The past few decades have been generally favorable for hospitals; inexpensive debt, solid revenue growth, and consolidation have fueled the accumulation of sizable capital pools.…
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Although we are more cautious heading into 2019 than we were 12 months ago, we still think a roughly neutral allocation to risk assets is the right approach.
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Yes. At a minimum, investors should consciously consider it. The co-investment “craze” isn’t going away anytime soon—we estimate co-investing currently accounts for nearly one-third of all private investment activity—and there are structural reasons why it will continue, as we will discuss.
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Last month’s sell-off was mainly a reaction to macroeconomic headwinds that have been building this year; recent and expected corporate earnings growth has not weakened much.
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In the November 2018 issue of Benefits Magazine, covering pension plan issues affecting multiemployer, single employer and public plan representatives, Investment Managing Director in Cambridge…
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Yes, if you control for tech overweights. Quality has historically been quite defensive relative to the broad market. Today, it is sensible to question quality’s defensive characteristics, as the factor is concentrated in tech stocks and has become quite expensive.
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Because the US economy has entered the late stage of the economic cycle, investors should consider the prospect of a bear market recession, even though one does not seem imminent. We have been evaluating the appeal of different asset classes through a late-cycle lens. In this edition of VantagePoint, we evaluate several potentially defensive equity strategies to see whether they are attractive today.
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Cambridge Associates partnered with The Association for Private Capital Investment in Latin America (LAVCA) to conduct an annual survey of global institutional investors about their…
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Although crude oil prices above $100 a barrel will pinch consumer pockets, investor anxiety on this topic is both premature and exaggerated.
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Elevated equity market valuations and potentially rising bond yields suggest the return environment for traditional risk assets could be difficult. Faced with this challenge, institutional…
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With a gender lens framework, investors can positively impact gender imbalances via their portfolio management choices; this paper provides tangible investment themes and implementable strategies.
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Investor approaches to mission-related investing (MRI) are as varied as the social and environmental outcomes they seek to achieve. Based on responses from 148 clients—54…
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With underlying assets that provide essential services, infrastructure debt can play a key role in institutional investor portfolios. The asset class offers the possibility of…
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In this report, we briefly highlight five key post-GFC developments and discuss how investors might adapt their portfolios to these changes.
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No, investors should consider staying the course. Though developments and headlines associated with the United Kingdom’s Article 50 negotiations with the European Union have been and likely will remain fitful, they reflect more the political nature of the process and less the underlying fundamentals of the economy and its listed equities.
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It is well known that corporate plan sponsors have until mid-September to make deductible contributions under the more favorable 35% corporate tax rate. This is…
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Yes, but investors should be selective in allocating to credit markets at this point in the cycle, and understand that the overvaluation of many credit assets could make attractive returns hard to come by.
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Solid fundamentals in most countries should limit the damage. The largest markets are not particularly exposed to the risk of a classic balance-of-payments crisis (like the ones occurring today in a handful of smaller markets, including Turkey and Argentina).
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Climbing the wall of worries is getting tougher. There is room for markets to progress, but caution is required at this stage in the cycle. Markets must overcome four main forces: monetary policy tightening, US dollar strength, a China growth slowdown, and trade friction.
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We don’t believe so. US small caps have benefited from cyclical tailwinds this year, including strengthening US growth and their more domestic orientation (helpful as the dollar strengthens and trade frictions increase), with small-cap earnings estimated to grow twice as fast as large-cap earnings in 2018.
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There is perhaps no better time for social equity investing. Many institutional investors have long sought to promote social equity through grant making and other philanthropic endeavors. With the field of impact investing maturing, these institutions are now increasingly seeking investment solutions to accomplish the same goal. In this paper we review the current state of social equity in the United States, highlight eight core social equity issue areas, and discuss the lessons we’ve learned in constructing portfolios with these investments. While investors need to be mindful of risks, we believe that investments can be made to promote a social equity impact agenda across the portfolio.
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In short, no—their use isn’t going away any time soon. Rather than avoid them, incorporate new elements to more clearly assess the manager’s true investment skill.
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No, MSCI index inclusion will not trigger a bull market in Chinese A-shares.* Given the very modest initial weights and the lack of clarity on future increases, we doubt that index-driven flows will drive share prices meaningfully higher.
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Yes. Since fixed income derivatives are more capital efficient and flexible than physical bonds, they can play a key role in liability hedging for many corporate and other single-employer pension plans.
