Pensions & Investments: Plan Sponsors - Navigating Uncertain Times Takes Careful Investing and Communication
NEPC’s Thomas Cook was quoted in a recent Pensions & Investments article highlighting key takeaways from the Defined Contribution West conference earlier this month. View the article on Pensions & Investments’ site here.
In an age of uncertainty, plan sponsors should continue to focus on protecting participants’ savings through making careful investing decisions and maintaining strong communication tactics.
That was one of the overarching themes at Pensions & Investments’ Defined Contribution West conference Oct. 23-25 in Carlsbad, Calif., as industry experts discussed how to handle rising inflation, increasing cybersecurity attacks, and environmental, social and governance investing, among other topics.
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A lively panel discussion on the highly polarized topic of ESG investing focused on what moderator Thomas Cook, a senior consultant at NEPC, described as “bringing it back to the middle.”
ESG investing is not about “not investing in this or that industry” but rather about “how it can be used as a risk-return economic factor within investment processes,” he said.
Click here to continue reading the full Pensions & Investments article.
CIO: The Rise of 3rd Party Search Firms That Find Consultants
NEPC’s Steve Charlton was quoted in a recent CIO article to discuss how the process of bringing in the right investment advisers for asset allocators has reoriented how the consulting industry does business. View the article on CIO’s site here.
Increasingly, asset owners are hiring consultants to find consultants. These search experts can help a plan’s board of trustees the whole market while also spotlighting any potential conflicts of interest.
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“The advent of OCIOs has increased the need for search providers, according to Steve Charlton, partner, and head of client solutions at consultancy NEPC. He notes that ‘the more concepts that are introduced into the business, the more necessary it is for a third party to be coming in to evaluate.’
Charlton says roughly a third of NEPC’s business originates from search providers. NEPC offers both advisory and OCIO solutions, with NEPC’s current OCIO business overseeing $60.7 billion in assets.”
NEPC Expands Real Assets Team, Hires Real Estate Industry Veteran
BOSTON–(BUSINESS WIRE)–NEPC, LLC, one of the largest independent, research-driven investment consulting firms, today announced that real estate industry leader Shelley Santulli has joined the firm as Principal and Senior Investment Director, Real Assets, effective October 10, 2022.
Santulli brings more than two decades of real estate investment and advisory experience to her new role, and will help NEPC identify and report on emerging investment themes across real asset markets, which include real estate, energy, renewables, natural resources, and infrastructure.
As a part of NEPC’s Real Assets Team, Santulli will be responsible for providing clients with market viewpoints, sourcing investing ideas, conducting manager due diligence, creating educational materials for various real estate and real asset strategies, and advising clients on the implementation of investment strategies.
“It’s only through our best-in-class talent that we’re able to consistently deliver actionable, best-in-class investment ideas to our clients,” said Matt Ritter, CAIA, head of NEPC’s Real Assets Team. “We’re thrilled to be adding yet another experienced leader like Shelley to our team. I know our clients will benefit from her diverse investment experience across markets, property sectors, strategies, investment structures, and market cycles.”
Prior to joining NEPC, Santulli was Executive Vice President, Portfolio Management at American Realty Advisors, where she helped lead the portfolio management and strategy of a diversified, open-end value fund. Throughout her career, she has held several other senior positions in notable investment management firms like Berkshire Group, AEW Capital Management, and Fidelity Investments.
“I’m joining a team that prioritizes delivering research-driven investment solutions tailored to clients’ unique investment goals,” said Santulli. “I have a proven track record of helping institutions navigate turbulent markets, and I’m excited to put that to work for NEPC clients every day.”
Learn more about NEPC’s Real Assets Team here.
About NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing more than 400 retainer clients with $1.5 trillion in assets with $301.2 billion in alternative assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals.
To learn more about NEPC, visit nepc.com.
