Cambridge Associates Manager Guide
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Transcript of Cambridge Associates Manager Guide
C|A Manager Guide
An Introduction to Working with
Cambridge Associates
Page 2
At Cambridge Associates, we value the relationship we have with our investment managers and strive to make it easier for you to do business with us. Ultimately, the better our researchers and consultants understand your firm’s investment philosophy, process, and performance, the better we can help our clients successfully build and manage their portfolios.
The C|A Manager Guide is designed to provide you with insight about how Cambridge works and how best to work with us. It provides an explanation of our manager-screening process, tips for having a successful meeting, and data-reporting expectations.
We appreciate the opportunity to work with you and thank you for your dedication to helping our mutual clients achieve their investment goals. As we continue to work together, we welcome your feedback.
Sincerely,
David ShukisManaging Director of Investment Manager Research
Welcome
Page 3
Table of ContentsAbout Cambridge Associates page 4
• Who We Are• Spectrum of Services• Our Global Network• Our Asset Allocation Philosophy • How We Are Structured
Working Together page 10• Building Successful Relationships• What C/A Looks For in a Manager
Manager Screening Process page 13• Screening Process Overview• Submitting Your Data• Requesting a Meeting• The C/A Meeting Culture• Having a Successful Meeting• Evaluating Business Risk• Assessing the Opportunity• Summary of Manager Steps
Contact Directory page 23• Contacting C/A
About Cambridge Associates
“Our research team is organized around the role assets play in a portfolio, rather than
just asset types. We think this is a better way to ensure full coverage of all opportunities.”
- David ShukisManaging Director of Investment Manager Research
Page 5
Who We AreCambridge Associates is a privately held, independent investment consulting firm. We strive to help global institutional investors and private clients meet or exceed their investment objectives by providing proactive, unbiased advice grounded in intensive and independent research.
Client Snapshot (as of 12/31/11)
Number of Clients Total Assets* ($ Billions)
Endowed Institutions 663 652Colleges & Universities** 210 302Foundations 192 189Medical 55 59Other Nonprofits† 206 102
Non-Endowed Institutions 91 2,841Corporations 51 167Public & Government Agencies 29 2,663Settlement Trusts 11 11
Families & Individuals 185 89Total 939 3,582* This represents client assets, not C|A’s assets under management.** Includes affiliated foundations of colleges and universities.† Includes performing arts, professional, religious, research, and service organizations; independent schools; museums and libraries; U.K. charities; and nonprofit retirement plans.
Page 6
Spectrum of ServicesThe Investment Manager Research group provides support across all of the types of services C|A provides to clients.
ResearchServices
ConsultingServices
Advisory and Outsourcing
Services
• Includesresearchoncapitalmarketsandallmajorassetclassesglobally,andresearchonabroadrangeoftopicalinvestmentissues
• Accesstoourproprietarymanagerdatabasesandtools
• Adefinedsetofcustomizedservicesprovidingsupportoninvestmentpolicy,assetallocation,implementation,and/orongoingmonitoringandreporting
• Comprehensiveday-to-dayoversightofportfolioinclud-ingallaspectsofinvestmentplanning,assetallocation,implementation,reporting,andongoingmonitoring
• Abilitytostructureasan“outsourcedinvestmentoffice”• Offeredonadiscretionaryoranon-discretionarybasis• Totalportfoliooralternativeassetsonly
Page 7
Our Global NetworkFounded over 35 years ago, we serve an international clientele from offices around the globe.
Total Cambridge Associates’ Employees Worldwide: 1,111 (as of 12/31/11)
Menlo Park
Dallas
Arlington
London
Singapore
Sydney
Boston
= Cambridge Associates’ offices
Beijing
North America
Consulting Team: 294Manager Research: 92
Asia-Pacific
Consulting Team: 24Manager Research: 8
Europe
Consulting Team: 41Manager Research: 11
Page 8
Our Asset Allocation PhilosophyHigh Equity AllocationThe investment objectives of most of our clients dictate that the major-ity of assets be invested in equities, which are the growth engine of a portfolio.
Hedge Against Catastrophic Risk High-quality, intermediate- and long-term bonds mitigate the risk of economic contraction, and inflation risk is hedged with investments in real estate, commodities, and inflation-linked bonds.
Diversify to Reduce Risk Volatility and other risks can be reduced by allocating growth invest-ments among a wide range of public equity investments (both long-only and long/short), as well as private investments. Portfolios also include investments specifically targeted to reduce volatility, like low-beta hedge funds and credit investments.
