June 22, 2021
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Endowment and Foundation OCIOs ‘Come Back in Force’ After Covid-19 Crash

By on June 2, 2021 0


A year after the Covid-19 market crash, endowments, foundations and aggressive risk-takers have seen the strongest recoveries, according to outsourced investment managers whose clients include major investors of all types of funds.

Of all the outsourced investments tracked by the Alpha Nasdaq OCIO Broad Market Index, endowment and foundation portfolios “have returned dramatically” with a year-over-year average net expense return of 35.8%, said Brad Alford, founder of Alpha Capital Management. . The “Aggressive Asset Allocation Index,” an index that takes into account OCIO strategies with a 0-20% allocation to risk-mitigating asset classes, boasted the strongest performance with a return of 46.3% over one year.

The Alpha-Nasdaq Indices began in 2019 and aggregate responses from anonymous OCIOs that “represent the large OCIO market” and “appropriately reflect nuances between sub-categories, such as plan type and profile of risk, ”according to this quarter’s report. Index numbers are calculated using reported data from OCIO respondents. In order to be included in the indices, respondents must be working with a fund that manages $ 50 million or more in assets under management. OCIO contributors include JP Morgan Asset Management, Verger Capital Management and NEPC, among others.

“The Alpha Nasdaq OCIO Indices aim to increase the transparency of the growing OCIO industry and are designed to give investors and OCIO companies the ability to objectively measure their performance against their peers,” according to the website. “OCIO indices segment risk profiles, asset allocation, client types and plan types. “

Fixed income investments have ‘gone really bad’ for pension funds

According to Alford, the resilience of the Endowments and Foundations Index is due to the “value-driven” managers who manage the portfolios. Alford said endowments and foundations also tend to house “broadly diversified” portfolios, making them more likely to withstand a disaster like the pandemic compared to funds that stick with less wealth flow.

Conversely, the Defined Benefit Pension Index has “performed really badly,” Alford said. The index returned 24.74% over one year, underperforming the overall return of the OCIO Index by 30.7%.

For the year ending March 31, allocations to fixed income were the biggest drag on pension plans, according to Alford. For example, the Bloomberg Barclays US Aggregate Index, which includes treasury securities, corporate bonds, mortgage-backed securities and asset-backed securities, posted a year-on-year return of 0.71 %, the lowest rate of return of the general index.

“Many pension funds are strongly motivated by liabilities and therefore they are heavy on fixed income,” Alford said. “It went very badly over the last year. ”



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