In this issue:
- Michigan State U endowment gains two new directors
- New OCIO list: AUM hits $1.3 trillion
- Alan Biller: An accidental money manager
- Wanted: President & CIO for large Asset Mgr
- Skorina’s Ultimate Outsourcer List 2016
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Michigan State University endowment gains two new directors:
Chief investment officer Phil Zecher, who’s building a new investment office from the ground up at Michigan State University in East Lansing, just hired his first two senior staffers. Allen Huang and Julia Lee have accepted positions as Directors of Investments.
We were happy to assist with the search and pleased to come up with two excellent professionals.
Ms. Lee came from the South Carolina Retirement System Investment Commission, where she was senior investment officer for private equity. She previously worked at Allstate Investment, XL Capital, and at Transamerica AM. She earned a BS in Industrial Engineering & Management Science, from Northwestern University.
Mr. Huang served as Director of Fixed Income at the Indiana Public Retirement System. He held prior positions at Barclays Capital and General Electric Capital. He holds an MBA from the University of Southern California and a BS in Finance from Northeastern University.
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Latest OCIO list: Three additional firms and another $24 billion
Our latest OCIO list (Outsourced Chief Investment Officer) just expanded by three firms since our September sendout, with UBS and PNC Bank rejoining the ranks and Highland Associates in Birmingham, Alabama reaching out for inclusion.
With 74 firms on the list as of November, 2016, total outsourced CIO assets (managed with full discretion) now total $1.367 trillion, increasing by $240 billion since we published our last list in 2014.
(Our full OCIO list of firms for 2016 is presented at the end of this newsletter.)
Our friends at Chief Investment Officer Magazine think that OCIO assets grew 17 percent year-over-year from 2014 to 2015, and almost 10-fold (860 percent) over the eight years 2007-2015. That eight-year growth ($91 billion to $873 billion) implies an annual growth rate (CAGR) of about 30 percent, but with growth beginning to slow down in 2014.
See: http://www.ai-cio.com/2016-Outsourced-Chief-Investment-Officer-Buyers-Guide/
(Pedant alert: 860 percent growth over eight discrete periods gives us 33 percent annualized. Continuous compounding gives us about 28 percent. The underlying data is too soft for over-precision, so we split the difference.)
Our own independent surveys for 2014 and 2016 imply that recent year-over-year growth is now only about 9 percent. So we agree with Chief Investment Officer Magazine that OCIO growth seems to be decelerating.
Nine percent annualized is still pretty brisk, but it’s not that much higher than the expected growth of managed global assets overall. It suggests that the OCIO niche may be maturing, with a lot of the low-hanging fruit having been plucked.
My unscientific survey of OCIO managers suggests they’re a little more conservative in their own estimates. They typically tell me they’re looking for 5 percent growth, but of course each firm has its own view.
They tell me that the number of RFPs is definitely up, but that potential clients aren’t always sure whether they want a fully-outsourced solution, a consulting/management hybrid, or a traditional straight-consulting arrangement.
The number of firms in this niche, however, seems to have plateaued and even fallen off a little in recent years.
Our list has grown from forty-five outsourcers six years ago in 2012 to seventy-nine in 2014 to seventy-one today.
Some have chosen to leave the business for one reason or another. Those include: Fortress, Fiduciary Research & Consulting, Salient Partners, and UBS. A few others either failed to respond to repeated requests or asked not to be listed.
And, at least three firms – Pacific Global Advisors, Marco Consulting, and Jeffrey Slocum & Associates – have been gobbled up by bigger firms: Goldman Sachs, Segal Rogerscasey, and Pavilion Financial respectively. So their AUM lives on under another label.
As headhunters, we’re not surprised to see that steady growth in outsourced AUM leads to a steady flow of management talent into the OCIO firms.
From the point of view of potential clients, the number of firms competing hard for their business is a good thing. Not only are the vendors competitive on price, they are building their bench with top talent.
For instance: Ranji Nagaswami, formerly pension advisor to Mayor Bloomberg in New York, has joined Hirtle Callaghan.
