LONDON, Nov. 1, 2016 /PRNewswire/ -- Partners Capital Investment Group, the Outsourced Investment Office serving sophisticated institutions and senior investment professionals in North America, Europe and Asia, today shared a summary of its first Annual Client Meeting, which focused on the topic of "The Future of Active Investing". Among the more than 120 Partners Capital clients that participated in the forum on October 25th were Eton College, The Victoria and Albert Museum, Guy's and St. Thomas' Charitable Foundation, the National Trust, The Royal Academy Trust and INSEAD.
Stan Miranda, Chief Executive Officer of Partners Capital, launched the meeting by asserting that investment manager 'alpha', or the return on top of what an investor can receive inexpensively and passively by investing in comparable index-tracking funds, "is clearly declining, predominantly driven by macro factors and increased competition. However, we are not on our way to 100% market efficiency, as that is not possible, so alpha will remain to be harvested."
Mr. Miranda emphasized that alpha is only becoming more important in view of the decline in long-term expected market returns. Alpha is cyclical, observed Mr. Miranda, surfacing and declining in different areas at different points in time, with new alpha opportunities being created by technology. Mr. Miranda stated, however, that access to the very small minority of managers who produce alpha on a consistent basis will be more competitive than ever. True "gem" managers still exist, he stated, but the percentage of persistent outperformers is shrinking and 2016 saw a marked reduction. This trend was evident as leading institutional investors such as Yale University produced lower alpha but are still generating approximately 200-300 basis points per annum of excess returns for their endowments.
At the meeting, five of Partners Capital's leading managers presented their views of the future of alpha in their respective asset classes:
- Private Equity – Marc Wolpow, Co-Chief Executive Officer of Audax Group
- Absolute Return – Ronen Israel, a Principal at AQR Capital Management
- Activist Equities – Lars Förberg, Managing Partner and co-Founder of Cevian Capital
- Real Estate – Manish Chande, Senior Partner of Clearbell Capital LLP
- Private Credit – John Sinik, Managing Partner and Chairman of Metric Capital Partners
Ronen Israel of AQR Capital Management summarized the 'state of alpha' effectively in his remarks: "Much of what hedge funds rely on is, in fact, just market beta and certain types of alternative risk premia in markets that offer a persistent long-term excess return. It is possible to define and implement systematic strategies to harvest these alternative risk premia and therefore replicate hedge funds returns at much lower costs. The fact that we can now identify these alternative risk premia raises the bar on evaluating asset managers, as the managers must demonstrate unique sources of return over and above market beta and alternative risk premia to justify their fees."
The London meeting, held at the historic St. Pancreas Railway Station, also included a panel moderated by Partners Capital's Chairman Paul Dimitruk on the dimensions of possible alignment between managers and their investors, including fees that are proportionate with alpha, manager's commitment of a substantial portion of their net worth to their own funds, and keeping fund size proportionate to the excess returns available in the strategy.
The meeting concluded with Colin Pan, Partners Capital's Chief Investment Officer, summarizing the 'call to arms' that is currently driving the firm: "This year, we have approved 10 new liquid managers, but, more importantly, we have redeemed 17. These redemptions reflect situations where the alpha opportunity set may have moved on, where the team dynamics have changed, or where we believe a manager no longer justifies their fees. We are cognizant not to throw babies out with the bathwater, but the bar we set must be and is extremely high."
About Partners Capital
Founded in 2001, Partners Capital is a wholly independent Outsourced Investment Office (OCIO) primarily serving sophisticated institutions and senior investment professionals in Europe, North America and Asia. With offices in Boston, New York, London, Singapore and Hong Kong, the firm is one of the few truly global OCIOs, employing 120 people worldwide and covering all major asset classes. The firm oversees assets of more than $18 billion. Its institutional clients include 11 Oxford and Cambridge Colleges, Eton College, the Research Foundation for the State of New York's University System, the Royal Academy of Arts, Milton Academy and the Cancer Research Institute. Additional information on Partners Capital may be found at www.partners-cap.com.
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SOURCE Partners Capital