1 / 15

Expanding Investment Opportunities Through Diversity

Expanding Investment Opportunities Through Diversity. Tessa Hebb, Senior Research Associate thebb@attglobal.net Pension Funds and Urban Revitalization Project, Labor and Worklife Program, Harvard Law School Sponsored by the Ford and Rockefeller Foundations. Presentation Overview.

sammy
Download Presentation

Expanding Investment Opportunities Through Diversity

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Expanding Investment Opportunities Through Diversity Tessa Hebb, Senior Research Associate thebb@attglobal.net Pension Funds and Urban Revitalization Project, Labor and Worklife Program, Harvard Law School Sponsored by the Ford and Rockefeller Foundations

  2. Presentation Overview • Pension fund investment opportunities through diversity • Emerging managers programs • Emerging domestic market investments

  3. Pension Fund Emerging Manager Programs • Investment firms with less than $2 billion under management. • Often these firms have short track records. • We find many women and minority-owned investment firms in this category.

  4. Current Research Findings • Attitudes to Diversity in the Fund Management Industry, (2005) CalSTRS and Leading Edge Investment Advisors • Key Findings: Biases against women and minorities still exist. • A Review of Developing Managers and Developing Manager Programs, (2003) PCA • Key Findings: Consolidation in the industry over time. Some significant risk-adjusted benefits associated with specific developing managers in specific time periods.

  5. Research Findings Cont. • Performance Characteristics of Emerging Firms (2005) Leading Edge Investment Advisors. • Key findings: advantage of small firms: greater performance without necessarily assuming higher risk. • Potential Benefits of Investing with Emerging Managers (2006) Northern Trust Co. • Key findings:287 firms with emerging managers 33% of sample found emerging managers comprised 39% of top quartile performers in the sample. Significant out performance in down-markets was found.

  6. Current Emerging Managers Programs • $3 b. committed to CalPERS’ Manager Development Program I. • 14 firms and 2 strategic partners • Manager Development Program II announced in 2004 (includes hedge funds) • $1 b. committed to CalSTRS’ Emerging Manager Program (2005 figures) • 19 minority firms and 3 strategic partners

  7. Domestic Emerging Market Investments • Types of targeted investment • Private equity • Real estate • Fixed income • Credit enhancement • Success if measured in risk adjusted rates of return • Pension funds are not market makers

  8. CalPERS’ and CalSTRS’ Targeted Investments • Geographic targeting: underserved capital markets • CalPERS’ Real Estate – CURE Program ($3.4 b. committed – 2005) • CalPERS’ Private equity – California Initiative ($475m. committed) • CalSTRS’ California urban and rural investments ($2.08 b. committed, credit enhancement, real estate, stocks, mortgage-backed securities, home loans)

  9. CalPERS’ California Urban Real Estate (CURE) • Thirteen vehicles in targeted real estate • Emerging managers key in this program • Broad geographic focus • ‘Location, location, location’ • CURE program initiated in 1997 • IRR 22.2% since inception

  10. Targeted Investment in Urban Revitalization – Hollywood CA Woolworth Building: Hollywood CA CIM Group

  11. CalPERS’ Private Equity • California Initiative started in 2000 • Ten vehicles of varying types across all stages • Large and small investments - $200 m. to $10 m.

  12. CalPERS’: California InitiativePacific Community Ventures: Planet Organics – San Francisco

  13. Steps in Targeting Investment • Board level champion • Board direction “let’s look at..” • Staff get outside expert study • Boards set broad targets • Select appropriate asset class and amount • Issue RFP • Hire top-quartile manager

  14. Best Practice in Pension Fund Domestic Emerging Market Investment • Success is measured first in risk-adjusted rates of return • Geographic rather than social targeting • Set broad targets • Allow top-quartile vehicles to do their job

  15. Conclusion • There remains bias in the market both for emerging managers and emerging domestic markets – both have implications for diversity. • Research shows emerging manager programs have potential to outperform without adding excessive risk. • Targeted investment can generate risk-adjusted rates of return and healthy, vibrant, diverse communities. For more information visit: http://urban.ouce.ox.ac.uk

More Related