Wednesday, February 27, 2013

What Will Distinguish Top Asset Managers in 2013? Innovation, Researchers Say

As defined contribution plans continue “the quest for new innovative products” in the alternatives space, money managers are going to have to notch up their product creativity.  Pension plan managers are looking for managers with unbundled fund options and customized target-date funds that offer multiple manager inputs. This search trend has created some challenges for large money managers as their smaller competitors have been able to adapt quickly to the needs of the DC plan market.

Pension Plans are also seeking more options in real assets, real estate, and private equity, and customized target-date funds provided by nimble small managers are allowing plans the flexibility they need for these allocations. This is good news for smaller managers, as asset owners are “basically asking for investment strategies traditionally managed by smaller managers,” said Ben Olmstead of eVestment LLC.

So what; is a large asset manager to do? According to research from Casey, Quirk & Associates and Cogent Research LLC, large managers could create replication strategies, refocus on product development and differentiation, and “recognize the shift” away from traditional equity and fixed income. While the largest managers are still growing assets, the managers that find a way to focus on asset classes and build expertise or differentiation have a chance to stay in the game, said Gary Shub of Boston Consulting Group.

Another arena larger managers are competing with their smaller peers is in emerging markets, where equity and debt saw more than $50 billion in inflows last year. However, while “it’s not too late to get in (to emerging markets),” Benjamin Phillips of Casey, Quirk & Associates said, managers will “need a highly differentiated product” to find any opportunity.

The Road Less Traveled

Here are some recent articles from Pension and Investments we found that illustrate plan sponsors’ search for innovation:

Demand for innovation threatens biggest firm
(Pensions & Investments, Kevin Olsen, February 18th , 2013)

Pension funds are unlikely to be part of any big equity push
(Pensions & Investments, Thao Hua, February 4th, 2013)

To share your thoughts about what you are seeing in the pension industry please get in touch with Francoise Van Keuren via email:

-The IIR Alternatives Team
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Wednesday, February 20, 2013

Which Crop is the Next to Pop?

Agriculture can be contradictory asset class, with investors often viewing the opportunities as both over-heated and under-invested. But throughout our research with investors and managers alike, all signs points to permanent crops as the next segment to pop. 

Many investors lump long-time favorite timber into the permanent crop category – and there are some relative newcomers like palm oil and perennial energy crops that are also getting attention. But more frequently, we’re hearing that the more niche permanent crops are the ones to watch. Investors love these “boutique” items, such as avocados, almonds and pistachios because they, often command higher prices resulting in higher margins. There’s even a shift within individual commodities – with the more profitable and easy-to-peel Clementine orange gaining traction over the more cumbersome Valencia version. And with last summer’s drought still fresh on the mind of many investors, permanent crops are often viewed as a more palatable investment amid environmental instability. 

Of course, there are risks. While permanent crops may be a better buy amid weather volatility, they are subject to market volatility and the whims of consumer demand. And while Asian countries are among the biggest purchasers of U.S. permanent crops, there’s some anxiety that China will become a hefty competitor in some categories in the not so distance future.

Currently row crops still dominate, accounting for roughly 70% of most Ag Investors portfolios but with permanent crops showing so much promise we expect allocations to increase.

How do permanent crops factor into your agriculture investment strategy? Tell us and get involved with the AgReturn conference series. Contact Conference Producer Diana Middleton,, for more details.

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Wednesday, February 13, 2013

The State of the Union… Now what?

Last night the President gave his annual State of the Union address laying out his plans for the economic future of the United States of America.  The main idea was more jobs. However you personally felt about the speech, we thought you would enjoy hearing what both sides of the aisle thought about Mr. Obama’s State of the Union. Below are links to some commentary on the speech for you to enjoy.

Chicago Tribune: State of the Union: Obama to GOP: Can we just move on?

The Washington Post: President Obama’s 2013 State of the Union by the numbers

USA Today:  Readers describe state of the union in a word: 'Screwed'

Forbes: 2013 State of the Union Recap

The IIR Alternatives Team is currently gearing up for GAIM Ops Cayman and our Investor Ops program held in April and June respectively. While the markets continue to experience significant volatility and uncertainty, one thing is certain, due diligence and strong operations have never been more important. Both events focus on these topics and we invite you to check out the programs by clicking here for GAIM Ops Cayman and here for Investor Ops. 

In addition to these exciting events our June calendar also includes our Private Placement Life Insurance event and our Direct and Alternative Investing Forum for Family Offices. If you need additional information or have any questions please get in touch with us.

-    The IIR Alternatives Team

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Monday, February 4, 2013

The Changing Face of the SEC

As Mary Jo White assumes the helm at the Securities and Exchange Commission, speculation as to whether anything or everything will change continues to fuel the regulatory flames.    Ben Protess and Benjamin Weiser of DealBook said that the appointment, in conjunction with other new nominations, demonstrated the President’s “resolve to hold Wall Street accountable for wrongdoing, extolling his candidates’ records as prosecutors.”    As noted in the WSJ, the nomination of Mary Jo White marks the first time a former prosecutor has been chosen to lead the Securities and Exchange Commission.   But, one must ask, is White’s prosecutorial background a preposterously delayed reaction to egregious infractions committed by members of the finance industry prior to 2008 or is it the beginning of a new, progressive, forward-thinking SEC?  

Comments made by Pippa Malmgren and former SEC Commissioner David Kotz at the recent GAIM USA event are worth considering when evaluating the changing SEC.   As Glen Florio summarized on OpenGamma, “Malmgren …raised the philosophical question of whether government can protect people from a loss in the first place. … we have a ‘bad guy’ that is publicly pulled off the stage, the public desire to feel the swamp is clear of the sharks is not yet fed. We will therefore continue to see a more aggressive regulatory approach.”  And regarding hedge funds in particular, Kotz acknowledged “the overall cost of all the disclosures is considerable, and they have little value. In many cases, documents are collected and just filed away. The SEC doesn’t have the resources to do much with them, so in many ways it can be seen as a waste of money.”

New leadership is always promising but without the proper resources, can we really anticipate change?

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