New institutional investor economy favours job hunters

Tue Jul 3, 2012

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It seems activity in the institutional investor sector has picked up again with a number of high profile moves in recent weeks and months

By Susan Barreto

When the music stops, who wins this game of musical chairs? There are after all many variables – market volatility, pension holidays, rising unemployment, and a general gloom due to the ongoing financial crisis. It seems it’s a perfect time to find a new job for many CIOs at endowments and pension funds.

Most head hunters reported a lull in searches and hirings at the beginning of the financial crisis, but now it seems activity in the institutional investor sector has picked up again with a number of high profile moves in recent weeks and months.

Stanley Mavromates joined Mercer Investments as chief investment officer for the Americas in late June (see page 5) after 12 years at the $50 billion Massachusetts Pension Reserves Investment Management Board, where he was chief investment officer. His departure follows that of Michael Travaglini, who joined Chicago-based Grosvenor Capital Management in 2010.

Cornell University’s $5.3 billion endowment is now overseen by AJ Edwards (see page 6), who was recently appointed as chief investment officer after serving as interim CIO since last May. The search for a new CIO began in 2010, when James Walsh left to form a new hedge fund – Cayuga Partners.

Srinvas Pulavarti, who joined Spider Management Company in 2005, is understood to be stepping down as chief investment officer. During his tenure, the endowment at the University of Richmond that is overseen by Spider Management Company has grown from $1.2 billion to $1.9 billion.

So are these CIOs not being paid enough, are they at an impasse with their investment committees or is this just more fallout from 2008? Each case of course is unique, but in uncertain times there seems to be just as much panic over career risk as there is over market risk.

In the public pension fund community there is greater interest in finding a job in the private sector. Some of this may be due to the unsustainable deficits most of these funds have racked up over the last 10 years or so. For instance, in Chicago alone it was recently calculated that every man, woman and child would need to come up with $15,000 to shore up local government pension plans.

No one wants to be at the helm of a sinking ship. And that may be why pension fund execs are less likely to move on to another neighbouring pension fund programme. That’s perhaps why Mavromates decided to move on to a lucrative business of managing money within a consulting firm. Massachusetts PRIM reported one year gains of only 0.19% through 30 April. For the year to date, the fund was up 7.13%. Both figures are gross of fees.

Also, Matthew Strube, former director of the Teachers Retirement System of Texas, moved on to the private sector within a portfolio research role at Mesirow Advanced Strategies. Texas Teachers has recently been implementing unique investment strategies including a strategic partnership with Bridgewater. Performance has remained strong overall at the pension fund, but expectations for long term returns (particularly in absolute return strategies) have been lowered.

The availability of private sector jobs doesn’t seem to be drying up, although funds of funds and consultants are expected to have tough times too as fee pressures mount with their institutional clients – many of whom are public pensions.

The game of musical chairs in the world of endowments continues, it seems. Investment staff changes at Yeshiva University, Cornell University and University of Richmond point to broader movements within the US endowment community. Investment returns among the nation’s largest endowments continue to be in the double digit range in some instances, all while the interest in growing hedge fund allocations seems to be waning (see page 16).

So what does this mean if you have institutional hedge fund expertise? You may just want to dust off your resume and be open to new opportunities.

ISSN: 2151-1845 / CDC10004H

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