Asset owners, managers turn to technology to combat COVID-19

Asset owners and their money managers are adapting to seeing less of each other when it comes to the day-to-day business of managing institutional portfolios.

The spread of COVID-19 across the globe and the potential threat it represents to human health and disruption to basic business practices in the U.S. have led to significantly curtailed travel and heavier reliance on remote meeting technology by both investors and managers.

"Everyone in the North American investment management industry is watching everything going on across the world very carefully," said Donald A. Steinbrugge, founder and CEO of Agecroft Partners LLC, a hedge fund consulting firm in Richmond, Va.

"While most of the virus cases are in faraway places like northern Italy, Iran, South Korea and other Asian countries, the situation in the U.S. and Europe could escalate significantly in a matter of weeks," Mr. Steinbrugge said in an interview.

More cases of the virus in the U.S. were identified last week as testing increased. As of March 5, U.S. officials had reported 11 deaths from the virus and more than 164 cases.

Given heightened volatility across global markets over COVID-19 fears, asset owners are relying on managers and consultants to stay in touch through conference calls and videoconferences as all parties implement travel restrictions.

Performance of major market indexes has been unnerving in the two weeks ended March 6 with the S&P 500 index down 10.95%; MSCI ACWI index down 10.09%; and Bloomberg Barclays Aggregate U.S. Bond index up 3.16%. The 10-year Treasury rate fell to 0.76% from 1.47% over the period.

Both money managers and asset owners described to Pensions & Investments the curbs they've put on employee travel, especially to Asia, Iran and Italy.

Northern Trust Asset Management, Chicago, has stopped all non-essential international travel and is encouraging staff to minimize non-essential domestic travel, including meetings with investors and visits to the firm's other offices, company spokesman Tom Pinto said in an email.

Northern Trust has "employed social-distancing strategies to limit large-scale, face-to-face meetings and whenever possible to leverage technology and communication tools such as videoconferencing, Skype, etc.," Mr. Pinto said.

Northern Trust managed $1 trillion as of Dec. 31.

Vanguard Group Inc., Malvern, Pa., also has mostly curtailed employee travel overseas and has "limited all large-scale group gatherings and has instructed its crew to cancel any plans to attend non-client or non-business essential events such as industry conferences," said Dana Grosser, a company spokeswoman, in an email.

She said she couldn't share information about how Vanguard is communicating with its institutional investors and investment consultants.

Vanguard managed $6.2 trillion as of Dec. 31.

Matthews International Capital Management LLC, San Francisco, an Asian specialist manager, is evaluating its work practices on "an ongoing basis given that the situation is very fluid," said Celine L. Colgan, head of North American institutional business, in an email.

Employees of Matthews Asia must receive approval for travel in China, Iran, Italy, Japan and South Korea, Ms. Colgan said. An employee who has traveled in a country on the Centers for Disease Control and Prevention's COVID-19 alert list must work from home for two weeks before returning to the headquarters.

Ms. Colgan said more of the firm's investors now are requesting webinars and online meetings, some-thing the company is glad to arrange but isn't pushing investors to do.

Matthews Asia managed $25.6 billion as of Jan. 31.

Greg Turk, director of investments for the $54.2 billion Teachers' Retirement System of the State of Illinois, Springfield, said in an interview that the system is doing more conference calls at the request of managers.

Mr. Turk said the pension fund hasn't implemented a formal travel restriction policy but is being careful about staff travel, noting that a trip to Hong Kong to meet with global macro managers is being postponed for now.

The $167.2 billion Teacher Retirement System of Texas, Austin, last week imposed a travel ban on trips to the Asia-Pacific region and Italy for its investment staff, said spokesman Robert Maxwell in an email.

"Other international and domestic travel is subject to heightened scrutiny and justification" with exceptions made for "business-critical" trips, he said.

"The safety and well-being of our workforce is a top priority, and TRS continues to monitor the COVID-19 situation," Mr. Maxwell said, adding that the system has a pandemic plan in place to support response efforts by local authorities if there is an outbreak in Austin and the surrounding area.

The pension management team at United Technologies Corp., Farmington, Conn., recently decided to limit travel to within the U.S. out of concern that's "more about not being able to get back home than actually (contracting) the virus. So, for example, we are calling into our U.K. trustee meetings … instead of flying there," said Robin Diamonte, chief investment officer.

Individual team members can decide for themselves if they want to travel within the U.S. for manager meetings or conferences.

In terms of contingency plans for managing UTC's $31 billion defined benefit plan and $30 billion defined contribution plan, Ms. Diamonte said every member of her staff now takes his or her laptop home each night and has full remote access to the files they need. The funds' money managers also are getting in touch with UTC staffers with updates about their investments, Ms. Diamonte said.

"The bottom line is that we discussed contingency plans and feel comfortable that we can manage plan assets effectively for an extended period of time if the virus escalates locally and we all need to work from home," she said.

Travel is easier and safer for the investment team at Textron Inc., Providence, R.I., because the firm is "in the business of (making) helicopters and airplanes and my staff often travels in private aircraft," said Charles Van Vleet, chief investment officer, in an email.

Thus, Mr. Van Vleet has not imposed travel restrictions on his staff and stressed that his team is, as ever, "most focused on how to … manage the (defined benefit plan) portfolio. Already, due to indiscriminate selling by retail investors, there are opportunities in (business development companies), REITs and closed-end funds."

Some of Textron's money managers have requested conference calls rather than live meetings, he said. "We always prefer in-person, but understand current extenuating circumstances."

The Textron investment team oversees management of $7.2 billion in defined benefit plan assets and $4.5 billion in defined contribution assets.