Accompanied by Willett Bird and Zac Corona from the Vidrio biz dev team, I recently joined the thousands of investors, managers and industry elite who attended Miami’s so-called Hedgeweek, which saw multiple conferences and events across the city, most notably the iConnections Global Alts 2022 event, which we were pleased to sponsor and attend.
The iConnections event hosted 2,400 attendees and over 8,000 one-on-one meetings between alternative investment allocators and managers, and the event was the first time the industry was really able to gather at such a scale since the pandemic began.
Besides being a prime people watching opportunity from a poolside, locale, the event really provided a moment for the industry to reflect on where it is headed and how much more work needs to be done in key private market arenas.
Some of these trends we have been following closely, but the conversations on the stage and on the sidelines informed our own viewpoints on this rapidly evolving industry. Following are just a few takeaways from our team.
In the opening panel “Fireside Chat: Taking the Reins to $1.5 Trillion at the Start of a Pandemic,” Jenny Johnson, CEO, Franklin Templeton spoke at length about the role ESG plays across the firm and its strategies and the role technology plays in getting the insights right.
At Vidrio, we have recognized ESG as an important emerging factor that allocators are constantly wrestling with in terms of industry best practices for implementing ESG portfolio reporting and analytics. As a firm we have done extensive work to help clients build systems and solutions on the reporting side to help them make sense of their overall ESG exposures. Though surprisingly, we have found through various surveys and discussions with of clients that many are still in the opening phases of building out systems with many still lagging in certain areas.
We Prefer "Digital Assets," Please
Industry proponents of the crypto craze of course were in full force as one would expect. Moderating a panel on this pervasive trend was SkyBridge Founder Anthony Scaramucci. One of his panelists quipped that the phrase preferred by the industry is digital assets as it means more than just cryptocurrency, an investment arena they see ripe for exponential growth in years to come.
At Vidrio, we view crypto and other technological advances as important market developments that need to be thoroughly investigated before we can take a stance on how allocators should manage and potentially allocate to such an investment option.
While crypto assets have grown in market adoption, our August 2021 Vidrio Views survey found hesitancy of a meaningful adoption of this asset class by institutional investors and reflected the minimal adoption we had seen across other investors in the Vidrio infrastructure. While there was a significant amount of interest in crypto, through our research we found that for this asset class to gain meaningful traction with the institutional investing community significant inroads will need to be made as it relates to education and that investors will need to reach a level of comfort beyond where current sentiment resides.
Transparency Triumphs over Complexity
The blurring of the lines of allocating across asset classes with the inclusion of private investments as a larger portion of allocator’s overall asset mix was also the focus of a panel tilted “The Investor Perspective – Redefined Returns for a New Market Era,” that featured Brian O'Neil, CIO, Robert Wood Johnson Foundation, Elizabeth Burton, CIO, The Employees' Retirement System of the State of Hawaii, and Shawn T. Wooden, Treasurer of the State of Connecticut.
Wooden has been one of the leading allocators to alternatives managers with alternative investments representing diversifiers in the Connecticut Retirement and Trust Fund (CRPTF) portfolio that represents approximately 32% of the fund. He also highlighted the importance of establishing robust due diligence and market best practices to onboard alternatives managers and how as an allocator they don’t typically look at new funds but will look at spinouts.
This panel touched on many factors we at Vidrio have been helping our clients manage over the years as the complexity of their alternative investment strategies has grown alongside exposures to new funds.
For instance, as private equity and private credit have become larger asset pools as investors look further out the duration curve and seek out asset opportunities that are less correlated to the public markets we recognize the importance of being able to look under the hood and get granular data as to how each GP is generating their risk premia.
Perhaps more importantly, it is worth noting that although Miami’s Hedge Fund Week was originally supposed to be about hedge funds, the focus on the part of investors has broadened under the label of private markets, which was a popular and distinct program track at the iConnections conference.
And yes, while privacy is implied, fewer investors are signing up for strategies not allowing for some basic insights to get a handle on risk, portfolio exposures and more importantly long-term expectations.
I would be happy to speak with you about any of the above discussion points, and I encourage you to view the Vidrio Blog and our past Vidrio Views survey results for more insights and ideas from the industry.