Also, Jay Willoughby has moved from the Alaska Permanent Fund to TIFF. And Fund Evaluation Group has hired Michael A. Condon, former CIO of Southern Methodist University.
Even the Harvard endowment lost a senior exec to an OCIO when Jameela Pedicini left to join Perella Weinberg.
Our friend Sage Um delved into some of these moves here:
http://www.ai-cio.com/channel/newsmakers/leaving-asset-owning-behind/
The rich get richer:
When ranked by AUM, our list is a skewed, “long-tailed” distribution with the lion’s share of business up in the Top Ten firms.
Among our top ten firms in 2016, eight grew substantially over 2014 (Russell reported a slight decline, and Alan Biller reported no change).
Those big firms as a group grew much faster than the sector as a whole. They grew $272.4 billion, or 48 percent; and they more than accounted for the total growth for the whole list.
Mercer moved up from 2nd-largest to 1st place with a gain of $54 billion, or 63 percent.
Goldman Sachs moved up from 13th to 4th-largest with a gain of $64 billion. That’s an eye-popping 250 percent. But that includes $20 billion it acquired by buying Pacific Global Advisors, which had been ranked 21st-largest in 2014.
Among firms outside our Top Ten, Callan Associates was the only firm adding at least $10 billion. It more than doubled, growing AUM by an impressive 150 percent, from $8.4 to $21 billion.
Among the second-tier firms (between $10 and $31 bill AUM in 2016), Vanguard, Partners, Glenmede, Cambridge, Investure, and SECOR all reported impressive percentage growth over two years. And most improved their ranking over this period.
This would be a good place to add some fussy qualifications.
First: These are their latest available figures as of early September, 2016. They represent various cut-off dates; but in most cases are as of June 30.
Second: Period-to-period changes in full-discretion assets in this sector aren’t always what they appear to be.
These are un-audited, self-reported numbers. They report them; we print them.
Also, what constitutes “full discretion” is, in the final analysis, defined by lawyers reading complex documents. Various firms undoubtedly have slightly different standards for what falls into that box. And, we know for a fact that some firms from time to time make their definition of “full-discretion” a little tighter or a little looser, because they’ve told us so. And that causes reported full-discretion AUM to rise or fall, even if the money is sometimes just being moved between categories.
Here’s a little chart reporting growth among the big guys. But potential clients should keep in mind that size is not necessarily a plus. Some of the smaller and mid-sized firms on our list are highly experienced and staffed with outstanding investment managers.
Top Ten OCIO Firms by full-discretion AUM – 2016
– |
Firm |
Full |
Full Discretion $bn 2014 |
Change: 2016-2014 $bn |
Change: 2016-2014 Percent |
1 |
Mercer |
$140.0 |
$86.0 |
$54.0 |
62.8 |
2 |
Russell |
$112.0 |
$115.0 |
-$3.0 |
-2.6 |
3 |
BlackRock |
$103.0 |
$55.0 |
$48.0 |
87.3 |
4 |
Goldman Sachs |
$89.0 |
$25.0 |
$64.0 |
256.0 |
5 |
AON Hewitt |
$88.0 |
$45.0 |
$43.0 |
95.6 |
6 |
Willis Towers Watson |
$80.0 |
$58.0 |
$22.0 |
37.9 |
7 |
SEI |
$78.6 |
$69.3 |
$9.3 |
13.4 |
8 |
State Street |
$66.0 |
$47.0 |
$19.0 |
40.4 |
9 |
Northern Trust |
$56.1 |
$40.0 |
$16.1 |
40.3 |
10 |
Alan Biller |
$31.5 |
$31.5 |
$0.0 |
0.0 |
– |
Top 10 total |
$844.2 |
$571.8 |
$272.4 |
47.6 |
The full list is posted down below, with firms listed alphabetically.
We hope this will be useful to anyone considering the OCIO option; specifically board members and directors at pensions, endowments, foundations, and other tax-exempt funds.
