In The News

Sarah Samuels said she wasn’t set up for success in the investment industry — and she wants to change that for the next generation.

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“I think every kid deserves the opportunity to be a steward of this capital, like we are, and to break generational cycles of making ends meet. But, it can be difficult if you don’t have the right training to make it in this industry,” she said.

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“When I talk about the power of capital being tremendous and making the world go round, I really felt that acutely,” she said.

The book follows Holland and London (her daughters’ names) as they learn about investing after not having enough money for ear piercing. More sophisticated concepts in the book, including stocks, bonds and diversification, target older children and parents, Samuels said.

“Amid the rise of machine learning and continued digital transformation across the retirement landscape, the role—and value—of Big Data in the industry appears to only be getting, well, bigger. For plan advisers, the increase in data availability and use creates myriad opportunities to better fit plan design to the needs of plan sponsors and better tailor financial advisement to the needs of participants.

But the debate continues as to whether plan sponsors must treat participant data as a plan asset, and regulations around the proper use of such data continues to evolve, according to industry players.”

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“One of the biggest areas of concern for plan sponsors is that their plan data is going to be used in a way to sell participants on something they don’t need or get them to leave the plan when they shouldn’t,” says Mikaylee O’Connor, head of defined contribution solutions at NEPC. “That’s an area where there’s still a dance going on between plan sponsors and advisers.”

“Tough markets have sparked tension between investment managers and the allocators who supply them capital.

With liquidity tough to access on both the buy and sell sides of the market, the delicate relationship between limited and general partners may be more balanced than it used to be — but that doesn’t mean things are easy.

“This is a gnarly market,” said NEPC managing director Sarah Samuels. “It’s not one we’ve seen in a long time… We’re all being tested.”

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“GPs think LPs want liquidity because they’re being greedy,” Samuels said. “LPs think GPs are being greedy by not giving them liquidity.”

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As for the liquidity problem? According to Samuels, LPs have found ways to commit, even if they have to write smaller checks than previously given liquidity constraints. But for those that can, there is immense opportunity.

“On the opportunity side, this is one of the best times to put your capital to work, but it feels really scary,” she said.

Publicly-traded large-cap companies continue to garner the attention of media and investors, but allocator interest is beginning to look down market to the small-cap sector.

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Following the outsized performance in the U.S. large-cap space in 2023, investment consultant NEPC is not surprised the data shows increased interest in the small-cap space.

“Investors are likely looking for places to put capital to work with large-cap valuation extended relative to history and growth expectations being outsized in the near-term. We are also not expecting a recession this year given the resilient economic backdrop, further supporting the trend,” Senior Investment Directors Jennifer Appel and Nedelina Petkova said, in a joint e-mailed response to questions.

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To NEPC’s Appel, who aides in setting the firm’s macroeconomic outlook, dynamic asset class views and capital market assumptions, as well as Petkova, who oversees long-only global equity strategies, small-cap exposure is often associated with higher expected growth rates than their large-cap counterparts.

“Further, many small-caps are more directly exposed to their domestic economy as opposed to the geographically diversified return streams that are present in many large multinational companies,” they said, adding that “small-cap assets generally reflect less efficient portions of capital markets and can be fruitful areas for active management to add value as a result.”

In a recent NEPC webinar Where is the Value in Equities?, Petkova indicated there is significant dispersion in smaller-cap spaces including U.S. small-cap, ACWI ex. U.S. small-cap and emerging markets small-cap, which supports the view that those areas can be “alpha rich” as they are less efficient and therefore, specialized manager skill can be “integral.”

“Utilization to global mandates can help investors outsource U.S. versus non-U.S. in that decision, optimizing overall performance by considering the interactions there. There also is inherent flexibility to invest across more regions and countries, adapting to changes and market conditions and for managers to take advantage of new investment opportunities as they arise,” Petkova said, in the webinar.

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Small-cap names notably have an elevated sensitivity to interest rates and while markets began expecting a dramatic path lower for the Fed Funds rate that fueled a strong year-end rally across equity markets, NEPC finds the dynamic may have increased interest in the space.

“As 2024 has progressed, many of those rate cuts have been squeezed out as the economy shows continued resilience and inflation pressures have re-accelerated. While small-caps appear relatively attractive on a valuation basis versus large-caps, we expect more caution on the space in the near-term as higher-for-longer rates and stickier inflation levels are likely to weigh more significantly on smaller firms than large,” Appel and Petkova said.

For those of a certain age, a tune sung by The Happenings — See You in September — might resonate with regard to the Federal Reserve. Most analysts now expect the Fed to hold rates in range between 5.25% and 5.50% until September, with some concern there will be no rate cuts this year.

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“Phill Nelson, director of asset allocation at NEPC, said, “Despite the Federal Reserve’s bias toward cutting interest rates, investors should brace themselves for the potential that there will be no cuts from the Fed in 2024 due to consistently elevated inflation data getting increasingly priced into markets.”

The Fed is focused on how wage gains are impacting potential inflation and also eying “the core services sector where we are still seeing stickier inflation.”

“For NEPC’s Sarah Samuels, giving back doesn’t just mean working with endowments and foundations at her day job.

Samuels, a partner at investment consulting and OCIO firm NEPC, is also working to improve financial literacy among children with a book that came out on April 16 called Braving Our Savings.

The book follows a little girl who wants to buy something she doesn’t have enough money for. Along the way, she learns lessons about delayed gratification, investments, and the downside of making decisions based on what her friends say. Samuels’s goal is to make investing more visible to young children who may not have role models knowledgeable about finance.”

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Samuels had grown up in a small town with a family that lived paycheck to paycheck. “That generations-long cycle of fear of money and institutions went back as far as anyone can remember,” Samuels said. “It’s very tough to break that cycle. That’s why I feel so grateful for this industry and the people who helped me and have seen the power of spreading knowledge and being a role model.”

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All the book’s proceeds will be used to buy books to donate to children in need. Samuels herself is donating 2,500 books, and NEPC, for its part, has committed to buying her books for all its employees. The firm has also donated copies to Boston’s branch of the Boys and Girls Club and other local nonprofits.

As a part of the launch, Samuels is partnering with professional athletes including Patriots cornerback Jonathan Jones to distribute books to children.

“They manage multibillion-dollar pension funds and portfolios for top asset management firms and work closely with clients across the nation as investment advisers, to describe just a few of their careers.

But the 20 women recently honored as trailblazers by the Chicago chapter of the National Association of Securities Professionals share one common mission: improving diversity in the financial services industry.”

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“These women are not only trailblazers in their careers, but they are using — and have used — their platform and their reach to encourage diversity in our industry,” said DeAnna Ingram Jones, a consultant at NEPC and president of the Chicago NASP chapter. “As these women lay this foundation for diversity, what we hope is that all the next generation of diverse financial professionals find their perfect self in our our industry,” she added.