The 2009 Preqin Alternative Investment Advisor Review A Guide to the Advisors of Institutional Investors in Alternative Assets

Transcription

1 The 2009 Preqin Alternative Investment Advisor Review A Guide to the Advisors of Institutional Investors in Alternative Assets

2 The 2009 Preqin Alternative Investment Advisor Review - Sample Pages The 2009 Preqin Alternative Investment Advisor Review - Sample Pages 2008 Preqin Ltd 1

3 The 2009 Preqin Alternative Investment Advisor Review - Sample Pages Contents 1. Executive Summary 7 2. Data Sources Review of Alternative Investment Advisors 17 - Breakdown of advisors by location, nature of service, number of staff and clients, age of fi rm 4. Advisor League Table 27 - Overview of the 25 largest advisors by assets under management 5. Advisor Attributes Directory 31 - Overview of service coverage, nature of service and location of clients 6. Expert Opinions on the Latest Factors Affecting the Market 37 - Watson Wyatt s Mark Calnan outlines his view of the state of the market - Courtland Partners Rob Negrelli discusses manager fees - Cambridge Associates on what happens next for large-cap buyout funds 7. Advisors for Most Important 25 Institutional Investors 49 - Overview of advisors used by the top 25 institutional investors that employ the services of advisors 8. Review of Investor Use of Advisors 55 - Breakdown of investors by region and fi rm type 9. Investor Survey Listings of Investors Showing Advisor Used Advisor Profiles 77 - Detailed profi les for 100 advisors 12. Index Alphabetical by advisor name 13. Other Publications Other Preqin Products 2008 Preqin Ltd 2

4 Executive Summary - Sample Pages Executive Summary Very Important Fig. A: Investor Attitudes Towards Advisor Attributes Advisors are an integral part of the alternative assets universe, providing investment advice and services to numerous institutional investors ranging from small family offi ces all the way up to multi-billion dollar public pension plans. Whether advisors are acting on a discretionary or non-discretionary basis, the advice that they provide to their clients is taken extremely seriously. As a result it is vital that all fund managers operating in the alternative asset classes have a good knowledge of which advisors are advising which investors, what the advisors are advising them on, and what they need to do in order to form strong relationships with these important custodians of investor capital. There are over 100 noteworthy advisors of institutional investors in alternative assets worldwide, between them responsible for advising over $2 trillion of investments in this area. Why is it that so many investors are willing to pay considerable fees to these fi rms to provide investment advice rather Importance Rating Less Important than channelling these funds into setting up in-house investment teams? In a survey of 50 institutional investors from around the world using advisors, Preqin asked respondents to rate the importance of the different functions performed by advisors out of fi ve. As the results in Fig. A show, the most important factor that investors consider when selecting new advisors is that they have a proven strong track record in fund selection. There are over 1,600 different unlisted private equity, real estate and infrastructure funds currently on the road seeking capital, along with several thousand hedge funds seeking to boost their assets under management. With the variation between the best and worst performing alternatives funds being considerable, fund selection is clearly both an important and challenging prospect for any investor in alternatives. Investors see their advisor s most important role as being able to select the top performing vehicles, with their resources allowing 2008 Preqin Ltd 3

5 Executive Summary - Sample Pages them to undertake detailed due diligence, and their market knowledge allowing them to review and be aware of all the opportunities available to them. Linked to this is the ability of advisors to gain access to in-demand top tier funds, which was also deemed highly important by investors. While fundraising for certain managers remains extremely challenging, other fund managers with a strong track record, and excellent past performance may fi nd themselves with more than enough interested investors to complete their fundraising. By making commitments via an advisor, smaller investors stand a much better chance of gaining access to these funds. Another factor deemed highly important was customer service, and good communication between the advisor and client. An international presence was deemed important, but less so than the other factors mentioned, while a competitive price was deemed the least important factor for investors when seeking out advisory services. It is clear that investors view the services that are being provided by advisors as extremely important and valuable, and are unwilling to compromise on quality, with the relatively low importance attached to competitive price showing that investors are willing to pay a high price in order to receive what they perceive as the best possible investment advice. These responses have some important ramifi cations for those involved with the management and especially marketing of alternative investment vehicles. With the market for alternatives fundraising currently more competitive than at any other point in the history of the industry, increasing numbers of institutional investors are utilising the services of advisors in order to assist them with fund selection, advice and due diligence. If a fund manager is able to communicate its strategy to an advisor in an effective manner, then it can lead to them potentially gaining a number of commitments from the advisor s clients. With the fundraising market currently in a crowded state, it is important that fund managers are maintaining effective communications with advisors both during a fundraising process, and also during a fund investment period when new capital is not being sought. A consistent approach to providing advisors with information on performance and strategy is vital in fostering a relationship that can lead to mutually benefi cial new commitments being made in future fundraising drives. In order for this to be effective, a good understanding of the key factors that advisors are considering, along with a detailed knowledge of the services they offer and make up of their client base is of the highest importance. Contained in the body of the 2009 Preqin Alternative Investment Advisor Review is the vital information necessary for managers and fund marketers to ensure that they are approaching the best advisors with the most appropriate clients in order to build the most effective and fruitful relationships possible. The Review is also an excellent resource for investors seeking detailed profi les on all advisors active in this space along with analysis for the latest factors affecting the market. The Review provides advisors themselves with comprehensive intelligence on other fi rms active in this space, and also the latest trends and breakdown of all areas of the alternative investment advisor universe. The alternative assets universe has grown dramatically in recent years, as many new investors 2008 Preqin Ltd 4

