2018 Knowledge Brokers New Guards

Laura Flaum

Laura Flaum joined Aon right after graduating from Vanderbilt University more than six years ago, eager to tap both her math chops and her interpersonal savvy. “I looked for a way to combine my analytical skills with client interaction,” she says. “I didn’t want to be in the back office crunching numbers.”

She’s had plenty of opportunity to do that lately. These days, Flaum, a senior consultant, finds herself devoting more time than usual addressing a growing concern about market volatility and its impact on client portfolios—something she hadn’t seen when she joined the firm. “These are conversations we’re having with CIOs constantly,” she says. “It’s top of mind.”

Aon, of course, is the global professional services firm giant. Flaum is part of what she calls “Retirement and Investment Solutions,” working as an investment consultant and partnering with actuaries within the firm. With a wide array of clients, from public pension funds to defined contribution plans, she works on portfolio construction, risk management, and manager selection and monitoring, among other tasks.  

Thanks to everything from the unpredictable outcome of US monetary policy changes to years of low volatility and market gains, clients have reason to be concerned about their portfolio’s performance, according to Flaum. “We believe we are starting to move through a transitional phase, where we expect to see more volatility and a flattening trend in returns,” she says. For corporate CIOs, she sees the biggest challenge as liability management, thanks to interest rate increases. For public pension fund CIOs, there’s the added pressure of increased scrutiny of their ability to achieve high expected returns over the long term.

With that in mind, CIOs increasingly are looking for alternative investments, particularly in private equity and real estate, as well as low correlational hedge funds. “Alternative investments are where we think our clients can get additional alpha outside of equities and bonds. Alternative investing provides diversification and risk reduction benefits without the return drag,” she says. At the same time, for Flaum, that also means added urgency in identifying managers with sufficient skills and a reliable track record. 

One other major topic of conversation is socially responsible investing. Aon’s research underscores current interest in that area. A study of 223 institutions found that 40% said they are “somewhat” interested in the area, 25% are “very” interested and 5% described their involvement as “mission-critical.” “CIOs will have to address this trend going forward,” she says.

To help clients handle the complexity of their portfolio construction, Flaum likes to provide an analogy to eye exams, during which patients typically try on a variety of lenses, fine-tuning their answers to get to the right prescription. “While showing a mosaic of different exhibits, we ask committee members to ask themselves ‘is it clear now?’ in hope that our story becomes clearer,” she says. “We encourage clients to ask questions and examine the analyses each step of the way.”

She points to a liquidity analysis as just one example of an analysis shown in an asset allocation study. During the allocation decision process, she helps clients examine a variety of scenarios.  “We’ll look at how the liquidity profile may evolve under different economic scenarios and if the Plan will be able to pay benefits, especially if the Plan is allocated to alternative investments that have a long lock-up period,” she says.

By Anne Field

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