Cambridge Associates: Leading the Charge into OCIO Battlespace

This article dives into the culture and history of Cambridge Associates since its founding in the early 1970’s, outlining the firm’s approach to investing and 40+ years of evolving into a broader investment firm.

The article articulates the “rapidly blurring boundaries” of institutional investment consulting (“which Cambridge virtually invented”) and asset management, explaining firms like Cambridge launched discretionary (OCIO) offerings as a result of “institutional clients demand[ing] more help dealing with increasingly complex and sophisticated multi-asset portfolios.” Former CEO Sandy Urie spoke to The Skorina Letter back in 2011 reinforcing this point: “Outsourcing is an evolution of what we’ve been doing for 36 years.”

Cambridge’s Chairman and CEO David Druley said, “portfolio management is the growth engine for Cambridge Associates… many of [our] colleagues ran money before coming to Cambridge. The better we do for our clients, the bigger the impact they can have on the world as they pursue their specific missions.  Knowing that is what gets me up every morning. By owning investment strategy and execution, and being able to pull the trigger on manager hiring and firing decisions, we become fully accountable for maximizing that impact.”

“CA’s edge has always been its reputation for the quality of its people and their work, built over 42 years.” – Charles Skorina

For this article Charles Skorina also sat down with  Cambridge’s Margaret Chen, Sona Menon, and Kyle Johnson to understand the relationships between boards and CIOs as it relates to the quest for alpha; learn about Cambridge’s OCIO business; and hear each person’s individual experiences in the context of the firm’s commitment to minority and female professionals. Highlights of this round-table include:

• Margaret Chen, Managing Director and Head of CA Capital Management
  • “Asset-categories become more numerous, more complex, more specialized.  This seems to be a natural, inevitable evolution.  But it means there also has to be more specialization and division of labor among the people managing the portfolio… This is one reason why we are seeing such growth in our OCIO business.”
  • Staggered board member terms and tenures may result in “the philosophy and strategy shift[ing] too often and too abruptly.  Then, institutions aren’t leveraging their most valuable asset — their long time horizon — to their maximum advantage… The investment pools with the worst performance are often the ones with high turnover of board members and staff.”
  • “The whole point of investing is to have a better idea than the next person, and to execute it well.  This requires resources, but it also means you have to generate well-founded ideas, and not be afraid to take a different point of view.”

• Sona Menon, Managing Director, CIO, and Head of Pensions North America
  • “We’re in the investment business.  And our objective is to produce good returns.  So how does diversity help produce better returns for our clients?  For me, diversity means diversity of perspectives with regards to investment ideas, process, managing risk, and managing teams.”
  • “In addition to putting the right investment strategy in place, a strong CIO should be able to navigate the various perspectives on the Investment Committee or Board.  Part of a CIO’s job is to educate the new members and develop a strong relationship with them… A CIO may have patience for tolerating short-term under-performance, but a specific Board member may not.  That’s another potential disconnect due to different time horizons.

• Kyle Johnson, Managing Director and CIO
  • “Investment Committee turnover can certainly present some challenges, but it’s an understandable fact of life for most institutions given the voluntary nature of Committee members’ service.  So, for better or worse, we’ve got to embrace that reality.”
  • “[When interviewing] I was really impressed with the CA investment team’s sheer breadth of capital markets knowledge. I realized then and there that I wanted to be on that side of the table because it seemed intellectually fascinating.  I also thought working with CA might give me more opportunity to explore socially-responsible investing in a more impartial way, which, given my fascination with political economic theory, was very academically interesting to me.”

Read the full article here.