Providing pension funds and other fund sponsors more direct access to academics and their research sounds like a worthy endeavor. The newest such attempt, by Sanford J. Grossman - professor of finance at the Wharton School, University of Pennsylvania - emphasizes the desire to eliminate the often sublime and sometimes annoying presence of sales pitches in investment conferences and research reports produced by money managers and brokerage firms. Thus, Professor Grossman has founded the Wharton Center for Quantitative Finance.
The problem is the new center risks questions on the same subtle selling he contends affects most other conferences. Professor Grossman may mean well in founding the center, but he needs to temper his criticism of other conferences and enthusiasm for his "unbiased" endeavor with an understanding of his own potential for conflicts of interests. Aside from being an academic and the center's director, he is a money manager.
The reasoning behind his intention has some merit. "Pension funds are mostly getting their research from brokers and other people trying to sell them things," Professor Grossman says. "What I want to do is to get them to the frontiers of investment research in a more direct manner, in an educational way." He wants, also, "to get academics familiar with real problems" that fund sponsors encounter, rather than ivy-walled situations professors often invent. "I don't think there are any forums that do this," he adds.
His effort is the center, whose first venture is a three-day conference in October at The Breakers resort in Palm Beach. The conference will be on global asset risk management, a timely theme in light of misunderstanding, mismanagement and misleading promises in derivative, currency and disciplined strategies. The lead-off address, on "currency as an asset class," promises a valuable inaugural for the new center.
But it seems also to skew the conference to Professor Grossman's own interests. One investment strategy of his own firm, Quantitative Financial Strategies, runs $260 million for clients under currency as an asset class. Professor Grossman denies any conflict, noting the address is entirely autonomous of his influence. Like his own conference, speakers at typical conferences often speak autonomous of the sponsor of the event. But Professor Grossman set the schedule, deciding to give currencies the most prominent position.
He risks unintentionally impugning the credibility of the center and of valuable conference addresses by issuing high-minded intentions while giving the appearance of potential conference-as-usual conflicts. Professor Grossman, while upfront about his firm, which he says runs a total of $700 million in currency and other strategies, doesn't mention it in the brochure about the new center. Instead, it presents him solely as an academic, furthering the appearance of the center as a purely academic institution, disconnected from any investment business.
Professor Grossman is seeking some funding to finance investment research by the center. But he hopes revenue generated from its conference and research reports will eventually make the center self-financing.
As distasteful as marketing may be, the center to be successful will have to compete by selling itself. The center's conference isn't the only such academic-type forum for institutional investors. Among them, there are the Q Group, or the Institute for Quantitative Research in Finance, and the University of Chicago's Center for Research in Security Prices seminars. Professor Grossman contends the two forums, while valuable, lack the intense focus on generating dialogue between academics and fund sponsors.
One thing is sure: academics on the frontiers of research won't reach very far without assisting fund sponsors and their money managers in being application pioneers.