Page 7 – Top1000funds.com

Massachusetts treasurer Deborah Goldberg said the current US political climate is “not business as usual”, adding that the state’s key strengths – including its higher education institutions and progressive social policies – are being targeted by the federal administration.

“All that makes Massachusetts great are direct targets of the federal administration,” Goldberg said during an opening speech at the Top1000funds.com Fiduciary Investors Symposium at Harvard University’s Medical School.

“This is not business as usual, and to be candid, this level of uncertainty and volatility is not good for anyone, both within this country and throughout the world.”

The state was credited as the first the country to have a constitution that abolished slavery, in 1780; and as the first to legalise same-sex marriage, in 2004. Aside from Harvard University, Massachusetts also houses 113 other public and private higher education institutions, including the Massachusetts Institute of Technology (MIT).

Just days after Goldberg’s comments, the Trump administration upped the ante on its war against Harvard, barring the Ivy League school from accepting international students on the grounds that it is permitting antisemitism and “pro-terrorist” behaviours on campus.

Harvard has since secured a court order temporarily blocking the Trump administration’s order, but without a longer standing arrangement, close to 7000 existing international students at the university may face visa cancellation or mandatory transfer to another institution.

Goldberg said Massachusetts’ investment in education is a key to not only maintaining its status as an innovation hub for industries like healthcare and biotechnology, but also as an attractive destination for domestic and international talents.

“Other recent challenges, not surprisingly, are the detention and arrests of visa holders, legal residents and citizens,” Goldberg said.

“These aren’t just assaults on the civil rights of people living here but threaten our workforce capacity. From hospitals, colleges and universities to restaurants and local businesses, our economy depends on the breadth of immigrants who come to work, study and thrive in our state.”

Goldberg is chair of the $110 billion public employees’ pension fund, MassPRIM, and its stewardship and sustainability committee. Despite recent efforts to label sustainable investing “with politically charged buzzwords”, she said MassPRIM’s commitment to stewardship is “simply common-sense investing”.

“[It’s] what every successful, savvy businessperson has always done,” she said.

“We believe in all of the challenges that the committee and our breadth of investments address. We look for well-run companies.

“We know quarter-to-quarter is not what we want to be invested in, and we understand the elements that help a company or our investments grow.”

But as a state treasurer, Goldberg said her primary goal is to maintain Massachusetts’ AA+ credit rating – the same level as the US federal government after its recent downgrading from a triple-A credit score by multiple ratings agencies.

She also signalled that the research innovations and start-ups in the state will need more support from investors as opposed to federal funding, “at least for now”.

“I am actually hopeful that philanthropic dollars will help to support our colleges and universities, which are generators [for the state’s economy],” she said.

“We have a combination of all types of things that are involved in health care delivery and all that are involved in pharma… High tech, bio tech, you name it.

“Invest in it. Invest in it here. It’ll be well-used, and you will be very successful.”

If aging were a disease like any other that could be treated and “cured”, the implications for society would be profound, and the Top1000funds.com Fiduciary Investors Symposium at Harvard University has heard that time is not far off.

Harvard Medical School Department of Genetics Professor David Sinclair told the symposium that aging is a medical condition like any other, that it may be preventable or treatable, and that getting older may, in the not-too-distant future, become a matter of choice.

Sinclair said understanding how genes are turned on and off is the key to understanding the aging process and therefore how to arrest or reverse it.

Heart attack, stroke and kidney failure and other diseases are “manifestations of this universal process I’m talking about today, that we now know occurs in every cell and in every organism on the planet, even yeast cells, that we call aging”, Sinclair said.

Ageing affects the body’s ability to handle those diseases, but if aging is reversed they go away.

“We know it works in what we call, affectionately, non-human primates, or monkeys,” Sinclair said.

“Monkeys are very similar to us, of course, and so I’m on record saying I’d be really surprised if it doesn’t work in us as well.”

Sinclair said it has long been believed that in the process of replication over a lifetime, DNA becomes damaged or mutates, and that’s what causes aging in cells.

“There’s still a few people that hang on to this idea, but there’s a lot of evidence that that’s not true,” Sinclair said.

“The other bit of evidence that, if you think about it, is really damning to the DNA-damage hypothesis, is I could take a cell from each of you and clone you, and I’d make babies out of your old cells.

“It says that [in] our old cells, it’s not the DNA that’s a problem, it’s something else that has a reset button. I believe we found out what that reset button is. And fortunately, we won’t have to go through a cloning step to be rejuvenated. We can do it while we’re still alive.

“It’s not the DNA that’s the destiny, it’s something else.”

Sinclair said that in essence there exists a kind of “backup” of an organism’s original DNA, called the epigenome, which can be used as a reference to “reset” the organism’s DNA. The trick, Sinclair said, is not to push back the aging process too far and cause the DNA to create stem cells, because that is fatal to the organism.

