This alts specialist is leading the charge on impact investing in NEPC’s endowments and foundations practice. When not vetting private equity firms and hedge funds as part of the alternative asset committee, he works closely with clients on developing environmental, social, and governance (ESG) strategies.
How do you defend investment consultants in face of critics?
In today’s environment where returns are getting harder and harder to come by, many institutions don’t have the resources to properly oversee and manage a sizeable investment portfolio. That’s where consultants can play an increasingly important role.
Describe the weirdest interaction you’ve ever had with a client or potential client.
Early in my career, I was at an investment committee meeting and the conversation started to go off the rails a bit. I tried to kick my colleague under the table so we could redirect the conversation, but I ended up missing my colleague and hitting the committee chair right in the shin. Probably left a nice mark on him.
Design a hypothetical portfolio: An existing foundation in your home country has been invested in a 60/40 portfolio since its inception and is looking to clean the slate. The fund has US$3 billion in assets with an annual target return of 7.5%. The annual spending rate is 5%, and the fund receives an average of $70 million in annual inflows. Given today’s markets, how would you allocate the assets?
Any foundation that has had a 60/40 portfolio for some time should first take a victory lap because they’ve probably done very well over the last five or ten years. But afterwards they should move really quickly in a very different direction. The 5% spending rate being somewhat offset by annual inflows, they have the opportunity to take on more risk. I would suggest a pretty sizeable equity beta: 65% to 75% of public and private equity with a healthy dose of non-US exposure. To complement those growth assets I would suggest a lower fixed income allocation and a lower absolute return allocation. Then round it out with some less correlated ideas—such as trade finance or reinsurance.
What is your least favorite part of being a consultant?
Catching the 6 am flight 30 times a year. Even with young kids, and we have three of them,
it’s still an early wake-up call.
What is the single most exciting investable idea you see in the market right now?
Venture capital still gets me excited. Mid- and late-stage valuations may be fairly elevated now but early stage still looks pretty compelling. And it’s a lot of fun to hear about the disruptive technology venture capitalists are looking at.
Name your favorite food & drink.
Two that would never go together: an acai bowl and an old fashioned.
The trend of consulting firms moving into OCIO is…
Not surprising, in light of the limited resources many institutions have in place. There’s a pretty strong case oftentimes for an OCIO approach.
What will be the biggest innovation in your industry in the next 10 years?
There’s a lot of buzz around ESG now, but I think after 10 years ESG will no longer be a separate part of the conversation or a distinct type of fund or type of manager. Eventually,
it will just become part of a holistic investment process.