We’ve updated all company and contact names, phone numbers and emails, and confirmed them all correct as of September 2016.
Give them a call. They would love to hear from you. Tell them Skorina sent you.
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Alan Biller: An accidental money manager
One of the perks of my job is meeting and learning from some remarkably accomplished people. Dr. Alan Biller is a case in point.
He’s the founder of the eponymous Alan Biller and Associates in Menlo Park, California; which happens to stand high on our latest OCIO list, with thirty-six professional employees and $33 billion in discretionary assets under management.
His firm, which has focused on serving Taft-Hartley benefit plans, advises more than 60 clients with over 100 plans (including one of the country’s largest), manages ten of these as OCIO, and has fiduciary responsibility for about $80 billion in total client assets.
He’s also sought after as an expert witness on fiduciary responsibility, investment policy and portfolio management in Federal court proceedings.
But he never planned on a career in money management.
Alan in person is an unpretentious man with a versatile intellect who puts one in mind of the college professor he once set out to be.
He earned degrees in philosophy from Yale, University of London and Columbia. Then, after two years of teaching at Pomona College in California, he received a National Endowment for the Humanities fellowship which he used to study medieval Islamic philosophy and classical Arabic at UCLA.
He was clearly headed for a life of teaching and scholarship, but then veered down another path.
Reasoning that an academic leader should know something about marketing and finance, he went off to Harvard and added an MBA to his stack of degrees. But instead of returning to the classroom — and over the advice of some Harvard faculty who thought he should try investment banking — he accepted an offer from the management science group at Wells Fargo Bank.
This cadre of bright young men was inventing modern quantitative finance in San Francisco in the 1970s with primitive computers and some wild new ideas. Consultants at WFB’s famous financial skunk works included William F. Sharpe, who won a Nobel Prize in economics in 1990; Barr Rosenberg, who founded pioneer quant group AXA Rosenberg; and many others who rose to eminence in the 80s and 90s.
[Historical note: Back then, Wells could have become the king of index investing, but didn’t. Their management science group worked out the basic design and software for the first index fund (for the pension fund of the Samsonite Luggage Company). The Wells Fargo Investment Advisor unit was formed to market these radical new products, but ultimately the bank sold half the company to Nikko then all of it to Barclays, rebranding the group as Barclay’s Global Investors (BGI). Larry Fink, spotting an opportunity, acquired BGI and its iShares products when Barclays struggled during the financial crisis in 2009. With the purchase, BlackRock became, at one stroke, one of the juggernauts in modern index investing.]
Alan made his own contribution as leader of the team which developed the first “closed-form” stochastic asset-liability pension model. He still owns the rights to PensionOptions ™, which he licensed for some years to pension consultants around the world.
After leaving Wells, Alan ran the investment industries department at SRI International; then left to help Bank of America acquire Charles Schwab.
A consulting project in 1983 ultimately led to Alan’s long-term role as fiduciary consultant to one of the country’s largest pension funds. That client gave him discretionary authority in 2013, making his firm one of the largest OCIOs on our list.
After working out of a kitchen, a garage and an office above a delicatessen, in 2005 the firm moved to respectable offices in Menlo Park and now has professionals working in Seattle, Boston and Washington D.C.
Alan still leads the asset management and pension consulting firm as CEO but has been careful to ensure that the next generation of OCIO leadership is in place.
Pension plans are complicated things. And Taft-Hartley (aka “multiemployer”) plans occupy an orbit of their own within the pension and investment-management universes. They are poorly understood and frequently overlooked, even though some have very substantial assets and cover hundreds of thousands of people.
On his advice Dr. Biller’s clients have diversified beyond public markets, and now have significant allocations to a wide variety of alternative assets.
Despite record-low interest rates and expected returns, Dr. Biller is pleased – as are his clients – that year-to-date performance is comfortably in the black and on the way to meeting their funding requirements.
Alan Biller would be the last to claim that his advice or management alone explains that success. Good board governance has certainly played a key role.
