"Late Night with David Letterman" never had a Top 10 list like this one.
Progress Investment Management, San Francisco, came up with a list of the most important issues facing pension fund sponsors and emerging managers, as a result of the discussion at its sixth annual client/manager conference in October. Progress manages about $3 billion in an emerging manager-of-managers program.
Its hand-picked issues follow in order of importance from 10th to first.
* Private equity -- plan sponsors are seeking capacity;
* Managing growth -- as managers grow, they need to manage their staff, infrastructure and investment management carefully;
* Diversity, specialization and small business -- sponsors must consider fiduciary responsibility when using these manager selection criteria;
* Relationship development -- emerging managers need exposure to sponsors and consultants to build management capacity and capability;
* Inexperienced pension board membership -- many trustees lack optimal investment management experience and understanding;
* Internet aversion -- only 67 of 2,500 existing investment managers link their Web sites with NelNET, a database that allows sponsors to match up their needs with managers' capability;
* Investment risk vs. access risk -- when hiring, sponsors have to weigh emerging managers' lack of experience with the potential that the manager won't have sufficient capacity later to accept an investment;
* Size and track record -- emerging managers have to compensate for short track records and low assets under management in RFP responses;
* Plan sponsor fiduciary responsibility -- plan sponsors have to select the best manager, regardless of its being an emerging or established manager;
* Passive vs. active management -- while many sponsors are moving to passive management for large-capitalization equity strategies, active management may add value in midcap, small-cap, global and foreign asset classes.