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For investors with private allocations, how one incorporates them into the policy benchmark will materially impact the portfolio’s relative performance, making the choice key to informed decision making. We review the various methodologies used and make a series of recommendations on best practices to follow. In considering the performance of private investments within the total portfolio, we anchor to a set of principles: keep it simple, don’t treat private investments differently, and make performance evaluation as meaningful as possible.
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When assessing performance at the aggregate private portfolio and sub-component level, investors should take the long view. In this publication, we review how long funds take to settle into their ultimate quartile ranking and highlight our framework for benchmarking a portfolio of private investments.
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While trade finance is among the oldest forms of institutionalized credit, it has only recently become an accessible market for most institutional investors. Providing high…
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Not in the United States. As short rates have increased and the yield curve has flattened, US T-bills offer more appeal than they have in some time (and short-dated Treasuries even more so).
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Impact investing – allocations that aim for social and/or environmental change or to solve a problem in the world – has historically stood apart from…
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Advice in Brief The global economy and capital markets are constantly evolving. From the industrial revolution in the 1700s, to information technology in the last…
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Retail is changing and some companies face challenges, but this theme has probably been overhyped, and implications for investors are limited. The retailing industry is…
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Not necessarily. Although we believe the announced tariffs are a negative for the global economy, recent market moves have probably more than baked in the pain they will cause.
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For many pension plans, investment strategy is often structured with a liability-hedging portfolio and a growth portfolio, with the weight and composition of each determined…
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We don’t think so. Investors with allocations to energy MLPs (master limited partnerships) may want to maintain existing allocations, despite their recent poor performance and the proposed regulatory changes impacting interstate pipelines.
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Yes. Inflationary pressures in the United States appear to be building, as positively trending wages, expansionary fiscal policies, and protectionist trade barriers feed into a humming economy.
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Not in the near term. The current environment of rising, but low, interest rates accompanied by strong earnings growth expectations is supportive for equities.
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No. The US public equity market remains the largest and most liquid in the world and continues to offer a robust opportunity set for investors.
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As the economic cycle progresses, the next recession draws inexorably closer, bringing with it the next downturn in the credit cycle. Recognizing this, institutional investors…
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No, most investors should sit tight. The persistence of strong corporate and macroeconomic fundamentals in the face of the recent sell-off and spike in volatility strongly suggests that the duration of the market rout should be limited.
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We are asked this question on a regular basis, but believe it is fundamentally the wrong question for investors to ask if they are seeking to outperform the market over the long term.
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The start of the year is a good time for planning and reviewing your investment strategy. In this edition of VantagePoint, we facilitate that effort…
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The new US tax bill creates little pressure for immediate action by individual investors, even though we expect the legislation to be quite impactful.
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In our 2018 outlook, we review the prospects for several asset classes—developed and emerging markets equities, credit, real assets, sovereign bonds, and currencies—and share the advice of our chief investment strategist.
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College and university leaders are paying close attention to the tax plans moving through the Senate and House.  As currently written, both proposals would levy…
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In our opinion, institutional investors are better served focusing on investing in companies seeking to profit from the development and adoption of blockchain technology and “fintech” more broadly than holding cryptocurrencies directly.
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As pressures on pensions mount, we believe financial executives are best served by re-evaluating major decisions in terms of the true tools at their disposal. In this paper we review four levers that are fundamental drivers of pension costs and outcomes: asset returns, liability hedging, contribution policy, and benefit management. Balancing these levers is critical to enabling greater probability of success in managing pension risk, and we introduce a framework for chief financial officers and other financial executives to use in doing so.
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In the November 2017 issue of Benefits Magazine, which covers benefit issues affecting multiemployer, single employer and public plan representatives, senior investment director and investment…
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It sure looks like it. The increasingly unforgiving nature of public equity markets, coupled with the continued evolution and growth of private investment markets, is making it easier for more companies to stay private, with some CEOs avowing to do so indefinitely.
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We would not seek to position portfolios specifically for tax reform as markets have already priced in some improvement in earnings from tax cuts, and the winners and losers from the proposed tax changes will not be clear until more details are provided.
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This quarter’s edition covers key risks to continued economic expansion, including monetary policy and inflation pressures. Also discussed are whether investors are being compensated for taking risk and different strategies for geopolitical risks.