Nonetheless, the trust his clients have reposed in him for thirty years speaks for itself.
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Skorina’s Ultimate Outsourcer List
Outsourced chief investment Officers (OCIO) Ver 4
Email: skorina@charlesskorina.com Website: www.charlesskorina.com
Phone: (415) 391-3431
N.B: AUM amounts are discretionary unless otherwise noted Sept 27, 2016
Agility (Perella Weinberg) Christopher Bittman, CIO |
Denver, CO (303) 813-7910 |
|
Alan Biller and Associates Alan D. Biller, CEO & Sr Consultant |
Menlo Park, CA (650) 328-7283 |
$31.5bn (includes $30.4bn Western Teamsters pension) |
Angeles Investment Advisors Leslie B. Kautz, Principal Tatijana S. Janko, Director |
Santa Monica, CA (310) 393-6300 (310) 463-7964 |
$27.6bn advisory, $2.5bn discretionary (5/31/16) |
AON Hewitt Steve Cummings, President |
Chicago, IL (847) 295-5000 |
|
Appomattox Advisory Drianne Benner, MD Institutional Marketing |
New York, NY (212) 546-6247 |
$1.2bn |
Artemis Wealth Advisors Peter M. Rup, Founder & CIO |
New York, NY (212) 838-9000 |
$800mm, $590mm discretionary |
Athena Capital Advisors John H. Tyler, Mgn Dir |
Lincoln, MA (781) 274-9300 |
$5.998bn, $5.212bn discretionary (12/31/15) |
|
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Arthur J. Gallagher & Co. Institutional Investment & Fiduciary Services Nick Davies, Area President |
Washington, DC (202) 898-2270 |
$45bn advisory, $2bn discretionary |
|
||
Balentine M. Rob Ragsdale, Partner |
Atlanta, GA (404) 537-4800 |
$2.3bn |
BlackRock Edward Ng, MD of BR solutions |
New York, NY (212) 810-5300 |
$103bn 6/30/16 |
BNY Mellon Asset Mgmt Andrew D. Wozniak, Head of Fiduciary Management |
New York, NY (412) 236-7940 |
$10.8bn total, $9.5bn discretionary (6/30/16) |
Callan Associates Jim Callahan, Executive VP |
San Francisco, CA (415) 974-5060 |
$2 trillion advisory, $21bn discretionary |
Cambridge Associates Deirdre Nectow, Mgn Director |
Boston, MA (617) 457-1781 |
$156.64bn advisory, $13.98bn discretionary |
Canterbury Consulting Poorvi Parekh, Director of Outsourced Investments |
Newport Beach, CA (949) 718-2224 |
$14.3bn advisory, $2.1bn discretionary |
Clearbrook Global Advisors Elliott Wislar, CEO |
New York, NY (212) 683-6686 |
$28.5bn advisory, $800mm discretionary |
Commonfund Sarah E. Clark, Mgn Dir, Head Strategic Solutions |
Wilton, CT (203) 563 -5254 |
$24.4bn total, $7.7bn discretionary |
CornerStone Partners Don Laing, Senior Partner |
Charlottesville, VA (434) 296-1400 |
$10bn |
Covariance Capital Management (TIAA-CREF) Cara Howe, Sr Dir bus dev Chris Carabell, Dir bus dev |
Houston, TX (713) 770-2042
(713) 770-2072 |
|
|
||
DiMeo Schneider & Assoc. Robert (Bob) A. DiMeo, MD & Co-Founder Jon Fellows, Partner & Chair, Discretionary Committee |
Chicago, IL (312) 853-1000 |
|
|
||
Disciplina Matthew W. Wright, President & CIO |
Nashville, TN (615) 490-6007 |
AUM not available |
|
||
Discretionary Management Services (DeMarche Assoc.) Thomas C. Woolwine, President |
Overland Park, KS (913) 981-1345 |
