For outsourced-CIO firm Partners Capital, the past year has been one of shakeups.
The firm’s chief executive officer, Arjun Raghavan, stepped into his role in July 2020. Partners Capital also made two new hires — its head of ESG and impact investing and a new managing director. Most recently, Colin Pan stepped down as the firm’s chief investment officer in late February.
Amid these changes — and the coronavirus pandemic — Partners Capital posted its “best-ever” year of performance, according to Raghavan, who spoke with Institutional Investor via Zoom on Monday.
“Colin is a talented investor, and we’re sorry to lose him,” Raghavan said of Pan’s resignation. Pan will remain at the firm for the next six months before striking out on his own to start an investment firm, as Institutional Investor previously reported.
[II Deep Dive: Partners Capital CIO Colin Pan Steps Down]
However, Raghavan said the firm has a deep bench of talent, and he believes that it will be able to “absorb” Pan’s departure.
“Philosophically I have a view that if we do have a great investment firm where we’re going to be training people and helping them succeed,” they may move on and “set up their own entrepreneurial ventures,” Raghavan said.
Last year, the $38 billion OCIO firm rebalanced its portfolio five times during March and April.
It worked: the firm had its “best-ever” year, he said. The portfolio outperformed its benchmark by 450 basis points net of fees at the highest fee level, a spokesperson confirmed Tuesday.
“In 2021, our main objective is to not give it all back,” Raghavan said. “We want to make sure we sustain performance from a longer-term perspective.” One thing the firm is concerned about moving forward, according to Raghavan, is inflation.
Partners Capital is also picky when it comes to choosing strategies to generate alpha, Raghavan said. On the public investing side, the firm is focused on specialist managers in healthcare, technology, and country-specific investments.
“The old model of alpha strategies, which is to pick a bunch of good managers, put money in their funds, and hope it works — we think that is dead,” Raghavan said. “You pay full fees on the funds, you put them together, and they end up underperforming a passive benchmark.”
On the private investment side, Raghavan said that in addition to engaging with private equity managers, the firm is looking at what he calls “alternative alternatives.” These include asset classes like litigation finance and drug trial investing, he said.
“These are asset classes that are new and nascent and emerging so that the flood of capital hasn’t come in and arbitraged it away,” Raghavan said.