6 Executive Summary - Sample Pages have made maiden commitments to funds, and existing investors have been increasing their allocations. In many ways the name alternatives is a misleading term for what is now a major component in the portfolios of institutional investors. As the market has evolved and become more complex, the importance and stature of advisors in the industry has also been growing. It is the aim of the 2009 Preqin Alternative Investment Advisor Review to provide a comprehensive overview of this signifi cant sector of the market, and we hope that it proves to be an effective tool in facilitating and furthering relationships between investors, advisors and fund managers Preqin Ltd 5

7 3. Review of Alternative Investment Advisors - Sample Pages Location of Advisory Firms Fig. 3.4: Advisor Firm Location Looking at the geographic location of advisory fi rms that are active in alternative investments, the majority, more than two-thirds, are based in North America, as shown in Fig This is unsurprising, since the US remains the main hub of alternative investment activity in the world, with major centres such as New York for hedge funds and Silicon Valley for venture capital. Additionally, most of the largest fi rms in terms of assets advised are headquartered in the US. Nearly one-quarter of advisory fi rms are based in Europe, leaving less than 8% based outside of the two primary regions. Again, this correlates with the prominence and maturity of alternative investment activity in the respective regions. The recent growth in demand for alternative investments in Asia, both from investors around the world wishing to invest there and from Asian investors wishing to add alternative investments to their portfolios, is refl ected by the fact that many of the larger advisory firms that are headquartered in North America or Europe now have offi ces in one or several locations in Asia. This allows them to benefi t from local knowledge when researching investment opportunities in the region, as well as providing the opportunity to take on clients based there. Russell Investment Group and Wilshire Associates have offi ces in Singapore. Albourne Partners has offi ces in Japan and Hong Kong, as well as Singapore. Age of Advisory Firms We also took a breakdown of advisory fi rms by the number of years that they have been operational. As shown by Fig. 3.5, firms that have been operating for less than 10 years form 27.5% of the population; 23.3% are between 10 and 19 years old; 25.9% have been running for between 20 and 29 years; 15.8% for between 30 and 39 years; and 7.5% have been operational for more than 40 years. These fi gures show a steady growth in the number of fi rms over the past 30 years, following the formative period of the industry prior to that. This would seem to imply that the demand for general investment advice and education about, as well as access to, alternative 2008 Preqin Ltd 6

8 5. Advisors Attributes Directory - Sample Pages Service Coverage Nature of Service Location of Clients Total Assets Alt. Assets Firm Name Page Location Year Est. No. of Staff Advised (bn) Advised (bn) Abbott Capital Management 79 US USD 4.0 USD Access Capital Advisers 79 Australia AUD Adams Street Partners 80 US USD 12.0 USD Aksia 81 US 2006 Alan Biller and Associates 81 US USD Albourne Partners 82 UK USD USD 149 Aldus Equity 82 US USD 6.0 USD 25 Alpha Associates 83 Switzerland USD 2.0 USD 18 Alternative Investment Capital 84 Japan USD 2.0 USD Altius Associates 85 UK USD 17.0 USD 25 Amanda Advisors 85 Finland EUR 2.4 EUR 25 Arnerich Massena & Associates 86 US USD 51 Asset Consulting Group 87 US USD 47 Auda International 88 US USD 5.6 USD 80 Babson Capital Management 88 US USD 20.8 USD 600 Bramdean Asset Management 89 UK USD 1.3 USD 13 Callan Associates 90 US USD 175 CAM Private Equity 91 Germany EUR 3.0 EUR 42 Cambridge Associates 91 US USD 37.0 USD 885 Canterbury Consulting 92 US USD 40 Capital Dynamics 92 Switzerland USD 20.0 USD 112 Central Park Group 93 US 2006 Cliffwater 93 US USD 19.0 USD 30 Colonial Consulting 94 US USD 5.0 USD 41 Commonfund Capital 94 US USD Consulting Services Group 95 US USD 66 Courtland Partners 96 US USD 25.0 USD 27 Credit Suisse Customized Fund 96 US USD 14.0 USD Investment Group CTC Consulting 97 US USD 11.0 USD 65 DB Advisors 98 US USD DeMarche Associates 98 US DTZ Investment Management 99 UK GBP 1.9 GBP 29 Ellwood Associates 99 US General Consultant Private Equity Hedge Funds Real Estate Infrastructure Discretionary Non-Discretionary North America Europe Rest of World 2008 Preqin Ltd 7