“What we had to figure out, which really was the hard part, was how do you reset aging by 75 per cent, 80 per cent, but not 100 per cent, and safely?” he said.

“What we’ve found is a way to not just keep embryos young, but to safely keep adult tissues young.

“We’ve done it… in living monkey tissue, and humans are next.”

Change the pattern

Sinclair said his lab’s goal is to “change the DNA methylation pattern on the DNA”.

“What we’ve shown in my lab and … in the monkeys is that we can reset the pattern of those chemical changes on the DNA,” he said.

“And if you’re astute, you might be saying, how is that possible? How does the cell know which of these chemicals is missing to put it back on and vice versa? And my answer is: that’s the Nobel Prize. If you want to win one, go figure that out. You’d be racing me for that answer.

“We don’t fully know yet how it works, but we have some clues, and I have students on that, but we think that there’s physical changes, some tags on the DNA that gets laid down when we’re babies that tells the cell how to go back and put those chemicals back where they belong.”

Sinclair said that if his research holds up and he’s correct about the hypotheses so far put forward, it could be as big an advance in medical science as vaccination or antibiotics.

“It’s really big, and it will really change society,” he said,

“It will change the way we think about our lives and what diseases we can treat that we currently have nothing for.

Sinclair said the pace of research and discovery has been accelerated exponentially by the application of artificial intelligence, allowing his researchers to do “AI screens of trillions of molecules in a matter of two months that would normally take probably 20 years to go through physically”.

“Out of those trillions of molecules, we have hits that are reversing aging in similar ways to the gene therapy, single molecules, not cocktails that we’ve been using.

“Those single molecules, if they work, you could imagine, and we will try them, to take a pill to cure blindness or to cure Alzheimer’s. That’s how fast it’s going, that in two months, we can do 20 years of research now by simulating chemistry in the computer and docking trillions of molecules against proteins.”

Sinclair said the work that’s been possible in the past few months was literally impossible only a few years ago and would have taken “more than a million years to do this, probably,” without AI.

“What we were looking for was a single molecule that could activate one enzyme and inhibit three other different ones,” he said.

“Normally, you’re after one target, which is extremely difficult. We said, let’s do four with one molecule, and we got it to work.

“But you can only do that in the in the virtual world. It wouldn’t be possible physically. So AI is huge. If you ask my students, how often do you use AI, for them, it’s like breathing.”

Asset owners have turned more optimistic about the role of active managers as market volatility and dispersion create fresh stock-picking opportunities.

The industry has been under stress for several years due to lukewarm performance which is commonly attributed to the rise and rise of large cap technology stocks and passive investing. However, investors at the Top1000funds.com Fiduciary Investors Symposium concluded that the root cause of that stress might be more complicated.

“The trouble that active managers have faced – I’m not sure passive is to blame,” said Trevor Graham, head of equities and deputy chief investment officer at TIFF, which offers outsourced CIO services to endowment and not-for-profit clients.

Active managers tend to be underweight the Magnificent 7, which was hurting their performance, in part because they feel the need to justify their fees by finding lesser-known companies of good value, Graham said.

“There’s a little bit of a behavioural bias here – I think there’s a reluctance on the part of a lot of active managers to walk into a meeting with a client say, ‘my biggest overweight is Apple’.”

But the number of eyeballs on these companies also means there is not much room for alpha.

“Anything in the Mag 7, it doesn’t matter what stock it is, there’s probably a hundred sell side analysts following that stock. There’s probably another several hundred buy side analysts looking at it too,” he said.

“I think a lot of them [active managers] rightly say, what’s the chance I’m going to have a divergent view here that’s right, and it’s going to lead to excess return?”

As an asset owner, Graham said TIFF does not have a view about whether the Magnificent 7 will continue to dominate market performance, and it tries to not become excessively overweight or underweight. It requests individual security level positions from managers and keeps the seven stocks within a tight range of the benchmark.

“[We’d rather] take the tracking error in other places where I think the odds of success are more in our favour,” he said.

The Magnificent 7 stocks have recovered after a tough first quarter in 2025 but are still underperforming the S&P 500, and Graham said the majority of its active manager roster are ahead of their benchmarks in the year so far.

“I really think for active to do better, one of the things that that needs to happen – and it’s a simple idea – is just that these roughly seven stocks don’t continue to outperform.”

Traders vs owners

But Aziz Hamzaogullari, founder and chief investment officer of growth equity strategy at Loomis Sayles, has a different view about the way active managers approach the Magnificent 7.

“The issue isn’t that there are a lot of people following these names. The issue is these managers cannot make up their mind if they want to own it or not,” he said.

Looking at the companies Loomis Sayles owns out of the Magnificent 7 and their past ownership, Hamzaogullari estimated that only 0.5 to 2 per cent of active managers held onto their holdings over the past two decades.

