A handful of sophisticated specialist consultants and a few general consultants are winning most of the new assignments as well as retaining existing clients or, increasingly, snatching clients away from each other, according to a review of reported searches and hires in Pensions & Investments' archives.
The top specialist alternative investment consultants include:
• Albourne Partners, which advised 202 clients on $230 billion in hedge fund investments as of May 31.
• Aksia, which advised 42 clients with $42 billion as of April 30 in hedge fund investments.
• Cliffwater, which provided customized consulting services to 27 clients with $19 billion invested in hedge funds as of May 31.
The Beryl Consulting Group LLC also offers clients both basic research and highly customized portfolio services.
General investment consulting firms with a reputation for robust hedge fund expertise include Cambridge Associates LLC, NEPC LLC, Hewitt EnnisKnupp, Rocaton Investment Advisors LLC and Fund Evaluation Group LLC.
Specialist hedge fund consultants are at “the leading edge of the phenomenon of many pension plans, especially public plans, moving to direct hedge fund investment,” said David Harmston, partner and global head of Albourne Partners' client group. Mr. Harmston is based in the London-based firm's Norwalk, Conn., office.
Each of the specialist consultants offers different services and specializations in combination, ranging from manager research and due diligence reports to highly customized portfolio construction, including manager selection as well as negotiation on fees and terms.
For larger funds, like Texas Teachers, Albourne Partners' in-depth, extensive research on hedge fund managers has served the fund well since 2005.
During a June 16 board meeting discussion about renewing the Albourne contract, Jerry Albright, deputy chief investment officer, told trustees: “I can't imagine running this portfolio without them. It would be devastating to lose Albourne.”
The Pennsylvania Schools fund is one relying on a more collaborative relationship with specialist consultants for hedge funds, private equity and real estate.
“We view our consultants as an extension of our investment staff,” said Alan Van Noord, chief investment officer. “It's like a basketball team: Our staffers are the starters, and the consultant is the sixth man, getting a lot of playing time.”
With an additional 2.3% or about $1.2 billion to put to work in new direct hedge fund investments under the fund's new asset allocation, Mr. Van Noord said Aksia and investment staff will gradually add new managers. The fund also is considering adding emerging hedge fund managers.