Contacts
Emma Rayder
CIO Announces 2022 Asset Management and Servicing Industry Innovation Award Finalists
NEPC is pleased to be nominated as a finalist for the 2022 Chief Investment Officer Industry Innovation Awards in the following categories: Diversity and Consultant of the Year, recognizing Kristin Reynolds and Allan Martin. It’s an honor to be recognized as one of the firms driving change and enhancing performance in institutional investing. View the announcement on Chief Investment Officer’s site here.
This year, we are celebrating those who have thrived and been incredible leaders as markets have turned rough and inflation and rates have risen. We are planning to gather in person to applaud their hard work on December 6 at Chelsea Piers in New York City.
As we selected these finalists, our mission was to search the industry for firms that have truly and reliably enhanced the portfolios and improved the work of their clients. While canvassing and reviewing the award nominations, we learned just how hard so many of you are working in the face of a global shift in monetary policy that has made markets challenging.
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The finalists are as follows:
Consultant of the Year
- Mercer Consulting, in recognition of the service of Cori Trautvetter
- NEPC, in recognition of the service of Kristin Reynolds and Allan Martin
- Aiperion
Diversity
- Ariel Investments
- PIMCO
- Verus Investments
- NEPC
Click here to continue reading the full Chief Investment Officer announcement.
The Boston Globe: Harvard, the Richest University, is a Little Less Rich After a Tough Year in the Markets
NEPC’s Kristin Reynolds was quoted in a recent Boston Globe article to discuss how Harvard’s endowment shrunk by $2.3 billion to $50.9 billion during a down time for financial markets. View the article on The Boston Globe’s site here.
Humility is not the first word Harvard University brings to mind.
But last year, when the storied school’s endowment soared in value along with just about every kind of investment on the planet, administration officials wisely tempered their enthusiasm – and expectations for the future. Their message to students, staff, alumni, and the often envious outside world: Markets give and markets take away.
Sure enough, their caveat got a call-back on Thursday as Harvard reported that the value of its endowment – including investments and donations – slumped by $2.3 billion to $50.9 billion in the year ended June 30, amid an ugly selloff in financial markets.
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“My impression is the worst is yet to come,” said Kristin Reynolds, a partner at investment consultant NEPC in Boston and the team leader of its endowments and foundations group. “However, I would say that private markets performance had been so strong the year prior, that it is still helping portfolios relative to public markets.”
Click here to continue reading the full Boston Globe article.
NEPC Survey Finds Institutions Want More OCIO Services But Gaps Exist
BOSTON–(BUSINESS WIRE)– NEPC, a leading research-driven investment consultant with $1.5 trillion in assets under advisement, today published its 2022 Governance Survey, which examines how institutions like pensions, endowments and foundations, and healthcare organizations are making strategic investment decisions and engaging with investment consultants to preserve and grow their capital across different asset classes and market cycles.
This year’s survey showcases data from 247 respondents, 47% of which are senior executives within their organization, while 28% serve on their organization’s board or investment committee.
The data across all respondents shows a desire for more OCIO services from investment consultants. Currently, 12% of respondents say their most trusted advisor handles everything like an OCIO. 17% of respondents expect their most trusted advisors to perform the role of investment manager that handles everything like an OCIO in the next 5-7 years.
However, the new report also showcases potential gaps in the OCIO market. When comparing NEPC’s 2018 Governance Survey to 2022, the data shows that expectations haven’t materialized. In 2018, respondents believed the share of trusted advisors acting as an OCIO would increase to 15% by 2023. The general survey results mask a decided shift toward OCIO for certain market segments, including endowments, foundations, healthcare, and defined contribution relative to 2018, and likely increased migration in the years ahead.
“As investment programs have grown over the past several years, we’ve also seen firsthand the increased desire and need for ways to streamline management and operational functions,” said Steve Charlton, Partner and Head of Client Solutions. “There are often good reasons to maintain trusted advisory relationships, which has slowed the overall progression to OCIO. Some clients look to maintain decision-making responsibility or hand off only portions of the governance process, whereas others have decided to move entirely to OCIO. We believe advisory and OCIO can co-exist within our firm and intend to provide the best services consistent with our clients’ objectives.”
