Ultra-High-Net-Worth (UHNW) families are well aware of the fees and hidden costs attached to wealth management offerings which explains why so many family offices are adding internal investment capabilities.

That’s our job, recruiting chief investment officers for institutions and families.

Leave it to the kids

While family dynamics probably haven’t changed much since Count Leo Nikolaevich Tolstoy wrote his famous line about unhappy families, the modern family investment office has come a long way from 1878 when Anna Karenina was published, adding structure, discipline, and academic rigor to the management of UHNW wealth.

According to Capgemini’s latest wealth report, Top Trends 2022, millennials and gen-X are set to inherit somewhere between $10T to $30T over the next two decades via multigenerational transfers. (Estimates vary widely but they all tally in the trillions)

Some will choose wealth advisors but, in our experience, once a family accumulates over half a billion dollars in investable assets, they start thinking seriously about hiring an investment manager.

That’s when it gets interesting. Each first-gen founder and every multi-generational family has a distinct culture, temperament, and objective. The fit has to be just right between the family and their head of investments.

Hands on, hands off

Most founders and families are inclined to invest in one of two ways, institutionally or opportunistically.

In the most general sense, the institutional, or “endowment style” of investing – with investment policy statements (IPSs), diversification, and risk mitigation – appeals more to gen-two and beyond, while first-gen entrepreneurs, not surprisingly, prefer a hands-on, opportunistic approach, investing directly in any business, security, or private vehicle that catches their eye.

As one highly successful family office client wrote in our last newsletter, “We consider ourselves opportunists rather than allocators; we are not driven by an allocation-based investment policy statement (IPS). So we always want to have sufficient cash (or borrowing capacity) to meet opportunities as they arise.”

Diversification? How boring

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CHARLES A. SKORINA & COMPANY works with leaders of Endowments, Foundations, and Institutional Asset Managers to recruit Board Members, Executives Officers, Chief Investment Officers and Fund Managers.

Mr. Skorina also publishes THE SKORINA LETTER, a widely-read professional publication providing news, research and analysis on institutional asset managers and tax-exempt funds.

Our Practice:

• We recruit Board Members and Executive Officers, Chief Investment Officers and Senior Asset Managers.

• Our research and analytics are backed by over thirty years of hands-on recruiting experience and an unrivaled personal network.

• We collect performance, compensation, and background data on most senior institutional investment professionals in the U.S. and the funds they manage.  We analyze that data to construct profiles of those managers and their funds, identify best-in-class people, and map their career trajectories.

• We share our research and insights in a widely-read professional newsletter – THE SKORINA LETTER – and website – www.charlesskorina.com.

• The New York Times, Wall Street Journal, Bloomberg, Thompson Reuters, Financial Times (Fundfire), Institutional Investor, Pensions & Investments, Private Equity International, and the institutional investment community use our research and analysis.  Skorina has been interviewed on chief investment officer compensation issues on Bloomberg TV.

• Our work is regularly re-printed in Allaboutalpha.com and other industry magazines, blogs, and third- party web postings.

• We focus specifically and effectively on the world we know: Board members and Executive Officers, Chief Investment Officers, and Senior Asset Managers at institutional investment firms and funds – including sovereign wealth funds, endowments, foundations, pension funds, banks, investment banks, outsourced chief investment officer firms (OCIO), and sell-side money managers.

Prior to founding CASCo, Mr. Skorina worked for JP MorganChase in New York City and Chicago and for Ernst & Young in Washington, D.C.

Mr. Skorina graduated from Culver Academies, attended Michigan State University and The Middlebury Institute of International Studies at Monterey where he graduated with a BA, and earned a MBA in Finance from the University of Chicago.  He served in the US Army as a Russian Linguist stationed in Japan.

Charles A. Skorina & Co. is based in Tucson, Arizona.

Contact
520-529-5677

6080 N. Sabino Shadow Lane | Tucson, AZ 85750

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    6080 N. Sabino Shadow Lane | Tucson, AZ 85750 | 520-529-5677
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