Alan Biller and Associates – one of the largest independent OCIO firms on our latest OCIO list – announced the hire of John D. Skjervem as their new chief executive officer and we are pleased that Charles Skorina & Co was able to assist with the search. Mr. Skjervem, currently chief investment officer at the mighty $111 billion investment division of the Oregon State Treasury, will be joining ABA in Menlo Park in early April. A University of Chicago MBA, Mr. Skjervem joined the Oregon Treasury in 2012 after twenty-one years at Northern Trust, most recently as CIO for NT’s $180 billion wealth-management unit. The OCIO Industry and Taft-Hartley Pension Plans As we noted in our 2019 OCIO (Outsourced Chief Investment Officer) report, the largest firms, including stand-alones like Alan Biller and Hirtle Callaghan as well as majors like Goldman Sachs and Mercer, continue to hire top talent and build infrastructure as the market grows. By our bottom-up reckoning, discretionary assets rose from $1.98 trillion in the middle of 2018 to $2.38 trillion at June of 2019, a very impressive year-over-year growth rate of 19 percent! ABA specializes in a sub-set of the OCIO matrix: the pension plans known as Taft-Hartleys (aka, “multiemployer,” or just “union plans).” These are not as well covered by the broader investment industry as, say, the endowment and foundation sector, but they are at the heart of ABA’s success. U.S. private pensions totaled about $25 trillion in assets as of year-end 2016 according to a recent OECD report. There are about 1,400 multiemployer defined benefit and 1,100 defined contribution pension plans in the U.S. covering over 15 million participants with total assets exceeding $720 billion. ABA advises approximately 15% of that, including by far the largest single defined benefit plan. Who is Alan Biller? Mr….
John D. Skjervem, new CEO of Alan Biller & Associates $100bn ($47bn OCIO) consultant
John D. Skjervem, new CEO at Alan Biller & Assocs. ($100bn total, $60bn OCIO) Mr. Skjervem, CIO & Director Inv Div $111bn Oregon State Treasury moves to ABs Menlo Park, CA office in April. xEVP & CIO Northern Trust wealth division, MBA U Chicago, BA UC Santa Barbara
OCIO Growth in 2019: The Party’s Over
OCIO growth in 2019: The Big Get Bigger, Slim Pickings for the Rest No one knows exactly when the Southern Cottontail Rabbit diverged from its other 19 (or so) North American Cottontail cousins, becoming its own distinct species of bunny. In evolution these things just happen. Similarly, among financial institutions, modern banks seem to have evolved from traditional moneylenders somewhere in northern Italy in the late 14th century. But that fateful development could only be recognized in retrospect. Our friend John Hirtle, of Hirtle, Callaghan & Co, claims that he (with fellow Goldman Sachs vet Donald Callaghan) birthed the OCIO species in 1988. He’s a very nice (and imposing) man, so we take him at his word. In any case, there were soon several smallish firms pursuing the OCIO business model in the early 1990s. The core idea was to offer a diversified and full-discretion money management function to family offices and others who could no longer effectively or affordably do the job in-house (even with the help of traditional trust banking services). The job was becoming too sophisticated and complex, both conceptually and operationally. Observing their success, a number of larger firms joined the scrum in the OCIO space and, in a couple of decades we had the OCIO landscape of today, managing not just billions, but trillions of dollars. And reaping proportionate fees therefrom. We’ve been charting the growth of the OCIO industry for the past decade in our annual OCIO report and the heirs of Hirtle, big and small, seem (mostly) to have flourished. In our shiny new 2019 report we observe that total OCIO assets grew from $1.98 Trillion to $2.38 Trillion. That’s a year-over-year growth rate of 19 percent. That’s pretty impressive! But, the AUM increase is not as vigorous as the annual growth over…
OCIO assets near $2 trillion after six-month 17.4% jump
In this issue Latest OCIO list: growth accelerates Skorina seeks a chief investment officer The 15 fastest-growing OCIO firms Goldman Sachs’ OCIO machine Breaking news: Pomona College gets their first CIO OCIO assets climb over 17% in six months: introducing our latest OCIO report Eighty firms have updated their AUM and contact information for our latest Outsourced Chief Investment Officer (OCIO) list. They include four new listings: Deutsche Bank with $15.5 billion, Ellwood Associates with $1.2 billion, LCG Associates with $0.382 billion, and Ballentine Partners with $6.6 billion in discretionary OCIO assets. Our total reported OCIO assets have grown 17.4 percent in just six months. That’s double the year-over-year increase we measured over all of 2017. And, almost all of that is organic growth in firms we were already covering. That’s what we call exponential growth! While we’re talking OCIO, we should note a major deal reported just last week: the American National Red Cross in Washington, D.C. tapped Cambridge Associates to manage its pension and endowment assets. That’s about $3 billion total, which any of these firms would have been happy to land. So, congrats to our friend Margaret Chen and her team at CA’s OCIO shop. The Red Cross deal is interesting from a headhunter’s point of view because investment performance seems to have been good under former CIO Greg Williamson (who left in April). But, as a non-profit, ANRC is obliged to report the CIO compensation on IRS filings for all the world to see. As a public charity soliciting donations, the board is sensitive about exhibiting that number. We have it on good authority that this was a major factor in their choosing to outsource. We also note a big move for Catherine Keating of Commonfund which is OCIO-relevant. She’s gone from running OCIO money for…
Alan Biller, why the OCIO business keeps growing. Endowment office costs cont.
Last month in our annual OCIO report, we listed OCIO assets up 18% from the prior year. We promised to come back with some additional thoughts about the outsourcing decision for endowments, and here we are. Now, with recent AUM updates as of June 30th from a few big OCIO providers, we’re reporting $1.7 Trillion in full-discretion assets under management by outsourced chief investment officer firms. That’s a year-over-year jump of $364 billion – or a little over twenty one percent – since September 2016! See our OCIO list from last week with these latest updates here: https://www.charlesskorina.com/?p=5145 Our headline now says that total outsourced AUM is up over 21 percent (about $364 billion) year-over-year by our reckoning — but we didn’t hazard any guess about where all that money was coming from. Our friend Dr. Alan Biller in Menlo Park, whose firm manages almost $40 billion on a full-discretion basis, has some thoughts on the matter. We profiled Mr. Biller last year. See: Alan Biller: An accidental money manager https://www.charlesskorina.com/?p=3916 Skorina: Alan, you deal with prospective OCIO clients on a daily basis. What do you think is driving the growth in this niche? Biller: The effort by corporate pensions to de-risk and off-load their retirement liabilities probably accounts for the lion’s share of the AUM growth, Charles. U.S. private pensions totaled about $25 trillion in assets as of year-end 2016 according to the latest OECD report (Organization for Economic Co-operation and Development). See http://www.oecd.org/pensions/private-pensions/Pension-Markets-in-Focus-2017.pdf And endowments, foundations, health systems, charities, etc., account for maybe a tenth of that: $2 to $2.5 trillion. So, that big jump you see in your list is bifurcated. The growth rate for pension assets is probably well over 21 percent. The growth rate in E&F is, I suspect, more modest than that. Pension…