“That means that 98 to 99 per cent of managers have been trading these names, and your return profile is very, very different if you owned it continuously… versus if you were trying to trade.

“They just trade it because of short term pressure; of this pressure of outperforming every day – which is not going to happen, and every year – which is not going to happen,” he said, adding that most pension managers would consider replacing a fund manager if they have underperformed in the three years trailing.

Another cause of the underperformance is because active managers have simply become less active. The Active Share – a measurement of differences between a portfolio’s holdings and those of its benchmark – has been declining every decade in the past 50 years, Hamzaogullari said.

“In large cap space, if you look at the best of the best managers, historically in the last 20 years, their information ratio is around 0.3 per cent.

“So just basic math tells you, the lower your Active Share for the same amount of information ratio, you’re going to get less returns.”

Unlike TIFF, Makena Capital – which is also an OCIO provider – has been underweight the Magnificent 7 as a collective in the past five years. But its managing director and head of public equity Anne Marie Fleurbaaij emphasised the seven stocks are not a “monolith”, and that the fund is overweight in some of the names.

When selecting active managers, the fund is looking for five things: clear process, fundamental research, long-term investment horizon, concentration and balance, and shareholder engagement.

“There’s… 160 or so names beat the S&P 500 over the last five years to [this] Monday and 90 stocks beat the Mag 7,” she said.

“If you look at year to date, it’s 350 or so names that have beat the Mag 7 and 250 names – so more than half – that has beat the S&P 500.

“This tells me that there are opportunities and you don’t have to just buy the Mag 7 to beat the market.”

Leading institutional investors said the industry could benefit from having a franker conversation about sustainable investments, both in terms of what climate goals are achievable on the path to net zero and what is behind the pushback on ESG funds.

The comments, made during the Top1000funds.com Fiduciary Investors Symposium at Harvard University, came as only 15 out of the 194 countries pledged to the Paris agreement submitted their latest plans for slashing greenhouse gas emissions within the deadline. The proposal, known as nationally determined contributions (NDCs), are renewed every five years.

“We’re big supporters of the Paris Agreement, but if you look at a lot of the work that came out immediately following that, they all called for massive, precipitous, immediate declines in fossil fuel use and emissions,” said Michael Cappucci, managing director, compliance and sustainable investing at Harvard endowment.

“Think on the order of what we experienced in 2020 during COVID. But every single year from now until 2050 those were never realistic assumptions.

“I think we would all be better served having a more realistic conversation around what a pathway to net zero might look like.”

This is not to suggest that everyone stops trying to decarbonise, but Cappucci said it is only one part of the bigger change investors can propel. Harvard endowment has committed to a net zero portfolio goal by 2050 and no longer holds positions in publicly traded fossil fuel companies.

It is using the framework developed by Breakthrough Energy – Bill Gates’ clean-tech investment firm – to find opportunities in new climate solutions around the five pillars of manufacturing, electricity, agriculture, transportation and building.

“As investors, all we can really do to impact change is invest,” Cappucci said.

“The impact we have, is the positive things we invest in, hopefully for the future to promote growth and including in decarbonisation.”

Generation Investment Management co-founder and partner Colin le Duc said another issue that warrants some candid discussions is the performance of ESG funds.

“A lot of people have tried to think about this pushback on sustainable investing, or the green retreat, or the green hushing – whatever you want to call it – as being a political thing. I actually personally think it’s because a lot of sustainable funds haven’t performed,” he said.

In it for the long haul

In public markets, the Nasdaq Clean Edge Green Energy index has “wildly” underperformed global stocks, especially since Russia’s invasion of Ukraine which saw the “fossil fuel complex come back into fashion”. While in private markets, there are promising green technology companies like Northvolt which end up failing spectacularly despite backing from corporates and sophisticated institutional investors, le Duc said.

“It’s really important to recognise that this energy transition, land transition space is just like any other investing – it’s hard, and one needs to be specialist to really execute properly and seize the opportunities in this space with a lot of volatility.

“Our best vintages in Generation’s performance history have always been when the tourists have gone home and people who leant into climate or sustainability have suddenly got distracted by something else and gone away.

“[And the entrepreneurs will ask] are you a private equity firm that I really trust to stick with me if the going gets tough on sustainability for a period of time, or not?”

For most asset owners, sustainable investing, like everything else they do, is about anticipating the long-term trend. For the Netherlands’ PGGM, this means the fund is not only investing in new technologies but also improving the sustainability of older assets.

“If you look at the current energy consumption for the next few decades, the demand for energy is going to outpace whatever we are able to build in terms of sustainable energy,” explained chief fiduciary manager Arjen Pasma.

“What can we do to make what we are doing right now more energy efficient?”

