TEXPERS Hosts Educational Webinar

Pension Industry Thought Leaders Discuss Outsourced CIO Relationships During Online Moderated Event

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TEXPERS Staff Report

What are the general duties of pension plan consultants and outsourced chief investment officers? TEXPERS gathered industry thought leaders for an educational webinar to give the trustees and administrators of TEXPERS' Member Systems advice on what pension plans should do to take stock of their funds' advisory relationships.

During the webinar, held Sept. 15, a moderator used a question-and-answer format allowing the panelists to identify some of the differences between non-discretionary and discretionary advisory models.

Click here to view a recording of the webinar. Those wanting to watch the video will be required to register for access.

During the session, the panel:

• Outlined some decision point considerations for plan trustees.
• Illustrated some of the more nuanced differences between the services.
• Revealed what the economic and market upheaval brought by the novel coronavirus pandemic has taught.
• Took audience questions relating to advisory relationships and the markets in general.

Mark Weir, from Maples Group, moderated the webinar. The expert panelists were Jim Link, from PFM; Chris McGoldrick, from PNC; and Robert Longfield, from CBIZ.

Future Webinars

TEXPERS is hosting educational webinars to help in the professional development of its Member Systems' trustees and administrators. Additional webinars are being planned.

The next webinar, Direct Lending – The Benefits of Scale and Differentiated Sourcing, will be held at 10 a.m. CDT on Wednesday, Sept. 23, 2020.

Synopsis: Since the Global Financial Crisis, investors globally continue in their search for yield, shifting capital from public to private markets, with private debt emerging as an attractive asset class for institutional investors seeking an illiquidity yield premium.

With the private debt market currently estimated to be ~$850 billion and likely to grow, in this webinar, Michael Patterson, Governing Partner and Portfolio Manager of Direct Lending Strategies at HPS Partners, will share insights on how best to extract attractive risk-adjusted returns through differentiated sourcing capabilities.

Topics will include:

• Non-sponsor lending: not just sourcing, it’s about execution.
• Utilizing scale as a competitive advantage.
• Opportunities to find excess returns persist at the larger end of the lending market.

Click here to register.

For an up to date listing of webinars, click here to visit TEXPERS Online Education link on the association’s website.

Earn Continuing Education Credits

New and Continuing pension system trustees and administrators who attended live webinars can earn one credit hour to satisfy state-mandated Continuing Education. To earn the credit, attendees are required to sit through the entire presentation, participate in polling questions during the session, and answer a survey emailed to attendees after the webinar. Those who do not sit through the webinar are unable to earn credit.

For additional information, email texpers@texpers.org or visit our website. Also, be sure to follow TEXPERS on Facebook and Twitter.

BY JAMES PERRY & MARK WEIR, Maples Group

A challenging investment environment over the last two decades has forced institutional investors to embrace a wide range of alternative investment strategies to achieve their performance objectives. At the same time, this has also dramatically increased the complexity of managing an institutional investor’s portfolio. These dynamics have led a growing number of institutions to consider outsourced chief investment officer, or OCIO, platforms as an alternative to establishing and maintaining the in-house investment expertise and operational infrastructure necessary to run a successful investment program in today’s market environment.

While the OCIO market has rapidly expanded in recent years, demands from these larger investment programs regarding transparency, a growing client base and increasing competition from new entrants has pushed leading OCIOs to find innovative ways to better serve their clients, differentiate themselves from competitors, and effectively scale their businesses. Solutions in the key areas of structuring, operations and technology that enable OCIOs to monitor, allocate and report on a broad range of asset classes, strategies and structures have arguably become the cornerstones of their success.

Pillar 1: Structuring

OCIOs are increasingly seeking optimal investment structures to facilitate portfolio rebalancing, maximise alignment of interest with underlying investment managers, and improve transparency, liquidity and control. Bespoke solutions such as fund of ones or managed accounts can assist OCIOs in differentiating themselves from their peers who may only invest through commingled funds. OCIOs are also recognising the benefits of managed custody accounts which introduce an innovative way of redefining the traditional relationship between asset allocators and managers and can play a significant role in enabling outperformance.

As OCIOs direct more of their alternative investments into customised vehicles and realise the benefits of structures such as MCAs, they must ensure that they have the robust technological infrastructure and expert support needed to maximise "structural alpha."

Pillar 2: Operations

Similar to optimising investment structures, establishing effective operations has become more and more difficult for OCIOs. With investment programs, client requirements and reporting needs becoming ever more demanding, OCIOs must ensure they have the resources, expertise and infrastructure necessary to deliver. Key areas of focus include data management, portfolio accounting and portfolio reporting and analytics.

Outsourcing these functions can improve operational efficiency and allows OCIOs to focus on engaging with their underlying clients and asset managers to drive performance and build better portfolios. In addition, this serves as a valuable way of introducing an added layer of independence that can supplement governance practices and enhance stakeholder reporting.

Pillar 3: Technology

Superior information delivery systems and the ability to make data useful is a necessity in today’s environment. For OCIOs in particular, the reporting and level of oversight that underlying clients demand is typically quite complex and fulfilling operational requirements demands the optimisation of existing processes through a single robust yet scalable technology platform. Conversely, sub-optimal technology solutions create myriad challenges for OCIOs.

Given increased complexity and competition across the industry, OCIOs are unquestionably under more pressure than ever before. The capabilities of an OCIO are determined by their ability to provide services tailored to the individual needs of a wide range of clients. This is something that can only be accomplished by a significant investment in resources and systems. With this in mind, many OCIOs find it useful to outsource specific processes and engage third party experts who provide proven operational and technological solutions.

Note: Visit the Maples Group’s website for more information on the pillars of success for OCIOs and the resources and support available to this rapidly expanding market.

The views expressed herein do not constitute research, investment advice or trade recommendations, do not necessarily represent the views of Maples Group nor TEXPERS, and are subject to revision over time.

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