Page 9
How We Are StructuredC|A has more than 100 professionals dedicated to manager research. They conduct 7,500+ manager meetings and publish 100+ proprietary research reports each year. The manager research team is divided into five areas of coverage that span the globe.
Equities;Higher-BetaHedgeFunds;Distressed;HedgeFundsofFunds
Investment-GradeFixedIncome;Inflation-LinkedBonds;UnconstrainedBonds;EmergingMarketsDebt;Cash
HardAssets;Commodities;PubliclyTradedRealEstateandEnergy
PrivateEquity;VentureCapital;Distressed;Non-MarketableFundsofFunds;Secondaries
High-YieldCredit;BankDebt;GlobalTacticalAssetAllocation;ActiveCurrency;Lower-BetaHedgeFunds;GlobalMacro;TailRiskManagers
PublicGrowth
PrivateGrowth
InflationSensitive
Diversifiers
Investment-GradeBonds
Our Business Risk Management team and the Manager Information Group provide support across all coverage areas.
Working Together
“Our goal is to know managers well, so we can represent you well, and get our clients to understand you better.”
- Ashby Hatch Director of Public Growth Manager Research
Page 11
Building Successful RelationshipsC|A has a proven approach to building successful manager relationships. We look for managers who are good business partners to help our mutual clients achieve their objectives.
In our most successful manager relationships:• there is open communication• we receive a steady flow of information• manager results are consistent with the expectations they have set
Our goal is to know managers well, so we can represent you well, so our clients can understand you better. We believe that good decisions about managers can be made when clients have the right tools and informa-tion. Our clients are often involved in the manager-evaluation process, so we ask managers, when appropriate, to meet with clients.
The result of our intensive manager-selection approach is that we tend to stick with managers for the long term through various investment cycles. It’s not about chasing performance.
Page 12
What C|A Looks For in a Manager
Strategy and Process• Clarity and viability of investment
principles and strategy• Consistency of the investment process• Transparency
Organization• Commitment to product• Thoughtful management of firm assets• Alignment of firm ownership, economics,
and succession plan with clients’ interests
Personnel• Individual skills and experience• Sufficient resources (i.e., human,
technological, and financial)• Experience, talent, chemistry, and
stability of the team
Performance• Performance relative to expectations• Consistency of performance relative
to expectations• Historical return relative to risks taken
Competitive Advantages• Differentiated interpretation of
information and data• Quality of investment models,
intellectual rigor, and creative thought• Disciplined execution of investment
strategy
Risk Controls• Degree to which risks are understood,
measured, and transparent• Risk oversight• Strength of compliance culture and
procedures• Quality of operations and controls
for the strategy
Terms and Fees• Fees competitive with peer group• Reasonable investment minimums and
liquidity provisions• Availability of commingled funds
We identify managers that can demonstrate strength, stability, and a competitive advantage. Here is what we look for in a manager/firm.
Manager ScreeningProcess
“We want all of our research and consulting teams to become familiar with the managers
we see throughout the year. That is why our manager meetings are open to anyone
at C|A who is interested in attending.”
- Jody Fink Co-Director of Consulting
Page 14
Screening Process OverviewData and Materials CollectionInformation on investment managers is gathered Manager MeetingsCambridge staff meets with managers to ask questions
Business Risk ReviewA thorough operational review is conducted
Data AnalysisCambridge staff reviews data and conducts analyses EvaluationAll available information and observations are used to assess the opportunity
Ongoing MeetingsCambridge staff continues dialogue with managers
Page 15
Submitting Your DataInformation on investment managers is gathered in the following ways.
• Hedge fund and long-only managers already partici-pating in C|A’s Investment Manager Database should submit their data in the database through our website, www.cambridgeassociates.com.
• New managers can request access to the database by visiting www.cambridgeassociates.com and clicking “manager” in the upper-left corner of the homepage, then following the instructions.
• Our Manager Information Group also reaches out to managers directly (see next page).
• Private investment managers are invited to participate in our private investment benchmarks. To join, email [email protected]. A C|A staff member will be in contact with you about collecting historical and ongoing financial statements.
For Hedge Fund and Long-Only Managers
For Private Investment Managers
Page 16
Submitting Your DataData requests-the type and frequency-vary depending on how much exposure our clients have to an individual manager.
