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…
OCIO assets up over 21% in Skorina’s latest OCIO list!
In this issue Our 2017 OCIO List: Outsourced AUM up over 21% Harvard lags in early-innings endowment returns President needed for West Coast asset manager A short guide to OCIO happiness ————————————————– Outsourced assets under management up over 21 percent year-over-year in Skorina’s latest OCIO list! With 76 firms heard from, we’re now 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 last year’s report, here: https://www.charlesskorina.com/?p=3916 The number of reported RFPs is also rising as institutions seek better returns and broader investment options. OCIO providers, in turn, are beefing up their resources to meet the needs of current and prospective clients. For example: Alan Biller, Hirtle Callaghan, Goldman Sachs, and Cambridge Associates, among others, all continue to add headcount and expand capabilities. Hirtle Callaghan is hiring senior client-centric investment professionals, Goldman and Cambridge continue to mobilize and deploy their deep internal resources, and Alan Biller continues to build for the future and consolidate their commanding position in the multi-employer pension space. Where are CIOs to come from? As a search-committee chairman remarked to me recently, there are very few Joe Montanas to be had among nonprofit CIOs. The accomplished stars and no-brainer candidates are mostly immovable. That’s obviously true among the mega-endowments. Seth Alexander, Andrew Golden, and Scott Malpass are happy where they are. Recent hires like Narv Narvekar and Britt Harris were well-known to Harvard and UTIMCO, respectively, for years. And in each case that is probably the only move either would have considered. But much the same problem exists at smaller funds. Proven leaders are already well-paid; and/or they’re closer to the end than the beginning of their careers. Paula Volent,…
Cambridge Associates: Leading the charge into OCIO battlespace
Upcoming issues 5-yr performance & rankings for top 100 endowment CIOs Compensation for the top 100 CIOs ————————————————– [image: David Druley, Chairman & CEO Cambridge Associates] Two Harvardians invent an industry In 1973, two former Harvard roommates and budding entrepreneurs – Jim Bailey and Hunter Lewis – took on an assignment to review the investments held in their school’s endowment. Things were very different back then. A treasurer of the Harvard Corporation with the wonderfully Bostonian name of Paul Codman Cabot had managed the endowment from 1948 to 1965 as an account at his own firm, State Street Research & Management; charging the school $20,000 per annum for his services. Mr. Cabot, one of the inventors of the modern mutual fund, had daringly shifted the Harvard portfolio from ultra-safe bonds into a more balanced stock-and-bond mix, catching the equities boom of the 50s and early 60s. And in 1973, with the fund having risen to a then-colossal $1 billion, Treasurer George Putnam and President Derek Bok created the Harvard Management Company. When Messrs. Bailey and Lewis began their consulting relationship with the Harvard endowment in 1973 and formally established Cambridge Associates, Mr. Bailey was still on campus, finishing his joint MBA/JD program, while Mr. Lewis was working at The Boston Company, an old-line merchant banking firm. Forty-four years later, CA continues to count Harvard as a client. A decade after CA’s launch, a young woman named Sandra Urie wangled a one-on-one job interview with Jim Bailey. She was a product of Stanford and Yale (and development office head at Phillips Andover Academy, a CA client). The scheduled 30-minute interview lasted 3 hours, and Mr. Bailey hired her. As a divorced single mother, she was not the typical junior consultant of that era. Yet, fifteen years later she was named CEO of…
OCIO update: more firms, another $24 billion
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 ————————————————– 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. ————————————————– 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…