Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
May 12, 2008 01:00 AM

One-stop shopping grows

More funds hiring master managers to make important decisions

Christine Williamson
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Deborah Boedicker calls the strategic partnerships part of a ‘tectonic trend’.

    Pension funds finally are turning to multiasset class managers in numbers.

    While pension executives have been reluctant to give managers investment discretion for large chunks of their funds, the idea is reaching the tipping point.

    Increasingly, pension officials are forging strategic partnerships or master manager arrangements and naming the money manager as a co-fiduciary. That relationship lets the money manager design the portfolio and pick both internal and external managers, speeding up the manager selection process and more efficiently investing pension dollars in capacity-constrained alternative investments.

    The idea is not new: GTE Corp. pioneered the concept in 1995 for its defined benefit plan. But these arrangements were rare and tended toward money managers running the portfolio internally with a global tactical allocation overlay.

    Today, strategic partnerships are just as likely to involve big alternative investment mandates us-ing an open architecture platform that by design includes external managers and a wide spectrum of strategies and asset classes. The master manager typically becomes a co-fiduciary, and can use both internal and external managers. However, the range of these strategic partnerships is extremely wide.

    Among the institutional investors that have forged strategic partnerships with money managers this year are:

    •The $110 billion Teacher Retirement System of Texas, Austin, hired four large multiasset managers to manage $1 billion each in portable alpha portfolios (Pensions & Investments, April 14 ). The move is the brainchild of T. Britton Harris IV, chief investment officer who held the same position at GTE.

    •Ford Motor Co., Dearborn, Mich., hired Lehman Brothers Inc., New York, in late March to manage at least $3 billion in alternatives, with hedge funds, private equity and real estate each reportedly getting $1 billion from the firm's $46 billion defined benefit plan (P&I, March 17).

    •South Carolina Retirement System Investment Commission, Columbia, has signed two strategic partnership deals worth $1 billion each with FrontPoint Partners and its parent company, Morgan Stanley, New York, to manage hedge funds and private equity. Officials of the $30 billion plan are searching for managers for $800 million to $1 billion investments in opportunistic credit and emerging market debt/high yield (P&I, Feb. 22);

    •Pending successful contract negotiations, Arizona Public Safety Personnel Retirement System, Phoenix, will give 90% of the $7 billion fund to Benchmark Plus Management LLC, Tacoma, Wash.; BNP Paribas Asset Management LLC, New York; Morgan Stanley; and Western Asset Management Co., Pasadena, Calif., in a variation of the master manager model using index-plus strategies (P&I, April 28).

    Market-driven partnerships

    The urge to partner with managers is market-driven, said consultant David Morton, partner and head of alternative investment research at Rocaton Investment Advisors LLC, Norwalk, Conn.

    Access to capacity-constrained investment strategies and investment discretion is critical in order to act quickly on investment opportunities in an era when competition for alternative investment capacity is very high, Mr. Morton said.

    “Capital needs to be competitive to be able to get into the best alternative investment strategies and that means that decision-making has to be much faster than ever before. These strategic partnerships are one way for large domestic pension plans to streamline the investment process, to make it more reactive and governance much smoother,” Mr. Morton said.

    Changing the investment decision process is a big deal for many pension plan sponsors, said Deborah D. Boedicker, principal, Strategic Investment Group, Arlington, Va.

    “The move to partnership relationships is part of a tectonic trend toward outsourcing the decision-making of manager selection ... Institutional investors are altering their governance structures, extending and expanding by naming the money partner as a discretionary co-fiduciary when it comes to investment,” Ms. Boedicker said.

    Managers report that their prospect pipelines are filling up with interested institutional investors.

    “We've seen a big increase in the interest in the strategic partnership concept. It's not a brand-new idea, but I think some of the recent hires have really pushed up institutional interest. I think we're hitting the tipping point for these kinds of relationships,” said Alan H. Dorsey, managing director, alternative investment strategist at New York-based Lehman Brothers. In addition to Ford, Lehman Brothers' other recent strategic partner is the Texas Teacher fund.

    Mr. Dorsey, a former consultant, said a huge attraction of strategic partnerships for institutional investors “is the value-added services. In exchange for managing a large pool of assets, managers can provide a lot more portfolio construction services than they could for a regular account.”

    Mr. Dorsey noted that because each strategic partnership is very labor-intensive for the manager, care has to be taken not to exceed capacity, a point echoed by other managers.

    Complex and unique

    “Each of these strategic partnerships is unique. They are complex, typically spanning a wide range of alternative asset classes, designed to give institutions access to talented advisers and capacity in desired asset classes. They all have wrinkles and hair ... and are complicated to set up and administer ... They all require the construction of a global multiasset portfolio that completely fits an individual client's needs,” Ms. Boedicker said.

    Her firm, Strategic Investment Group, manages $15 billion in alternative funds of funds, including several large strategic partnerships that Ms. Boedicker did not identify.

    Only a handful of global multiasset firms with the institutional heft, research capability, capacity with the best external alternative investment managers, and wide spectrum of investment strategies needed, sources said.

    Among the managers most often hired recently as strategic partners are Lehman Brothers, FrontPoint/Morgan Stanley, JPMorgan Investment Management, BNY Mellon Asset Management and BlackRock Inc., all of New York; and UBS O'Connor LLC, Chicago. And though Strategic Investment Group manages much less than these megamanagers, Ms. Boedicker said the firm's pipeline of partnership prospects has filled up this year.

    Consultants generally are receptive to client interest in strategic partnerships, even if the manager's involvement is more consultative than in a traditional account.

    “There's increased awareness that the lines between what a consultant and a money manager are getting blurred,” said Patrick Mulvey, managing director and head of marketing and business development, Rogerscasey LLC, Darien, Conn.

    “With harder to implement strategies like alternatives, manager-institutional partnerships make perfect sense. The reality of the markets we're in right now mean that everyone has to be more creative and at the end of the day, what everyone wants to do is find solutions for clients,” Mr. Mulvey said.

    Contact Christine Williamson at [email protected]

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    The Future of Infrastructure: Building a Better Tomorrow
    Fulcrum Issues: Equity Returns and Inflation — Choose Your Own Adventure
    What Matters Most in Considering a Private Debt Strategy
    Why pursue direct lending in the core middle market?
    Research for Institutional Money Management
    Are Factors a Thing of the Past?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing