Services Tags: Investment Consulting

Are You Ready for Some Fixed Income?

As the leaves change to autumn and the authors cheer on their Fighting Leathernecks, fall is the perfect time for investors to reassess their fixed income portfolios. Fixed income is a hybrid security that offers both offensive and defensive properties. Much like a good football team, a fixed income portfolio needs to combine a strong offense with a solid defense.

Some strategies provide more offensive characteristics while others are more defensive. Portfolios with too much offense act like the Greatest Show on Turf. They do well when the economy is strong, but falter in down markets. Conversely, a fixed income portfolio that is overly reliant on defensive strategies will do well in a risk-off environment but will struggle in a strong economy like the Super Bowl Shufflin’ ’85 Bears.

While those were great teams, they were not a dynasty that stood up to the test of time. To build an all-weather fixed income portfolio that will perform in multiple market environments, an investor needs to balance offense and defense.
Fixed income has three primary objectives: income, diversification, and liquidity. Income, or yield, is what an investor is paid for loaning money to another entity. Fixed income helps to diversify portfolios primarily through duration. When risk assets are selling off, interest rates are generally falling. Duration is what drives fixed income prices higher in such scenarios. Finally, fixed income assets can be a source of liquidity. The weight of these qualities is dependent on if the strategy is more offensive- or defensive-minded.

This white paper outlines offensive and defensive fixed income characteristics and strategies and considerations for investors when building a “gameplan” for their fixed income allocation.

Evan Frazier Speaking at Institutional Investor Central Sub-Advisory Roundtable 11/19

On Tuesday, November 19, Evan Frazier, CFA, CAIA will be speaking at the 3rd Annual Central Sub-Advisory Roundtable hosted by Institutional Investor in Chicago.

Evan will be leading a think tank discussion entitled, “A Peek at Future Interest Rate Environments” with several investment professionals.

Through expert-led panel discussions, presentations, guest speakers, and live market research, the roundtable will bring together leading participants in the sub-advisory landscape to assess how the investment objectives of institutions are changing and how firms that offer sub-advised strategies can respond to these needs. For more information, please visit the event website.

Luis Sierra Speaking at New America Alliance Chicago Allocators Connection Summit 10/29

On Tuesday, October 29, Luis Sierra, CFA will be speaking at New America Alliance’s Chicago Roadshow, Allocators Connection Summit.

Luis will be judging a session entitled, “The Elevator Pitch,” described as follows: Six managers representing various strategies deliver a 5-minute elevator pitch to a panel of allocators, who then provide feedback on both the pitch and pre-submitted marketing materials. He will also be joining a panel entitled, “Navigating Key Metrics and Macroeconomic Headwinds: A Consultant and Family Office Guide for Emerging Private Equity and Venture Managers,” described as follows: In an era marked by economic uncertainty and evolving market dynamics, this session brings together leading consultants and fund of funds managers to address the pressing challenges faced by emerging private equity and venture capital managers. Our expert panelists will provide actionable strategies for navigating fundraising hurdles, optimizing portfolio performance, and meeting the expectations of limited partners (LPs) in today’s competitive landscape.

Founded in 1999, the New America Alliance is comprised of a 501(c)6 and a 501(c)3 national organization committed to building on American Latino success to forge a stronger America. NAA leadership and members leverage their influence to increase capital access for women and minority-owned firms, and to accelerate diverse leadership in entrepreneurship, corporate America, and public service. For more information, please visit their website.

Keep Your Eye on the Ball

When it comes to baseball, successful hitters have little trouble hitting the ball when they know what pitch is coming. But when pitchers can vary the speed as well as the spin and curve of the ball, hitting becomes exponentially more difficult. An effective curveball can make even the most accomplished hitter look feeble.

As we look at the second half of 2024, we are reminding our clients to “keep their eye on the ball.” Indeed, the first half of the year has been pretty “hittable” as far as returns are concerned, with the majority of asset classes positive through June 30. However, curveballs such as Fed policy, equity index concentration, exchange rates, and a capricious election could quickly flip the script and send investors back to the dugout shaking their heads.

With that said, here is our scouting report for the second half of the year, organized by asset class. We share not only “down the middle” themes but also the curveballs that could flummox performance. A well-prepared investor is no different than a well-prepared baseball player: Insight and realistic expectations provide the foundation for a successful season!

2024 Halftime Market Insights

This video is a recording of a live webinar held July 23 by Marquette’s research team analyzing the first half of 2024 across the economy and various asset classes and themes we’ll be monitoring over the remainder of the year.

Our quarterly Market Insights series examines the primary asset classes we cover for clients including the U.S. economy, fixed income, U.S. and non-U.S. equities, hedge funds, real assets, and private markets, with commentary by our research analysts and directors.

Featuring:
Greg Leonberger, FSA, EA, MAAA, FCA, Director of Research, Managing Partner
Frank Valle, CFA, CAIA, Associate Director of Fixed Income
David Hernandez, CFA, Director of Traditional Manager Search
Evan Frazier, CFA, CAIA, Senior Research Analyst
Hayley McCollum, Research Analyst
Chad Sheaffer, CFA, CAIA, Senior Research Analyst

Sign up for research alerts to be invited to future webinars and notified when we publish new videos.

If you have any questions, please send our team an email.

David Hernandez Speaking at NASP Consultant and Manager Retreat 10/17

On Thursday, October 17, David Hernandez, CFA will be speaking at the sixth annual Consultant and Manager Retreat hosted by the National Association of Securities Professionals (NASP) in Dallas, Texas.

David will be joining the Consultant Outlook Discussion with fellow industry professionals. The Annual Consultant & Manager Retreat is an opportunity for institutional consultants to identify talented diverse-owned asset management firms. Concurrently, it provides an effective means for diverse-owned managers to better understand the critical role of institutional consultants and how best to engage with them. For more information, please visit the event webpage.

What Does Elevated Index Concentration Mean for Active U.S. Equity Managers?

Indexing has risen in popularity over the last decade, particularly for U.S. equity investors. The fees are lower and indexing is perceived as less risky, with investors primarily seeking beta exposure to the market. However, these indices have evolved against an ever-changing economic and financial market backdrop. As a result, several unintended structural issues have emerged, particularly related to concentration risk. Understanding this evolution and how it could alter the overall exposures within a broader portfolio is critical, as these indices are not static. Notably, the composition of some indices alongside the increase in passive capital has created headwinds for active managers and helps to explain recent performance challenges.

This newsletter examines the progression of passive management, how and why U.S. equity index concentration has increased in recent years, and the effects and risks investors need be aware of across the market capitalization spectrum.

Marquette Speaking at Institutional Investor 2024 Roundtable for Consultants & Institutional Investors 10/9

On Wednesday, October 9, Nat Kellogg, CFA, Dave Smith, CFA, Greg Leonberger, FSA, EA, MAAA, FCA, and Frank Valle, CFA, CAIA will be speaking at Institutional Investor’s 2024 Roundtable for Consultants & Institutional Investors in Chicago.

On the 9th, Nat will be joining a panel entitled, “Consultant CEO/CIO Perspective: Adapting to an Evolving Market & the Growing Scope of Asset Owner Needs,” described as follows: Following on from the consultant market overview, we now hear insights and perspectives from the heads of leading investment consultants. With over 85% of U.S. institutional investors using investment consultants (95% among public pension funds) and the top 20 consultants dominating with 85% of the market share (up from 66% just 10 years ago) according to Coalition Greenwich, advisory market dynamics continue to shift. But what does this mean for consultants and how they work with asset owners and managers?

  • How is your role as investment consultant evolving? In what ways is the scope of work with asset owners increasing and how does this vary between the different types of asset owner? To what degree – and in what ways – do you see your role as a partner to asset owners changing?
  • What are notable investment trends and challenges within the different asset owner channels? What requests are you getting from asset owner clients around geopolitics/ESG/DEI – incorporating/excluding what from portfolios?
  • How are consultant – manager dynamics evolving? Does consolidation within consultancies give greater leverage in fee negotiation with managers? To what degree is the growing manager entry into the OCIO market impacting relationships with consultants? Is the balance changing from one of collaboration to one more competitive in nature?
  • Who are the winners and losers in a consolidating market? What is the role of the smaller, specialized consultants? What is their value proposition? How to compete with the top twenty who dominate market share? Where’s the opportunity within the market evolution?
  • Peer-to-peer collaboration: what types of strategic partnership (if any) are you doing with other consultants?
  • To what degree are you expanding into the RIA channel?
  • Parting thoughts: how optimistic are you about 2025? What will be your main focus for the year? Challenges? What can the institutional investment industry expect in 2025? Where is the industry headed over the next 5 years?