$22.2bn advisory, $275mm discretionary |
|
||
Edgehill Endowment Partners Ellen Shuman, Mgn Partner Nina F. Scherago, Mgn Partner |
New Haven, CT (203) 654-3552 (203) 654-3551 |
|
Federal Way Asset Mgmt Jeff Klein, CIO Michael Hillman, Head of IR |
Federal Way, WA (253) 236-3535 |
$5.5bn total, $3.5bn discretionary |
Fund Evaluation Group Gary Price, Managing Principal |
Cincinnati, OH (513) 719-5101 |
$50bn advisory, $3.6bn discretionary |
Glenmede |
Philadelphia, PA (215) 419-6640 |
$32bn total, $14.5bn institutional discretion |
Global Endowment Mgmt Stephanie Lynch, Partner |
Charlotte, NC (704) 333-8282 |
$7.6bn (7/1/16) |
Goldman Sachs Kane Brenan, Mgn Director |
New York, NY (212) 855-9851 |
$89bn |
Hall Capital Partners Sarah Stein, President |
San Francisco, CA (415) 277-2634 |
$28.6bn, $4.9bn discretionary (6/30/16) |
Highland Associates Kelly Campbell, Mrktg Assoc |
Birmingham, AL |
$9.2bn (6/30/16) |
HighVista Andre Perold, CIO |
Boston, MA (617) 406-6510 |
$3.5bn |
Hirtle Callaghan Susan McEvoy, Director |
W. Conshohocken, PA (610) 943-4120 |
$23.8bn |
Investment Performance Services David A. Russell, Sr Investment Strategist |
Newtown, PA Savannah, GA (215) 867-2330 |
$38bn advisory, $9.6bn discretionary |
Investure Ellen Meyer, Client Team Dir |
Charlottesville, VA (434) 220-0280 |
$12bn |
J.P. Morgan Asset Mgmt Monica Issar, Head Endowment & Foundation Group |
New York, NY (212) 464-2852 |
$2.3 trillion, $22.3bn discretionary (6/30/16) |
Lowe, Brockenbrough & Co. Christopher Dion, MD & CIO |
Richmond, VA (804) 287-2744 |
$2bn total, $925mm institutional discretion |
Makena Bill Miller, Partner & COO |
Menlo Park, CA (650) 926-0510 |
$20bn |
Mangham Associates Joel R. Mangham, Principal |
Charlottesville, VA (434) 973-2223 |
$1.5bn |
Marquette Associates Tim Burdick, Mgn Dir |
Chicago, IL (312) 527-5500 |
$125bn advisory, $6.1bn discretionary tburdick@marquetteassociates.com |
Mercer Rich Joseph, US delegated solutions leader |
Boston, MA (617) 747-9540 |
$140bn delegated global AUM |
Mill Creek Capital Advisors Josh Gross, President |
Conshohocken, PA (610) 941-7700 |
$5bn total, $4.4bn discretionary (6/30/16) |
Morgan Creek Cap Mgmt Mark Yusko, CEO & CIO |
Chapel Hill, NC (919) 933-4004 |
$2.9bn |
Morgan Stanley/Graystone Robert Mandel, Exec Dir Suzanne Lindquist, Exec Dir |
New York, NY (914) 225-5420 (212) 296-1064 |
|
NEPC Steve F. Charlton, Director consulting services |
Boston, MA (617) 374-1300 |
$7.2bn |
New Providence Asset Mgmt Lance Odden, Mgn Director |
New York, NY (646) 292-1200 |
$3bn |
Northern Trust Margret Duvall, Sr Solutions Strategist |
Chicago, IL (312) 444-7336 |
$112bn, $56.1bn discretionary (6-30-16) |
Partners Capital Paul Dimitruk, Chair, Partr Brendan Corcoran, Partner |
Boston, MA & UK (617) 292-2575 (617) 330-7679 |
|
Pentegra Retirement Services Sarah Coxe Lange, Nat Sales Director |
White Plains, NY (914) 821-9563 |
$10bn total discretionary |
Permanens Capital Russell Leto, CFO |
New York, NY (212) 993-7440 |
$1.3bn |
PNC Bank Robert Zeidman, Dir OCIO solutions |