9 9. Investor Survey - Sample Pages Do you believe your advisor provides good value for money? Fig. 9.10: Advisors Success At Providing Good Value For Money In general LPs agreed that their advisor provided good value for money, with 29% stating it was excellent value and 34% believing it was above average. A minority of 8% thought that the service they received was below average with regards to value for money and only 3% commented that it was poor. One small German insurance company explained their reason for believing their advisor provided them with good value for money by stating we are a small team with limited experience in alternatives and rely heavily on our advisor to use their expertise to provide us with access to top performing funds. Very Important Fig. 9.11: Attributes LPs Seek When Reviewing Advisors What are the most important attributes you seek when reviewing advisors? For these questions we asked our respondents to rank a list of attributes by importance. LPs were asked to rate the criteria out of 5, with 5 being very important and 1 being the least important. Unsurprisingly, all the attributes were deemed as fairly important by investors and this is demonstrated in Fig Importance Rating Less Important 2008 Preqin Ltd 8

10 11. Advisor Profiles - Sample Pages Albourne Partners Garden House, 8 Battersea Park Road, London, SW8 4BG, UK Other Offices: Hong Kong, Norwalk, San Francisco, Singapore, Tokyo, Toronto Tel: +44 (0) Fax: +44 (0) enquiries@albourne.com Albourne Partners, established in 1994, advises sophisticated hedge fund and private equity investors. It is a dominant worldwide hedge fund advisor, while the private equity advisory side of the business is still relatively new and is growing, having been established in June 2007 with four founder clients. Overall, Albourne has 137 hedge fund clients and nine private equity clients. All but two of its private equity clients are also hedge fund clients. It is looking to grow its number of clients, but not at a pace that would compromise the level of service it can offer. Types of clients served include endowments, foundations, pension funds and high-net-worth individuals and families. Its clients have more than USD 180 billion invested in hedge funds. The size range of Albourne s clients varies from one relatively small family right up to some of the largest institutions in the world, such as Teacher Retirement System of Texas. Albourne offers its clients non-discretionary services only, running itself purely as an advisory firm, as it wishes to avoid all potential conflicts of interest between itself and its clients. Albourne Partners operates a policy of transparency with its clients and shares its tools for services such as manager selection and portfolio construction. It has a flexible attitude to first-time funds, but feels that the team must have a good reason for coming together and that the strategy set out must be very sound. Within hedge funds, Albourne has a permanent list that it recommends to its clients. It will add and remove funds to and from this list and flag new and interesting opportunities as and when they arise. It flags all new fund launches. It gives each fund a rating for its clients depending upon various factors including strategy, geographic focus and experience of the management team. Albourne is of the opinion that private equity has come through the credit crisis in a fairly good state. It feels that 2006/07 vintages may not perform well, but now is a good time to invest in the asset class and that investors with well-constructed portfolios should be in good shape. However, the threat of global inflation is of concern. It feels that the current clamour regarding investing in distressed funds is somewhat overplayed and it would have been better to invest with distressed managers beforehand, to enable the managers to handle the cycles as opposed to investors trying to manage them. It also feels that infrastructure and cleantech have been overhyped and that investors high expectations of large returns from these types of funds may well not be realised. Total Assets (mn): 200,000 USD Alternative Assets Under Management (mn): 200,000 USD PE Assets Advised (mn): 20,000 USD HF Assets Advised (mn): 180,000 USD Total No. of Clients: 146 No. Alternative Investments Clients: 146 Service Coverage General Private Equity Hedge Fund Real Estate Infrastructure Location of Clients: Nature of Service: N. America Europe Rest of World Discretionary Non-Discretionary Sample Clients Name General PE HF RE Infra Investor Type Arizona Public Safety Personnel Retirement System CDP Capital Hedge Fund Group Ferd External Managers FFC Capital Corporation Fort Worth Employees' Retirement Fund Hermes Pensions Management La Fondation Lucie et André Chagnon Public School Retirement System of Missouri Regents of the University of California Rice University Endowment San Diego County Employees' Retirement Association Teacher Retirement System of Texas University of Texas Investment Management Company Virginia Retirement System Investor Location Asset Manager Canada Investment Company Family Office / Foundation Norway US Hedge Fund of Funds Family Office / Foundation UK Endowment Plan US Endowment Plan US Canada 2008 Preqin Ltd 9