To make it easier for you, we direct the majority of requests through our Manager Information Group and have established automated processes for requesting updated data.
Even so, managers should expect to occasionally hear from C|A consultants with specific questions.
(cont.)
Page 17
Requesting a MeetingManagers with institutional-quality funds can send their marketing materials to [email protected]. This is considered your meeting request.
We receive hundreds of requests from new managers each year. While many don’t result in a manager meeting right away, we do look at all the submitted materials.
There is no simple formula to determine whether a manager is invited for a meeting. It depends on the current needs of our clients and a judge-ment of whether your product would fill those needs.
The timing of our response does vary depending on the schedule and priorities of the Investment Manager Research group.
Rest assured, the inbox is checked daily and that Cambridge staff will be in touch with you if we would like additional information.
Page 18
The C|A Meeting CultureAt Cambridge, we want all of our research and consulting teams to become familiar with the managers we see throughout the year. That is why our manager meetings are open to anyone at C|A who is interested in attending.
At a meeting there could be two people or twenty. They may include members of our research teams, consultants, or interested support staff. Cambridge personnel from our multiple offices worldwide may also par-ticipate by conference call and some meetings are videotaped. Sending your presentation materials in advance by email and bringing ten hard copies is advised.
Meetings are typically one hour long. Please note that many staff can only attend part of a meeting due to scheduling conflicts, so it is common for people to come and go during the course of the discussion. Please don’t misinterpret this as lack of interest. Members of the appro-priate research team will be in attendance for the entire meeting.
Also, expect lots of questions. While you may have a planned presenta-tion, questions from our staff may change the course of the discussion.
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Having a Successful MeetingIf you want the meeting to be successful...
DO DON’T
Send no more than three investment decision makers with ten hard copies
of your materials (A soft copy should also be emailed prior to the meeting)
Send people who won’t contributeto the meeting
Focus on individual products even if you have multiple products
Base your case entirely on your track record
Talk openly about your business plan Be afraid to admit historical mistakesor problems
Be transparent about the portfolio and investment process Overstate expected returns
Explain performance attribution Pretend your strategy will outperform in every market environment
Articulate your competitive advantage Make assumptions about what our clients want or need
Be balanced in your presentation between big picture and details
Be concerned if we interrupt you with questions
Page 20
Evaluating Business RiskInvestment managers may be subject to our thorough and comprehen-sive operational due diligence before they are considered for recommen-dation to clients. Our Business Risk Management team conducts a five-phase operating risk assessment for all hedge funds and selectively for other managers.
Phase I: ResearchExamination of firm legal documents and thorough background checks
Phase 2: Risk Profile and PlanningDevelopment of business risk profile and customized risk review plan
Phase 3: On-site MeetingOn-site visit to interview key management staff
Phase 4: Follow UpFollow-up on requests as a result of findings in the on-site visit
Phase 5: Review and DocumentReview of findings, discussion of strengths and weaknesses, and summary of conclusions
Page 21
Assessing the OpportunityThrough multiple meetings, a review of manager data, and often a busi-ness risk review, C|A research consultants collect all available data and formulate, or reinforce, an opinion of the manager and product. The opinion is then shared with the consulting organization and our clients.
Our due diligence never stops and our opinions evolve over time.
We believe that our thorough manager selection process enables Cambridge to select truly talented managers versus those who have merely experienced strong performance due to favorable market condi-tions. To ensure this, we conduct ongoing monitoring, which could include annual meetings with the manager, analysis of quarterly results, and possibly a quarterly call and evaluation of any changes. As with any successful partnership, we expect to be informed by manag-ers of any significant changes related to personnel, ownership, or the organizational structure.
Page 22
Summary of Manager StepsWhile our manager-screening process is lengthy, there are actually only two steps for managers.
1. Submit data • Hedge fund and long-only managers: Submit your data
through our Investment Manager Database on the C|A website.
• Private investment managers: Join our benchmarks by contacting the benchmarking team.
2. Submit marketing materials/meeting request
C|A will follow up for additional information if warranted.
ContactDirectory
Page 24
Contacting C|A
To become part of our database or to update your data:Visit www.cambridgeassociates.com and click “manager” in the upper-left corner of the homepage.
To join our benchmarks:Email us: [email protected]
To submit your materials and meeting request:Email us: [email protected]
For Hedge Fund and Long-Only Managers
For Private Investment Managers
For All Managers