ENDOWMENTS, FOUNDATIONS, PENSION FUNDS
Anything new under the sun? - Charles Skorina & Company“There’s only one way to describe most investors: trend followers.” —Howard Marks We recently sent out an email query asking asset managers and chief investment officers, “anything new under the sun,” and received some serious replies. One thoughtful, highly respected, mega-fund chief investment officer wrote: “There are quite a few interesting trends: AI, energy transition, innovations in healthcare are a few positive ones. Commercial RE, small cap, China and Emerging Markets are a few negative ones. “The slow pace of private capital coming back to investors is another important trend that everyone is contemplating. Everyone is hoping that lower interest rates will restart more M&A and IPO activity. “However, personally I think the bigger trend is how investors are thinking about asset allocation. I remember the strong emphasis across the industry on diversification. If you could find uncorrelated return streams, the trend was to add them almost blindly. Diversification and low vol was the main point. “Today (and for some time), diversification has not been your friend. The future is moving to disruption, and you need companies and funds that have size, data, the ability to invest in AI, and cheap financing. “Disruption is so large in the U.S. that we may not need geographic diversification like we used to.” Another CIO replied: “I find the dominance of U.S. public equities, and a teeny-weeny handful of them at that, to be quite troubling. “One of our IC members is pushing us to divest of non-U.S. equities and it’s difficult to find any recent data to argue against that, yet the idea of having 40% of our endowment in a stock portfolio that’s really just five giant tech stocks is scary to me. “We’ve reduced our hedge fund exposure, our real asset portfolio was always pretty small, and those big...