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Lessons from Fiscal Year 2017 Results Diversified investors are noticing quite a difference in 2017 fiscal year performance—and it’s a welcome change. In the midst…
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The strong Atlantic hurricane season and Mexican earthquakes have resulted in a tragic loss of life and property. Insurance-linked securities (ILS), meanwhile, have suffered a less dramatic impact.
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Yes. Although investors do need to be mindful of the long-term transition occurring in energy markets, we don’t believe that mindfulness should preclude new investments in top-quality traditional private energy managers.
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Cambridge Associates partnered with the Latin American Private Equity & Venture Capital Association (LAVCA) to conduct an annual survey of global institutional investors about their views on Latin American markets. The survey report covers both domestic and international investors’ views of private equity opportunities and challenges in Latin America, based on responses from 103 limited partners.
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Private credit offers distinct advantages and appeal in a low return environment, but investors should be aware that behind the name is a diverse array of strategies, some more familiar to institutional investors than others, each with idiosyncratic risks. In this report, we describe the broad array of private credit strategies and position them along the risk/return spectrum, review the investment process, discuss expectations for the performance of these strategies in various parts of the economic cycle, and highlight some key risks for investors to consider.
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The potential for strong performance and use as a diversifier give private energy investments merit as part of portfolios.
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Mission-related investing. Socially responsible investing. Impact investing. Sustainability investing. Environmental, Social, and Governance. Also known as: MRI, SRI, II, SI, ESG. The lexicon of mission-related…
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Commercial real estate lending funds represent an opportunity for investors worried about real estate valuations to move up the capital stack yet still earn an attractive return.
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Policy benchmarking is a critical component of building and managing a successful investment program. In this paper we set out our comprehensive benchmarking framework and then zero in on the policy benchmark as the primary reference point for evaluating investment decisions.
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Sustainable investing and the consideration of environmental, social, and governance (ESG) factors continue to gain prominence. The new 2017 investment guidance for defined benefit (DB) schemes from The Pensions Regulator (TPR) in the United Kingdom has material new ESG content. This follows similar guidance for defined contribution (DC) schemes issued last year. Cambridge Associates has prepared this short piece to summarise this guidance and its implications for pension scheme investment strategy, including how we might help.
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Not in our opinion. Recent market leadership by the so-called FAAMG stocks is not extraordinary relative to history, and their valuations and fundamentals, combined with this year’s relatively healthy market breadth, mean that they don’t necessarily present an outsized threat at this time.
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Investors seeking to gain initial exposure to private investments should actively consider secondaries, rather than funds-of-funds, as the very first step to constructing a long-term private equity portfolio.
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Investing in revenue development and fundraising while simultaneously pursuing goals for asset growth is a balancing act. Public universities commonly draw from a combination of…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. We are not ready to pronounce…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. Prospects for a continued turn in…
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This quarter’s edition covers the very overvalued US equity market, reviewing what late cycle looks like in the US and casting a critical eye at the consensus view of an overly concentrated market. Also discussed are the better prospects for ex US markets and the importance of remaining diversified.
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If passing the Dodd-Frank Wall Street Reform Act in July 2010 did not spawn direct lending, what did? In this analysis we explore the genesis of the recent direct lending phenomenon to identify risks to the strategy and what investors should watch going forward.
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Some market participants have feared the worst for direct lending from a potential repeal of The Dodd-Frank Wall Street Reform and Consumer Protection Act. In this brief, we review the data and show that changes in banks’ lending behavior cannot clearly be traced to the passage of Dodd-Frank or its implementation.
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Recent policy proposals assume endowments can do more to reduce the reliance on student revenue, and thus the cost of a college education. These proposals aim to shift more endowment wealth to current student beneficiaries. Our analysis shows that while well intentioned, these proposals will affect endowment and organizational stability and intergenerational equity. While endowments may be able to do more to support the enterprise and thus lower the cost of attendance, considering the implications of current policy proposals is critical, as is examining other strategies that could address current pricing concerns.
