Fred Alger swims against current in world crazy for alternatives
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Varagon Capital fills new business development role
      Fitch Group in deal to acquire CreditSights
      Credit managers’ outlook still gloomy but brightening – survey
      Digital Colony picks head of Europe capital formation
    • Will Martindale
      Cardano Group chooses group head of sustainability
      Meketa hires first chief marketing officer
      Nick Horsfall
      Redington names managing directors for investment consulting team
      Marsh & McLennan Agency sets sights on Compass Financial
    • New York State Common challenges Tyson’s dual-share stock structure
      Credit managers’ outlook still gloomy but brightening – survey
      Investors call for action on COVID-19-induced humanitarian crisis at sea
      U.S. jobs worker restaurant
      Job market slipped in December as virus surge hindered activity
    • Ascensus, Empower acquire Truist record-keeping business
      PCS Retirement acquires Alliance Benefit Group-Rocky Mountain
      David Ireland
      Sponsors returning to questions about in-plan annuities
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
    • New law requires MassPRIM to increase diversity of managers, consultants
      Impact investors getting savvier, more efficient – report
      SSGA alum named head of ESG at Mirova
      Aegon moves to cut carbon from workplace DC business
    • Galina Churkina
      Building research earns honor from Aquila Capital
      Blackstone holiday video
      Blackstone would like to show you how things are done around the office
      MacArthur Foundation invests in women’s safe housing fund
      Robot illustration
      Thomas H. Lee Partners sees robots driving future returns
    • The Sun Hung Kai Properties Ltd. logo is displayed on the Sun Hung Kai Centre building in Hong Kong on Sept. 13, 2018
      SHK spins out East Point Asset Management
      Man holding a business card with Hedge Fund written on it
      Hedge funds chalk up decade’s best returns in 2020 – HFR
      New hedge fund launches surpass liquidations in third quarter
      Michael Hintz
      CQS deal with spinoff team falls apart
    • New York State Common challenges Tyson’s dual-share stock structure
      A sign on the exterior of a Northern Trust Corp. branch in Chicago on July 13, 2017
      Northern Trust to cut 500 jobs
      Wells Fargo targets $8 billion in cuts
      Maine Public Employees boosts target to alternative credit
    • A sign on the exterior of a Northern Trust Corp. branch in Chicago on July 13, 2017
      Northern Trust to cut 500 jobs
      Wells Fargo targets $8 billion in cuts
      A sign at a China Telecom Corp. store in Shanghai on Jan. 6, 2021
      Managers make further divestments from sanctioned Chinese firms
      The Chinese flag flies in front of the Liaison Office of the Central People's Government in Hong Kong on May 22, 2020
      Standard Life Aberdeen JV to open mainland China pension insurance company
    • Maine Public Employees boosts target to alternative credit
      Los Angeles City Deferred Comp narrows list to 2 in manager search
      Connecticut pension fund CIO resigns
      Arizona State Retirement looking for CIO
    • Sharmila Chatterjee Kassam
      AIF Institute hires former Texas ERS deputy CIO as executive director
      Varagon Capital fills new business development role
      SSGA alum named head of ESG at Mirova
      Capital Group hires BlackRock executive to launch ETF unit
    • Pension funds continue private equity investing spree
      Big jump in private equity AUM expected over next 5 years
      Thoma Bravo takes in $22.8 billion for 3 funds
      Jason Thomas
      Data, technology become new prized possessions
    • Ivanhoe Cambridge Inc. signage is displayed outside the company's office near Bay Street in Toronto on Aug. 29, 2011
      Ivanhoe Cambridge, PAG announce joint venture for Japan logistics investments
      Residential buildings in Hong Kong on Feb. 20, 2020
      KKR closes first Asia-Pacific real estate fund at $1.7 billion
      CPPIB in deal with Greystar to develop U.S. housing
      Global real estate investments to hit $79 billion in 2021 – survey
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      David Ireland
      Sponsors returning to questions about in-plan annuities
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
    • Outlook 2021
      The top 10 stories of 2020
      The best places to work in money management
      Investment consultants
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • San Jose Federated commits $11 million to real estate fund
      Essex Pension Fund on the lookout for private debt manager
      Lexington Contributory wants large-cap equity manager
      Fort Lauderdale fund scouting for large-cap manager
    • San Jose Federated commits $11 million to real estate fund
      Essex Pension Fund on the lookout for private debt manager
      Lexington Contributory wants large-cap equity manager
      Fort Lauderdale fund scouting for large-cap manager
    • International Small Cap Manager Services
      Financial Expertise
      Passive Index Manager Services
      Emerging Markets Equity Investment Management Services
    • U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
      Hedge funds warming up to financial sector, remain long U.S. equities
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      view gallery
      25 photos
      Cartoons depict a year like no other
      view gallery
      25 photos
      2020 in editorial Cartoons
      Consultants cartoon
      Seeking an investment consultant? Caveat emptor
    • Climate change and emerging markets after Covid-19
      An Asset Owner's Guide to Multi-Manager Portfolio Management
      Research for Institutional Money Management
      The Future of the U.S. Dollar - Dominant currency or one of many?
    • Michael McNally
      Commentary: New ‘investment-plus’ test poses risks to private equity investors
      Adam Waterous
      Commentary: Institutions urged to act now on opportunities created by current global oil disruption
      Ron Lagnado
      Commentary: Straw man critiques don’t hold up in face of real world success
      Robert Raben
      Commentary: What the asset management industry must do to bolster diversity
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
      Sponsored Content By Aberdeen Standard Investments
      Taking a passive approach to the hedge-fund universe
      Sponsored Content By World Gold Council
      Gold: the most effective commodity investment
      Sponsored Content By iShares
      For institutional investors, ETFs can make meeting liquidity needs easier
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:24
      U.S. stocks were 2020’s comeback kid
      watch video
      1:23
      Outlook 2021
      watch video
      1:52
      Buy gold's pullback?
      Coronavirus and the S&P 500: 2020
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
    • POLL: Retirement issues in 2021
      POLL: Money managers' priority in Asia-Pacific region
      POLL: Retirement issues in the presidential election
      POLL: The S&P 500 in the third quarter
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Graphic: U.S. stocks were 2020's comeback kid
      U.S. fixed-income returns post another positive year
      By the Numbers
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. MONEY MANAGEMENT
April 29, 2013 01:00 AM