11 11. Advisor Profiles - Sample Pages Wellcome Trust West Virginia Investment Management Board Family Office / Foundation UK Government Agency US Ennis Knupp and Associates 10 South Riverside Plaza, Suite 1600, Chicago, IL, 60606, US Tel: Fax: Investment Consultant Name Position Tel David Harmston Head of US Client Services David Hutchings Head of Private Equity Frank Moens Tom Cawkwell Senior HF Advisor Senior Analyst (0) d.harmston@albourne.com d.hutchings@albourne.com f.moens@albourne.com t.cawkwell@albourne.com Ennis Knupp and Associates is a Chicago-based investment consulting firm that was established in 1981 by Richard Ennis and Jim Knupp. The firm specialises in full consulting and advisory services and is owned by 26 key employees, with four principals and 130 employees in total. It has around 160 clients, 15-20% of whom have investments in private equity, and advises on aggregate total assets of USD 840 billion. Clients include public pension funds, endowments and foundations, which are the most involved with alternative investments, as well as corporations, universities and hospitals. The size of its clients varies from tens of millions up to USD 220 billion, with allocations to alternatives also varying dependent upon size, goals of the investor and appetite for risk. The majority of Ennis Knupp s clients are served on a non-discretionary basis, although more recently the firm has started working with some clients, including a union pension plan, on a discretionary basis. It offers a full range of consulting services, as well as fiduciary audits and operational reviews, education and board/ committee governance advice. Its longest advisory relationship stands at more than 20 years. Ennis Knupp and Associates has grown fairly rapidly, with growth averaging 10% per year over the past ten years. This growth is controlled to ensure the quality of services provided to existing clients remains high, and certain teams within the firm have also seen rapid growth. The firm has an approved list of investment managers for each asset class and conducts approximately 1,400 manager meetings each year, adding or removing managers from these lists as necessary. Whilst Ennis Knupp closely monitors prevailing market conditions, it feels that these do not directly affect its advisory positions, as it is not a market timer, maintaining long-term positions and encouraging its clients to diversify their portfolios. The firm and its clients are becoming more interested in frontier markets. In terms of first-time fund managers, there is no prerequisite minimum track record or level of assets under management. If the manager meets strict requirements after a month due diligence process then they can be approved, regardless of whether they are firsttime managers or not. Total Assets (mn): 840,000 USD Total No. of Clients: 160 Service Coverage General Private Equity Hedge Fund Real Estate Infrastructure Location of Clients: Nature Of Service: N. America Europe Rest of World Discretionary Non-Discretionary 2008 Preqin Ltd 10

12 11. Advisor Profiles - Sample Pages Sample Clients Name General PE HF RE Infra Investor Type Arizona State Retirement System Arkansas Teachers' Retirement System Chicago Park Employees' Annuity & Benefit Fund Chicago Police Pension Fund FirstEnergy Florida State Board of Administration Georgia-Pacific Corporation Harry and Jeanette Weinberg Foundation Health Care Foundation of Greater Kansas City Illinois Municipal Retirement Fund Kansas Public Employees' Retirement System Lawrence University Endowment Maine Public Employees Retirement System Maryland State Retirement and Pension System Nebraska Investment Council New Hampshire Retirement System Pension Benefits Guaranty Corporation Private Sector Pension Fund Investor Location US Private Sector Pension Fund Family Office / Foundation Family Office / Foundation US US US Endowment Plan US Government Agency US Policemen's Annuity and Benefit Fund of Chicago San Diego County Employees' Retirement Association Sonoma County Employees' Retirement Association State Universities Retirement System of Illinois United Technologies Pension Fund University of Illinois Endowment University of Illinois Foundation Private Sector Pension Fund US Endowment Plan US Endowment Plan US Name Position Tel Amy Hauke Brett Nelson David J. Keil Doug Patejunas Harmony Watling Stephen Cummings Senior Investment Analyst Partner in Charge, Private Equity Primary Consultant Primary Consultant Communications Manager & Associate CEO and President a.hauke@ennisknupp.com b.nelson@ennisknupp.com d.keil@ennisknupp.com d.patejunas@ennisknupp.com h.watling@ennisknupp.com s.cummings@ennisknupp.com 2008 Preqin Ltd 11

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