Beyond OCIO relationships, the data also helps show how institutions are remaining committed to their ongoing diversity, equity, and inclusion (DEI) investment goals even amid a tough economic landscape. While data shows that more than half of respondents expect an economic recession and 67% are concerned about rising interest rates, the survey also shows:
- 80% of all respondents said it is important to incorporate DEI in their investment program, with 18% saying it is extremely important.
- Healthcare organizations were more likely to believe that incorporating DEI in their investment programs is a top priority, with 29% of these respondents saying it is extremely important.
- Alternatively, pensions and insurance organizations were slightly less likely to recognize the importance of incorporating DEI into their investment programs, as 23% of these respondents stated DEI was not an important piece of their program.
For more information about NEPC’s, click here, and about NEPC’s OCIO Services, here. To download the full results of NEPC’s 2022 Governance Survey, click here.
ABOUT NEPC, LLC
NEPC, LLC, is one of the country’s leading investment consulting firms, servicing more than 400 retainer clients with $1.5 trillion in assets with $301.2 billion in alternative assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net worth individuals. To learn more about NEPC, visit nepc.com.
Pensions & Investments: Interest in OCIO Remains Strong, but Growth Slower Than Anticipated
NEPC’s Steve Charlton was quoted in a recent Pensions & Investments article which covered the findings of NEPC’s 2022 Governance Survey. View the article on Pensions & Investments’ site here.
Institutional investors are eager to utilize the services of outsourced chief investment officers, but the market is not growing as quickly as anticipated, according to a new report from investment consultant NEPC.
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“As investment programs have grown over the past several years, we’ve also seen firsthand the increased desire and need for ways to streamline management and operational functions,” said Steve Charlton, partner and head of client solutions at NEPC, in a news release announcing the survey results. “There are often good reasons to maintain trusted advisory relationships, which has slowed the overall progression to OCIO. Some clients look to maintain decision-making responsibility or hand off only portions of the governance process, whereas others have decided to move entirely to OCIO. We believe advisory and OCIO can co-exist within our firm and intend to provide the best services consistent with our clients’ objectives.”
Click here to continue reading the full Pensions & Investments article.
Institutional Investor: Endowments and Foundations Increasingly Want Their Top Advisors to Act Like OCIOs
NEPC’s Sam Austin and Steve Charlton were featured in a recent Institutional Investor regarding the findings of NEPC’s 2022 Governance Survey. View the article on Institutional Investor’s site here.
Institutional investors increasingly want their most trusted advisors to function like outsourced chief investment officers.
In the next five to seven years, a third of endowments and foundations want their most trusted advisors — usually investment managers — to handle their portfolios like OCIOs, according to NEPC’s 2022 governance survey published Thursday. The survey included responses from organizations including public and corporate pensions, foundations, defined contributions plans, healthcare organizations, and endowments.
This increasing reliance on managers and consultants was recorded across fund types, with 19 percent of healthcare funds and 17 percent of defined contribution funds also anticipating that their most trusted advisors will act like OCIOs in the near future, up from 10 percent and 13 percent, respectively.
Among endowments and foundations, 26 percent said they currently view their most trusted advisors as investment managers, which NEPC defined as a “consultant or manager who handles everything like an OCIO.” Thirty-two percent said they see their most trusted advisors taking on this role in the next five to seven years.
“That’s a trend that’s been going on for a while now,” Steve Charlton, NEPC partner and head of client solutions, told Institutional Investor. “At least in the last six or seven years, endowments and foundations have been turning more and more to OCIO-type organizations to manage their assets.”
As institutions attempt to navigate increasingly-complex markets and develop more advanced portfolios with exposure to alternative investments like hedge funds, private equity, and private debt, they may need additional expertise from OCIO providers who have more experience in these areas, Charlton said.
Among the asset owners surveyed by NEPC, 43 percent described their most trusted advisor was a partner, someone with whom they work closely to develop their investment programs. About a quarter said they have advisors (“I make the decisions, but almost always do what they recommend”), while 15 percent said they use a consultant as a key source for information and perspective. Twelve percent identified their most trusted advisor as an investment manager who acts like an OCIO, with 17 percent expecting their top advisors to take on this role in the next five to seven years.