Dave will be moderating a session entitled, “Debate: Active vs. Passive – Time to Reassess?” described as follows: With capital flows shifting from active to passive having made the markets less efficient, and with market observers commenting that active strategies tend to outperform in down or highly volatile markets, is it time to revisit the age-old debate of active vs. passive? Has active underperformance been unfairly overstated? What are the scenarios/environments in which each strategy outperforms? Are the lines between active and passive blurring? How to use the advantages of both in a balanced approach? In this session, we debate these questions along with the merits and disadvantages of each option. Are you ‘Team Active’ or ‘Team Passive’ or ‘Team Balanced’ and will the views put forward persuade you to reconsider? (And to what extent will this become moot with AI?)

Frank will be the session leader for “Think Tank Networking: Is Your Public Fixed Income Strategy Robust Enough? Examining the Understated & Overlooked Opportunities Within the ‘New Fixed Income Regime’” described as follows:
After being savaged by long duration bonds in 2022, are asset owners a little gun-shy today? After a great drawdown and now that rates are back up, are there enough truly diversified underlying assets in portfolios? Are portfolios underexposed in high-quality bonds? How have allocators been adapting to the “new fixed income regime”? Where is capital being deployed and what are expectations in this higher rate environment? How are approaches to traditional fixed income changing, particularly with possible rate cuts on the horizon? Are opportunities being overlooked or understated? What are the new emerging strategies and opportunities to take advantage of in public fixed income? And what should allocators be watching as we close out 2024 and head into 2025? 

Greg will be moderating a panel discussion entitled, “Being Creative with Pension Surplus in a New Environment,” described as follows: Today’s pension environment is drastically different from what it was in 2008 when pensions were last overfunded. Today’s higher inflation and interest rate environment has changed conversations about what to do with surpluses while they exist. Beyond using OCIOs and PRTs, how are plan sponsors optimizing the surplus? Using fixed income to de-risk plans? Introducing cash balance plans? Offering members healthcare benefits? In this discussion, we examine various strategic options for surpluses, their pros and cons for sponsors and members, and the implementation considerations. We also address the question of when to spend vs. maintain a surplus.

The Roundtable for Consultants & Institutional Investors will offer valuable insights and a forum for critical exchanges with peers. For more information, please visit the event webpage.

Impact of SEC Rule Changes for Money Market Funds Regulatory Update

Over the past year, the SEC has been phasing in regulatory changes for money market funds resulting from adopted amendments to Rule 2a-7. These amendments were passed on July 12, 2023, in response to the stress that money market funds faced at the start of the pandemic in March 2020 when investors rapidly pulled more than $130 billion dollars from money market funds. As a result, the Treasury and Federal Reserve had to step in to provide emergency liquidity facilities to shore up the short-term funding market. The changes primarily focus on institutional prime and tax-exempt money market funds, which have historically been more susceptible to investor runs.

This regulatory update summarizes these changes as well as which fund types are impacted.

Luis Sierra Speaking at 2024 529 Conference 9/30

On Tuesday, September 19th, Luis Sierra, CFA, will be speaking at the annual 529 Conference hosted by ISS Market Intelligence in Orlando, Florida.

Luis will be presenting a session entitled, “Structuring & Evaluating the Investment Lineup,” addressing:

  • Investment structure in philosophy and in practice
  • Defining key terms and differentiating factors
  • Investment types and management style trends
  • New asset classes, trends in selection, and review of fee types

The 529 conference brings together the entire 529 and ABLE ecosystem and includes critical conversation and debate surrounding the latest federal and state legislative developments, product enhancements, investment trends, marketing campaigns, distribution strategies, operational initiatives, consumer insights, and regulatory and compliance announcements.

For more information, please visit the 529 Conference website.