Global money managers increasingly are forming partnerships with universities and academic institutions, seeking a competitive edge in portfolio construction and research.
Sources in the money management and investment consulting industries say they have recently seen more high profile tie-ups.
Thinking differently is a key part of these partnerships. “In finance, we tend to have been trained in the same way, trained to think the same and process information in the same way too,” said Nicolaas Marais, head of multiasset investments and portfolio solutions, London, at Schroders PLC. “Everybody studies for (the Chartered Financial Analyst program) and there is almost a monolithic way of thinking. It is incredibly important to break that mold, and engage with those thinking differently.”
“There is a big disconnect between academics in the field of financial research and financial practitioners in (London),” said Simon Pryke, London-based chief investment officer at Newton Investment Management Ltd. “What strikes me is how little both parties talk to one another. Our job in investment management is to think laterally about themes driving change in the world, then to find stocks in which to invest. The idea of tapping into smart people with different perspectives makes a lot of sense.”
Part of that has been a recognition that universities and colleges have long been running successful endowment funds, some for centuries, said Mr. Pryke.
The latest data from the annual NACUBO-Commonfund Study of Endowments shows that 832 U.S. college and university endowments returned an average 15.5% for the year ended June 30, up from 11.7% the previous year. These institutions represented $516 billion in endowment assets.
“Our focus as investment managers is on identifying long-term themes driving change, and then finding great stock ideas consistent with these themes,” said Mr. Pryke. “Academics typically have a bias to the long term so can be very helpful in identifying themes. By contrast, investors are often more short term. Endowment asset management is inevitably focused on long-horizon investing — some endowments have been around for centuries.”
In October, Newton — which has £50.7 billion ($75.8 billion) of assets under management — announced a five-year partnership with the Centre for Endowment Asset Management at Judge Business School, Cambridge University, England, renamed the Newton Centre for Endowment Asset Management. “We are learning a lot, and we think the center's work will be of interest to our current and prospective clients,” said Mr. Pryke.
Teaming up with universities or academic institutions and tapping into their long-term thinking could help money managers to address their big challenge: “We and all investment firms (are) trying to keep all our clients thinking longer term. In the U.K. and the U.S., education endowments have long-term investment track records; we think there is an awful lot that we could learn from looking at them.”
Of course, the partnerships work both ways: Newton can tap into academic knowledge and research around investment decisions and impacts on institutional investors. The school can further extend its research and educational efforts with Newton's support. “We help to find an audience for their research among our clients in the U.K. and in North America,” said Mr. Pryke.