Over the past two years, I have been working on a research project examining the challenges and constraints of managing assets internally at public pension funds and sovereign wealth funds. As part of this work, my colleague Gordon Clark and I have been to visit 20 institutional investors with in-house operations on five continents for the purpose of conducting in-depth case studies. Why put ourselves through all of this crazy travel? Fantastic question. I have no idea. No, actually it’s because we feel we must first understand the idiosyncrasies and local institutions that underpin each fund before we can make any credible assessments of how the funds are doing in terms of execution. And so that means actually going to the funds and spending time in their offices.
Anyway, after all the field work we have finally written up a practical paper that shares some of our relevant findings. (Note: We also recently wrote an academic paper geared towards an academic audience on the same topic, but that paper is quite theoretical and, well, dense... you’ve been warned.) As for this recent paper, we hope you find it quite user-friendly and easy to read. It’s entitled “Principles and Policies for In-House Asset Management”, and here’s a blurb:
“Spurred on by the recent financial crises, a growing number of institutional investors are working to bypass traditional financial intermediaries, agents and centers through the development of in-house teams of investment professionals. As such, the institutional investment community, which is often characterized by broadly diversified and outsourced organizations, is becoming much more involved in the day-to-day asset management of their portfolios. Research shows that this new path offers a variety of important benefits, including higher net-of-fee returns. And yet, there remain significant pitfalls as well. In this paper, we outline the challenges facing would-be ‘in-sourcers’ and offer a series of principles and policies for effective in-house asset management. Drawing on 20 case studies, we conclude that successful in-house asset management is a function of the people, processes, systems and overall resources at the disposal of management.”
Again, download the paper here. We’d of course be very grateful for any feedback or critiques that you’d be willing to share. You can email them to me here or feel free to comment below. Thanks in advance!