Pittsburgh, PA (973) 881-5056 |
$4.5bn discretionary |
Post Rock Advisors Carol B. Einiger, President |
New York, NY (212) 838-7300 |
AUM not available einiger@postrockadvisors.com |
Pyramis Global Advisors Jim Zadrozny, SVP institutional sales |
Smithfield, RI (401) 292-4760 |
$500bn global, $16bn discretionary |
|
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Rocaton Investment Advisors John Hartman, Mgn Director |
Norwalk, CT (203) 621-1717 |
$420bn advisory, $8.2bn discretionary |
Rockefeller & Co. Neil Craig, Mgn Dir |
New York, NY (212) 549-5314 |
$25.2bn total, $10.0bn discretionary (6/30/16) |
Russell Investments Eric Macy, Mgn Dir |
New York, NY (212) 702-7941 |
$2.2 trillion advisory $112bn OCIO global institutional clients (6/30/16) $44bn OCIO US institutional clients (6/30/16) |
SECOR Asset Mgmt Tony Kao, Mgn Principal |
New York, NY (212) 980-7350 |
$11.1bn |
Segal Rogerscasey Peter Gerlings, SVP Institutional solutions |
Darien, CT (617) 424-7357 |
$2.69bn discretionary Segal RC will acquire Marco Consulting, effective January 1, 2017 |
SEI Institutional Group Michael Cagnina, VP, MD |
Oaks, PA (610) 676-1496 |
$78.6bn (6/30/16) |
Seven Bridges Advisors M. Ram Lee, Partner |
New York, NY (212) 490-6320 |
$4bn total |
SLOCUM/Pavilion Financial Leigh Engdahl, Communication Director |
Minneapolis, MN (612) 252-7173 |
|
Spider Management Co. Rob Blandford, President, CIO |
Richmond, VA (804) 200-6917 |
$3.8bn |
Spruceview Capital Partners John A. Garibaldi, Mgn Partner |
New York, NY (212) 485-8617 |
AUM not available |
|
|
|
State Street Global Advisors Jai Chanda, Head Fiduciary solutions |
Boston, MA (617) 664-1539 |
$66bn (7/1/16) |
Strategic Investment Group Nikki Kraus, MD, Client dev |
Arlington, VA (703) 243-4433 |
$36.4bn total, 25.1 full discretionary |
Summit Solutions (Summit Strategies Group) Don Wehrmann, Principal |
Saint Louis, MO (314) 727-7211 |
$3.1bn in OCIO assets |
The Investment Fund for Foundations (TIFF) Pat Torrey, Mgn Director |
Radnor, PA (610) 684-8201 |
$9.5bn discretionary (6/30/16) |
UBS AG Nathan Shetty, Americas Head of Investment Solutions |
Chicago, IL (312) 525-5795 |
$10.3bn OCIO mandates |
US Trust Bank of America Bernard Reidy, National Sales Executive |
New York, NY (646) 855-5647 |
$29.2bn discretionary |
Vanguard Kevin T. Jestice, Principal |
Malvern, PA (610) 669-6449 |
|
Verger Capital Management Tommy Elrod, Dir bus develop |
Winston-Salem, NC (336) 758-4129 |
$1.3 bn discretionary (6-30-16) |
Verus Investments Jeffrey C. Scott, CIO |
Seattle, WA (206) 622-3700 |
$20bn |
Wells Fargo -Institutional Asset Advisors Rob Kent, VP national sales dir |
Overland Park, KS (913) 234-2929 |
$22bn discretionary (6/30/16) |
Willis Towers Watson Debra Woida, Head, Delegated Investment Services, Americas Pieter Steyn, EMEA head Delegated Investment Services |
Chicago, IL
(312) 525-2336
44 (0) 207 170 2714 |
|
Wilshire Consulting Kristofer T. Kelleher, VP & Principal |
Pittsburgh, PA (412) 434-1602 |
$970.4bn advisory, $7.3bn discretionary (6/30/16) |