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The practice of sustainable investing and the consideration of environmental, social, and governance (ESG) factors continues to grow. Concurrently, the demand for effective investment policies…
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Since 2009, US equities have outperformed every major asset class by a considerable margin, returning 14.5% a year on average. And, over the same period,…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. No. Market forces and technological innovation…
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New private infrastructure fund investors can find value in carefully evaluated managers and strategies, but they should ratchet down return expectations relative to years past.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. Yes. Issuance of ultra-long Treasury bonds…
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The IRS’s somewhat unexpected decision to delay implementation of the RP-2014 mortality tables has impacted at least three separate aspects of pension plan strategy: calculating minimum contribution requirements; determining variable-rate PBGC premiums; and valuing lump-sum distributions to be paid out to terminated vested participants. This brief discusses what has changed and provides general considerations for all sponsors to weigh in the near term.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. Investments with the potential to earn…
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Within impact investing, real assets investments constitute one of the largest opportunity sets. This report presents findings from our analysis of the financial performance of 55 private real assets impact investing funds across three sectors: timber, real estate, and infrastructure. We find that risk-adjusted market rates of return are achievable in impact investing, but note that as with conventional funds, manager selection is key to success.

This report also marks the launch of the real assets impact investing financial performance benchmarks, which will track the performance of impact investing funds across the three sectors of focus and will be maintained and updated on a quarterly basis.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. Although the election results provide a…
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Adaptive and sophisticated strategies are necessary to serve the unique features, constraints, and needs of multiemployer plans. In this note, we explore some of the key challenges that many multiemployer plans face, discuss how to invest in light of these challenges, and provide thoughts on governance and the overall role of the investment advisor in the multiemployer context.
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An extended bull market can tempt even the savviest investors into abandoning their long-term discipline. Resisting the impulse to switch horses in the middle of the race is hard, but necessary—the most important trait of successful investors is their ability to maintain discipline in sticking to a long-term strategy during good times and bad. Diversified portfolios—structured to earn returns comparable to their rate of spending at tolerable levels of risk—have benefitted long-term investors and grown their purchasing power for decades, and we have no reason to expect a different outcome when today’s bull market inevitably corrects.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. We don’t think so. Investors with…
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This quarter’s edition discusses the reflationary environment, positioning in global equities, prospects for sovereign bonds (both nominal and inflation-linked), and USD strength. We also profile two strategies that can diversify portfolios without dependence on economic growth: life settlements and pharmaceutical royalties.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. No. If the interest expense deduction…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. We still expect a rising US…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. We doubt it. But, price levels…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. Some of the reflation trades that…
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Investor approaches to mission-related investing (MRI) are as varied as the social and environmental outcomes they seek to achieve. This survey report explores trends in the structure and implementation of MRI programs, investor motivations and perceived challenges, and expectations for future growth in MRI investment activity, based on responses from 159 non-profit clients, 50 of which are actively making mission-related investments.
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This paper introduces Cambridge Associates’ Investment-Level Benchmarks and shares examples of the types of perspectives they can offer subscribers.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. In a word, yes, albeit slowly…
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The start of the year is always a good time to focus on personal improvements with resolutions. In this edition of VantagePoint, we share in the spirit of a new year by providing investment resolutions.
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. Simple is not so sweet in…
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Answers to our clients’ questions about market action and the market environment in a few paragraphs every two weeks. No. You just need to know…
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In an increasingly complex landscape, the fiduciary management of robust 403(b) plans has become more challenging than ever.
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Making sure that portfolios are aligned with risk tolerance and return objectives is critical in allowing asset owners to withstand volatility and to take advantage of opportunities that may arise.
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Our examination of incorporation of environmental, social, and governance factors into the stock selection process for two major MSCI indexes finds evidence that ESG factors added value in emerging markets equities but not developed markets equities. Given our findings, investors evaluating managers would do well to focus on understanding if and how the manager incorporates ESG factors, for what reason and how consistently, and whether ESG-based stock selection has added value to their funds.
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Select hedge funds have provided attractive long-term returns with reduced equity beta and can be integral to pension investment strategies.
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While corporate plan sponsors are keenly aware of interest rate risk within their defined benefit plans, few fully appreciate the complex and significant risk posed by credit spreads.
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For investors seeking regional diversification and differentiated exposure to emerging markets, Latin American private equity and venture capital warrants serious consideration.
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Before incorporating impact investments into their portfolios, we encourage families to define the overall context for their impact investments. Our contextual framework—focused on purpose, priorities, and principles—establishes the base of impact strategy and guides the development of governance structures. These elements will help ensure that family values and decision-making processes are advantages rather than obstacles in pursuing impact investing goals and objectives
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When endowment funds slip “underwater” (below the historic dollar value of the original gift), institutions face a tradeoff between distributing anticipated budget support and restoring the endowment to its original value. Ultimately, the choice of underwater policy depends on the situation and needs of each institution in balancing endowment preservation with program support.
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