Letters to the Editor: February Issue

Abuse for Assistant European Editor Nick Reeve and props on CIO’s coverage of diversity—or lack thereof—in asset management.

Dear Mr. Reeve,

Your article (“Waking the Dead,” November 14, 2014) is hilarious. I particularly enjoyed your inability to write consistently in sentences; and how you managed to sidestep any meaning in several of those worthy of being “sentences” (sic). Your mixture of US and UK spellings was a delight. The article will shine as a beacon to aspiring “international asseteers” and underline the high standards of illiteracy required for technical journalism.

Kind (or should it be best) regards,

—Iain Walker, Actuary & Managing Director, Ragbourne Consulting (London, UK

Mr. McDaniel,

Leanna Orr’s article on diversity in the asset management industry (“Whiteout,” September 2014) was balanced, well researched, and most important, necessary. 

As a resident of St. Louis, I have learned how much of a need there is for open discussion of the issues that divide us, even or especially if that discussion is “awkward or imperfect.” As a woman in finance, I am certainly accustomed to gender imbalance, although I am guilty of viewing the asset management industry as offering more of a meritocracy.  Perhaps [it is] for women—but as Ms. Orr points out, clearly not so for individuals of color or those who are otherwise marginalized. And as a board member in both the public and professional nonprofit arenas, I am also aware of the need for broader, different, and additional perspectives at the executive table.

—Kim Walker, Chief Investment Officer, Washington University in St. Louis

Re: “Dutch Pension Giant Ditches Hedge Funds,” January 19, 2015

The highlighted quotation really sums up the problem: “With hedge funds, you’re certain of the high costs, but uncertain about the return.”

It’s not that hedge funds can’t provide diversification benefits (meaning both strong risk-adjusted performance and low correlation with the rest of the portfolio) that outweigh their extremely high investment costs. It’s that they generally don’t.

The diversification benefits are hugely uncertain (and generally doubtful); the huge investment costs are not. Check out CEM Benchmarking’s study of actual realized investment performance for more than 300 US pension plans: Hedge funds provided the worst average net total returns—at 4.77% per year over the 14-year historical period (1998-2011)—but investment costs of 1.25% per year were higher than any other asset class except for private equity.

I would love to have some open discussion: Is it correct or incorrect that hedge funds have failed to provide diversification benefits that outweigh their investment costs?  

—Brad Case, SVP, Research & Industry Information, NAREIT


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