“This survey is reinforcing our belief that more and more investment committees or brand sponsors or whoever it might be are interested in turning over additional responsibilities to their trusted advisor,” Charlton said.
NEPC also asked respondents about the degree to which they consider diversity, equity, and inclusion issues — something which 80 percent agreed was an important consideration in their investment programs.
However, respondents from pension plans (both corporate and public), defined contribution plans, and insurance organizations were slightly less likely to indicate DEI as an important aspect of their program. Specifically, 38 percent of respondents from these organization types said that DEI was not important, significantly higher than the average of 20 percent.
Meanwhile, endowments and foundations were slightly more inclined to say that DEI initiatives were “extremely important” to their organizations. Nineteen percent of respondents from endowments and foundations answered “extremely important” versus 18 percent overall.
This discrepancy may be a result of endowments’ and foundations’ more recent adoption of DEI issues compared to pension plans, according to Sam Austin, NEPC partner and governance board member. Austin said pensions were at the forefront of DEI initiatives in the eighties and nineties. Other institution types have started to catch on in more recent years, particularly after the murder of George Floyd in 2020 and subsequent civil rights protests.
“Endowments, foundations, and healthcare organizations have increasingly caught fire over this issue over the last two and a half years, going back to that catalyzing event of George Floyd,” Austin said.
Austin said endowments and foundations now place a greater emphasis on aligning their organizations’ missions with their investment portfolios than they did ten or 15 years ago.
“The intensity of the issue is more front and center and it’s a fresh topic for the endowment and foundation world, whereas it’s been an issue that’s been on the table for pensions for much longer,” Austin said.
Pensions & Investments: Market Shocks Prompt Allocation Overhauls
NEPC’s Aaron Chastain was quoted in a recent Pensions & Investments article to weigh in on how corporate pension plan portfolios in the U.K. & U.S. have been distorted by upheaval. View the article on Pensions & Investments’ site here.
Corporate pension fund portfolios in the U.K. and U.S. that have been distorted by recent market events are set for an asset allocation overhaul. A combination of rising interest rates leading to falling liabilities, plus increased needs for liquidity in portfolios means asset allocations are, in some cases, no longer serving their intended purpose on either side of the pond. Sources said pension fund sponsors now have an opportunity to further derisk portfolios, with a view to completing a risk transfer or achieving self-sufficiency.
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There are also conversations among U.S. plans on what constitutes an appropriate interest rate hedge, since it “now takes less dollars to achieve the same interest rate hedge,” said Aaron Chastain, Atlanta-based senior consultant at NEPC LLC.
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NEPC’s Mr. Chastain is also seeing some clients reducing commitment sizes but not stopping investments altogether. They “definitely don’t want to eliminate those relationships (with fund managers) for a shorter-term market event in terms of an asset allocation perspective,” he said.
Click here to continue reading the full Pensions & Investments article.
Bloomberg: Stocks See Late-Day Rebound After Unnerving Twists: Markets Wrap
NEPC’s Phill Nelson was quoted in a recent Bloomberg article to discuss what to expect from the 9/21/22 Fed meeting’s announcement on interest rates. View the article on Bloomberg’s site here.
Stocks pushed higher in the final hour of New York trading, with a rally in megacaps like Apple Inc. and Tesla Inc. driving a rebound that followed the worst weekly rout for the market since mid-June.
Major equity benchmarks had a tough time finding direction Monday as traders geared for another super-sized US rate increase amid fears on whether the Federal Reserve could overtighten and raise the odds of a hard landing. Treasury 10-year yields hovered near 3.5% while the two-year rate, which is more sensitive to imminent policy moves, hit the highest since 2007.
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“The question to focus on isn’t whether the Fed will hike rates by 75 basis points or 100 basis points,” said Phillip Nelson, head of asset allocation at NEPC. “What we’re looking for is how aggressive Powell will be in the next six to 12 months. The messaging we get in the next few weeks could be a bigger data point and a shock to investors.”