One of our defining characteristics, and main objectives, at Top1000funds.com, is to provide behind-the-scenes insight into the strategy and implementation of the world’s largest investors. An analysis ofthe most read stories of 2018 shows that’s where our readers’ interest lies. In 2018, readers were interested in learning from one another with regard to asset allocation, innovation on fees, new investment opportunities and organisational design.
This year, we have delivered more than 300 investor profiles and other analytical and research-driven pieces on the global institutional investment universe, and we now have readers at asset owners from 95 countries, with combined assets of $48 trillion.
In September,we relaunched our site and we can now measure by “category” of story what our readers like. The top three categories are: organisational design (including fees, manager relationships, technology and in-house investments), asset allocation and sustainability.
We are also pleased to say that you, our readers, are spending more time on our site, as evidenced by our 10 most read stories, which averaged 4.2 minutes per article. Thank you to all our interview subjects, readers and supporters over the last year. Below is a look at the 10 most popular stories of 2018.
The world’s biggest funds are gaining even more market share, and arguably more influence, over the world’s pension capital. The largest 300 funds now account for 43.2 per cent of all global pension assets.
Further, the capital is becoming even more concentrated at the very top, with the largest 20 funds in the world accounting for 40.3 per cent of the assets of the Willis Towers Watson 300 ranking, the Pensions & Investments/Willis Towers Watson 300 Analysisfor the year 2016 states.
The report shows that assets under management (AUM) at the world’s largest 300 funds totalled $15.7 trillion at the end of 2016, up by 6.1 per cent for the year.
The top 20 funds increased assets by an even greater proportion, 7.1 per cent, bringing their combined assets to about $6.9 trillion. These funds invest about 41.7 per cent of their assets in equities, 37.2 per cent in fixed income and 21.1 per cent in alternatives and cash. Read more
The board of the California Public Employees’ Retirement System has directed staff to look into aligning its $357 billion portfolio with the UN’s sustainable development goals.
The largest pension fund in the US is already one of the global leaders in engaging with companies on ESG risks, but by adopting the UN SDGs,it would embrace more specific social objectives, such as ending poverty, hunger and gender inequality.
CalPERS’ CIO Ted Eliopoulos characterised the 17 SDGs as a “gift to investors” at the board’s retreat meeting on January 16 in Petaluma, California. He said investment staff would report back to the board at its July meeting regarding how the goals could connect with CalPERS’ existing sustainability investment plan. Other institutional investors will be invited to that meeting to discuss their experiences implementing the SDGs.
The 17 goals address everything from the environment to various social principles. But Eliopoulos acknowledged in an interview that whether aligning a portfolio with them when they were combined would lead to better returns hadn’t been tested. Read more
In 2016, Ontario Teachers’ Pension Plan paid staff more than C$360 million ($276 million) in compensation. This is a huge figure in anyone’s world. But when it comes to salaries, the OTPP story is one of value, not absolute figures, and it’s a good case study for investors looking at their own compensation structures. Read more
APG, Europe’s biggest investor,is one of the few large asset owners putting AI to work effectively in its investment process. Amanda White looks at how it is integrating machine learning and more to enhance decisions. Read more
Embedding ESG factors into investment decision-making processes makes related risks more apparent, while strategies based on SDGs align portfolios more closely with long-term wealth creation. Sustainability has long been a focus for Mercer, which advocates integrating SDGs. Read more
The Canada Pension Plan Investment Board is a true long-term investor. It considers investments in quarter-centuries not the next quarter, amortises returns over 75 years, and can put capital to work in long-term projects, such as infrastructure.
But CPPIB still has about 10 per cent of its assets handled by external managers in public-market exposures. This style of investment management is not typically associated with the long term, so how the board works with those managers is important formaintaining a consistent long-horizon framework.
In fact, itworks towards a full understanding of its external managers’ strategies. These efforts, plus a customised fee structure, ensure a focus on long horizons. Read more
Investors need to face the reality of lower returns and adjust their portfolios accordingly, Greg Jensen, co-CIO of hedge-fund giant Bridgewater, told delegates at the Fiduciary Investors Symposium at the University of Oxford. Read more
Thanks to recent history, flawed methodology and ill-chosen indices, most say private equity consistently outdoes public equity. But the right data tells a different story, Oxford academics write. Read more
The problem of attracting and retaining investment talent at the California Public Employees’ Retirement System, where compensation lags industry peers, has come to the fore once again. As the largest pension fund in the US begins its search for a new CIO and continues to seek a new head of private equity, CalPERS is looking to get creative about how it attracts and pays talent. Some suggested remuneration structures include tying pay to funded status or to the fund’s contribution to the state of California. Read more
Co-investment, and other alternative private equity vehicles underperform a manager’s associated main fund, a new paper by leading private equity academics Josh Lerner and Antoinette Schoar shows.The paper, co-authored by Harvard’s Lerner, Schoar from MIT, and Nan Zhang and Jason Mao from State Street Global Exchange, examines the performance of alternative vehicles, such as direct investing and co-investments, for the first time.
The research found that, on average, co-investment private equity vehicles underperform a general partner’s (GP) main fund; however, there is a twist. The paper also found that limited partners (LP) with better past performance invest in alternative vehicles that have above-average market performance. In fact, the performance of co-investment vehicles for those investors outperforms even the GP’s main fund.
In other words, if you’re an investor with access to high-performing GPs, it’s worthwhile to invest in a co-investment vehicle. For everyone else, it’s not worth it. Read more