Fred Alger swims against current in world crazy for alternatives

The firm sticks with growth equity despite its untrendy status

Rick Baert
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Daniel C. Chung says Fred Alger won't be moving out of growth equities: 'It's our only business: One philosophy, one process.'

    Updated with correction

    Growth equity boutique Fred Alger Management Inc. is fighting the trend toward alternatives and other investment strategies.

    “It's like swimming in a river against very strong currents,” said Daniel C. Chung, CEO and chief investment officer, in an interview. “Competitors are falling behind us, but when we look to the shoreline, our progress forward is less than it should be. But that's the nature of the markets.”

    Still, the New York-based money manager that survived the terrorist attacks of Sept. 11, 2001, also has come through a turbulent several years for active growth equity firms, and some institutions have taken notice. Alger, which had $18.6 billion in assets under management as of March 31, has gained four institutional clients since the start of 2012, according to Alger and Pensions & Investments data:



    • the $2 billion Purdue University endowment, West Lafayette, Ind., which put $57 million in the Alger Capital Appreciation strategy, funded last December;

    • the $436 million Philadelphia Gas Works Retirement Reserve, $27 million in active large-cap growth in mid-2012;

    • Kaiser Foundation Hospitals, Oakland, Calif., $101 million in the capital appreciation strategy, funded in April 2012; and

    • the Montana Public Employees Retirement Board, Helena, which added the capital appreciation strategy as an option in its $75 million 401(a) plan early in 2012.

    Tough market

    “It's been a very tough market,” Mr. Chung said, with average equity allocations among institutional investors dropping to around 30% today from 50% in 2007. “It's still a large market in terms of equities. Alger is a firm that will be 50 years old next year and has focused on one process that continues to do well in a market with growth out of favor. It's our only business: One philosophy, one process.”

