By Niki Natarajan
While Troy was being destroyed in its last battle against the
Greeks, Virgil’s Aeneas left the city and led a
quest to find a new home. On this journey Aeneas had to descend
into Hades, the underworld, paying the ferryman Charon to cross
the river Styx in search of the Elysian Fields; the final
resting places of the souls of the heroic and the virtuous.
It was a treacherous hero’s journey –
much like one that all involved in the world of hedge fund
investing, not just funds of funds, are currently undertaking.
Pension funds have almost always paid a ferryman to help them
cross the river of asset classes to get them from one world of
investing to another.
And until recently, to get to hedge funds investors have had
to pay the ferryman –funds of funds – as well
as sedating Cerberus, the three-headed hound that guards the
gates of the pension fund world.
In the last few years, however, only a few investors have
been able to get beyond the performance purgatory of the
three-year investment timeframe to find their Elysian returns,
with or without hedge funds.
To begin with, like Google, many of the multi-faceted
consultants have gone from being the gateway to the gatekeeper
of the pension fund world and as such entering the asset
management arena, seemingly condemning funds of funds
– like the dead souls that could not pay Charon
– to wander the shores aimlessly looking for
investors. But are they really?
On the road to the Elysian Fields some funds of funds like
Grosvenor Capital Management have taken on pension fund talent
such as Michael Travaglini from Massachusetts Pension Reserves
Investment Management Board and are said to be offering their
expertise in the form of advisory/quasi consulting
Like Aeneas, other even braver funds of funds are facing
Cerberus. Instead of sedating him, these managers are dancing
with the devil and are in talks with the consultants to
collaborate so that their clients get the best manager
selection expertise possible.
Proving that befriending the pension funds’
gatekeeper is likely to gain an audience is the Merchant Navy
Officers’ Pension Fund. By counter-intuitively
hiring consultant Towers Watson as the outsourced chief
investment officer, for all assets including hedge funds, this
investment pioneer has actually seen better performance that
The world at large is at war: at war with the economy; the
climate; the environment; so is continuing to fight to hold
onto what some believe to be an out-dated model the right thing
to do? Is the so-called Trojan horse actually the modern day
This controversial topic will be the subject of a session
entitled Consultants: Trojan Horse or Modern Day Saviour? at
the two-day InvestHedge Forum in October – and likely
to be one of the most highly attended sessions as more and more
frustrated funds of funds rightly or wrongly look to find ways
to work with or collaborate with both the investors and their
But it is not only the funds of funds that are teaming up
with the consultants. Other independent advisors such as
Sovereign Investment Research in Australia have realised that
scale and access are the name of the new game. Key team members
including Ray King, Scott McNally and Sarah Azzi are set to
join Mercer Investments as members of their alternative
research boutique. And as a sign of solidarity, it seems that
most of Sovereign’s clients will transfer over
But in a twist that will see Mercer’s
investment manager head rear higher than that of advisor or
consultant, Stanley Mavromates, chief investment officer of the
$50 billion Mass PRIM Board
is joining Mercer Investments as CIO for the Americas.
It would seem that the "if you can’t beat them,
you join them" attitude will see asset management and advisory
converge from both sides at least in the interim – at
least as long as performance and fees remain elusive.
Yet despite all of this, pension funds looking for
performance will still need to have their own golden bough to
gain access to the Elysian Fields, namely the confidence and
ability to ask more and better questions to their advisors in
whatever form they eventually become. Something that
Nick Greenwood of Royal County of Berkshire Pension Fund has
started to do.
As Andrew Waring of the Merchant Navy Officers’
Pension Fund has discovered, once one knows what one is looking
for in terms of investment values and beliefs finding the right
partner is all the more simple.