For example, PGGM has been purchasing older office buildings and improving their energy efficiency, so that they can satisfy European regulations standards and remain eligible as rentals after 2027.

The fund also holds windmills in the North Sea which are made of steel produced using fossil fuels – that manufacturing aspect could also be improved, Pasma said.

All these investments are in the core part of what the fund calls a core satellite sustainable investing approach. The core part, which accounts for about 95 per cent of the assets and is where the pensions are paid out, has a 3D investing framework emphasising risk, return and sustainability.

“In that part of the portfolio, we’re not looking for sustainability just for the sake of sustainability. We look for great investment opportunities,” he said.

But in the satellite parts, the fund conducts impact investments around three themes: energy transition, healthcare (the main industry for its fund members), and food transition.

While return still matters, this part of the portfolio is about maximising impacts, Pasma said. For example, PGGM usually has a minimum ticket size of €100 million for any investment but it is making an exception when investing in healthcare. It is primarily a venture capital investor in that sector and is trying to address the “lack of functioning capital market union” for innovative companies looking for funding in Europe.

PGGM also has a broader exclusion list, but Pasma said the goal is not to “exclude companies and then claim that the resulting portfolio is more sustainable”. It doesn’t invest in certain countries or companies because its plan participants do not want it to.

“We did calculate the numbers over the last 13 years, and the net [performance] result [after adding exclusions] is plus three basis points.

“So our data shows there is no indication that we actually made a lot of money out of those [exclusions] as of yet. On the flip side, there’s also no indication that we lost any performance.”

The healthcare sector emerges as an attractive destination for asset owner capital as new technologies reshape established and startup companies and regulatory headwinds abate, according to a panel of investors.

“[Healthcare] is very ripe for investing and has been for a long time,” Paul McCracken, managing director of growth equities at the $470 billion Canada Pension Plan Investment Board (CPPIB), told the Top1000Funds.com Fiduciary Investors Symposium at Harvard University.

“It’s huge, it’s growing fast, it has historically, both in public and private equity, been a category where specialists have reaped excess returns. In this environment, where change is accelerating, that view holds as much as ever.”

CPPIB has some venture capital exposure for “earlier stage, moonshot-type investments”, but it typically takes a more diversified exposure, with its overall program covering everything from bets on small, unproven companies to classic growth equity.

“I think for a lot of generalist investors it’s a very tricky area,” McCracken said. “The number of things you have to keep track of, the number of risks in terms of projecting outcomes, is getting harder. And it seems like a great period to continue to allocate to healthcare, and it’s a great place to deploy capital for a large asset allocator.”

Bolstering that view is the fact that healthcare is finally going to start integrating with technology in a more holistic way, following years of predictions that have – until now – not come to pass, according to Philip Broenniman, managing partner and portfolio manager at Varana Capital.

“We’re really at a nexus where there’s artificial intelligence, but also robotics; two years from now there’s going to be opportunities we never imagined. There will be things I can imagine,” Broenniman said.

“AI helping reduce the need for phase one studies by creating new combinations, new therapies and… being able to test automatically, electronically, being able to test therapies and then maybe accelerate the approval process. I don’t know that robotics, at least in the near term, will be used for something like general surgery, but for micro activities within and without the operating room? Absolutely. We are really going to see a mashup of healthcare and technology now.”

Healthcare typically lags behind tech by a decade due to the fact that it’s a highly regulated business, while technology companies can go directly to consumers without the need for lengthy trials. The industry is now at an “inflection point”, according to Daniel Matviyenko, managing director and portfolio manager for healthcare strategies at Jennison Associates, but it’s “going to take a little bit more time”.

“On opportunities, we love to be contrarian,” Matviyenko said.

“There was some commentary earlier about budgets being cut, but we’re very excited about the life science tool space… thematically we think that sector is going to do very well going forward, because you had multiple years of underperformance. A lot of those headwinds, we think will abate. The NIH funding won’t get cut 40 per cent and China, once we’re done with this nonsense trade war, will come back. And lastly, we think pharma and biotech are returning to spend.”

But investors should perhaps temper their enthusiasm for the next shiny thing. Some of the biggest value creation has come from established companies with established therapies.

“Leading into the pandemic, there was a lot of enthusiasm about AI and cell therapy and gene therapy, mRNA,” McCracken said.

“And I think we’ve seen sort of moving through various stages of the trough of disillusionment, you know, in each of these categories. Where has the most value being created? It’s been in obesity, and two publicly traded companies. It’s kind of like the Nvidia moment for healthcare.”

“This information was in plain view, and very astute public markets investors took very large positions where they saw real indications from human clinical trials. These are the things that are going to move the needle on big cardiovascular outcomes. So it’s a good object lesson for me anyway, that we ought not to be looking through one lens to see where the value creation is going to be.”