    Alger's three largest institutional strategies — the $7.79 billion capital appreciation, $2.46 billion small-cap growth and $2.03 billion smidcap growth portfolios — account for the lion's share of Alger's assets under management, and their performance has topped benchmarks for the one- and 10-year periods ended Dec. 31, according to data from eVestment LLC, Marietta, Ga.

    For the 12 months, the capital appreciation strategy returned 19.26% vs. 15.26% for the benchmark Russell 1000 Growth index and for 10 years the strategy returned an annualized 12.32% vs. the benchmark's 7.53%. The small-cap strategy returned 13.63% for 12 months and 12.33% for 10 years, vs. the Russell 2000 Growth's 14.59% and 9.8%, respectively; and the smidcap growth strategy returned 15.63% for 2012 and 12.44% for 10 years, vs. the Russell 2500 Growth's 16.13% and 10.55%, respectively. All multiyear returns are annualized.

    The five-year returns for all three strategies were below their benchmarks, with the largest variance being the smidcap strategy, with a 1.15% return that was 292 basis points below the benchmark. “While the absolute returns were positive, they were restrained by a number of material influences, most notably the 2008 global financial crisis,” according to Mr. Chung.

    Bicycle lesson

    Mr. Chung equated the firm's single focus to a story from his childhood. His parents had bought him a Sting-Ray bicycle, but as he grew older he wanted a 10-speed bicycle that his parents refused to purchase. “I wanted that bike,” he said, “so I looked for a job and ended up subbing on a paper route. I kept that job, which enabled me ultimately to get that bike. It's the same here; people succeed when they know what their goal is and focus on it.”

    While Mr. Chung called Alger “one of the hot ones” during the heady global equity days of the 1990s, with AUM reaching a peak of $22.1 billion in March 2000, the ensuing declines from the technology bubble in 2000 and the financial crisis of 2008-2009 made for tough times. But, he added, Alger survived. “The contrast is that many firms diversified into growth in the '90s, but in the last decade they also diversified into other things,” Mr. Chung said. “But that's not Alger. We have been and are a boutique.”

    Aside from the market shifts, Alger also has changed since Sept. 11, 2001, when the terrorist attack on the World Trade Center — Alger's home office at the time — killed 35 of its employees, including David Alger, the firm's CEO and chief investment officer. Fred Alger, the firm's founder and chairman, came out of retirement and promoted Mr. Chung, his son-in-law, to CIO.

    Before then, Alger had about $1 billion in institutional assets. Institutional assets are now about $8 billion — just less than 50% of total AUM. “In 2008, we re-engaged our sales and marketing effort with institutional clients. Before then, we had not made it a major initiative. Institutional investors have responded very well.”

    Prior to Sept. 11, Alger had only one dedicated institutional marketer. Today, there are 11 staff members dedicated to its institutional business, along with eight marketers and two client portfolio managers. “We had a willingness to invest in the (institutional) business, and we're very gratified that we've won new mandates,” he said.

    Institutional investors still see a role for global equity in their portfolios. “We've heard from endowments and foundations who allocated too much to alternatives,” he said. “As equity markets continue their recovery, I think we'll do well in getting more clients.”

    Related Articles
    Fred Alger employees remember colleagues, honor them by actions
    Fred Alger Management hires international equity team
    Alger celebrates the past by looking to future
    La Francaise takes stake in Fred Alger Management U.K. subsidiary
    Alger adds small-cap equities portfolio manager
    Recommended for You
    Northern Trust to cut 500 jobs
    Northern Trust to cut 500 jobs
    Wells Fargo targets $8 billion in cuts
    Wells Fargo targets $8 billion in cuts
    Managers make further divestments from sanctioned Chinese firms
    Managers make further divestments from sanctioned Chinese firms
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Climate change and emerging markets after Covid-19
    An Asset Owner's Guide to Multi-Manager Portfolio Management
    Research for Institutional Money Management
    Bond ETFs show maturity during Covid market mayhem
    Global gold-backed ETFs: A popular gateway to the gold market
    The Future of the U.S. Dollar - Dominant currency or one of many?
    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

    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.

    pilogo-NEW
    About Us

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

    Chicago Office
    150 N. Michigan Ave.
    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 © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center