Sona Menon’s insights as an outsourced chief investment officer at Cambridge Associates were featured in this Investor Profile, where she highlights the firm’s expertise in alternative investments and hedge funds as contributors to client performance.
“As a whole, we are trying to create a portfolio with less beta,” Menon says. “Alpha costs money but we’re very careful in where we get that.”
Menon says, “A meaningful allocation to hedge funds is a perfect way to de-risk and also allows portfolios to take advantage of growth opportunities… Hedge funds give me me some upside but protect the downside.”
She explains that manager selection is critical across asset classes, especially in the hedge fund universe, and outlines the requirements that she and her colleagues look for when sourcing and diligencing managers for client portfolios. These include being of institutional quality, having a certain level of assets under management, exhibiting a certain track record, having good fee terms (CA has negotiated more than 100 fee levels), transparency in business and operations, and more.
The search for alpha is not just in alternatives. Menon mentions that Cambridge Associates also likes active credit, and looks to add value through sector selection and geographically focused managers in long-only equities.
“It is an interesting time to be in active,” Menon says. “From an active manager, we look not only to get the best stocks but the best sectors, and protect on the downside by not being in the most expensive names. In the last year, all of my active managers have done really well.”
Menon also serves as the head of the North American pension practice which works with corporate defined-benefit plans, pension funds of not-for-profits, and public plans.
Read the full interview here.