Making (Investment) Marriages Work

Some institutional investors — think Seth Alexander at MIT or Robin Diamonte at UTC — already achieve great success that they attribute to putting time into their partnerships. But for the lion’s share of us, there’s room to improve. We can drive value creation by being better partners.

The first thing we need to do is shake the “vendor” culture mentality. Understandably, public institutions have the hardest challenge here, as their structures dictate procurement protocols, vendor approvals, and overabundant bureaucracy as terrifying as a Stephen King novel. So it’s not easy. But we could all benefit from spending less time labeling each other in this client/vendor world and simply treating one another like peers working toward a common goal.

Think about your boss. Do you prefer when he (or she) introduces you as “on his staff” or “on his team”? Words matter.

第二步，我相信，就是开始表演同事。在改变客户/供应商的看法后，我们可以解决行为。同行，我的评论适合您 - 但显然，资产经理人担任难以改善。（一定Chris Schellingat the Texas Municipal Retirement System will be writing on that topic soon.) For asset owners, behaviors such as requesting feedback, holding regular conversations with managers, articulating expectations, and offering support are worth our time.

For example, at Hartford HealthCare we try in every meeting to ask our managers if there’s anything more that we can do to help them. Recently, our star European venture capital manager seized on my offer and asked me to weigh in on the firm’s internal code of ethics. I was happy to do so, and thanks to the request, my oversight (of them and others) became stronger and deeper. This goes both ways: We likewise look to our managers for their feedback on our job performance.

We’re all seeking better outcomes, so the benefits of actively managing thepartnershipshave to translate to improved results. There are simple metrics for gauging an asset owner’s success here — namely, cost structure and knowledge transfer. If costs are declining while more knowledge is flowing into the investment office, then a win-win partnership is happening.

At HHC during 2019, we moved an incremental 2 percent of our assets into esoteric, opportunistic, niche, and high-conviction manager best ideas for no additional fees — a structure known as direct co-investing. This may not seem massive, but remember that the goal of a CIO is to continually move the needle towarddesired outcomes，所以每一位计数。正如我的祖父会说，你需要100便士来制作一美元。

今天我们站在经济衰退的门口。随着分配者对更好的投资者具有智力承诺，我建议从愚蠢测试版的积极回报很快成为遥远的记忆，并且CIO将被迫最大化其阿森纳中的每个资源。只需等待被拿起，有增量便士。发展正确的伙伴关系肯定会使CIO的工作更容易，更好地为我们的利益相关者提供服务。

The fashion world provides a real-life case study. I recently presented a deal to my investment board, which includes investment rock stars Cynthia Steer (retired executive vice president of BNY Mellon), Bob DeAngelo (Eversource’s CIO), and David Roth (of family office WLD Enterprises). We were very comfortable with an existing private equity platform relationship that our partner wanted to expand with a new vertical. So we did it. That unique opportunity in the consumer branding space was a portfolio success (and mutually so) only because the partnership foundation existed.

Everyone in our industry already understands the performance impact of asset allocation and manager selection. But I believe that partnership alpha has been overlooked. We must start having more and deeper conversations about whether we’re in the right relationships and how we’re handling them for better outcomes.

In investing, as in love, relationships take work.

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David Holmgrenis chief investment officer of Hartford HealthCare, where he leads a team managing $3.3 billion in pension and endowment assets.