Every institutional investor says they’re long term — until a crisis hits.
In the wake of ongoing trouble at regional banks, not to mention rising inflation and interest rates, many long-term investors are reassessing their investment strategies.
“The hardest thing for clients in a time like this [is that], like everyone else, you start focusing on the immediate,” said Kane Brenan, CEO at outsourced chief investment officer firm TIFF Investment Management. “It’s just harder. Everyone does this wrong.”
Brenan and his team have been coaching clients — primarily small endowments and foundations — through the recent market turmoil, urging them to not act rashly. But that doesn’t mean that TIFF is standing still.
The OCIO firm has been embracing an active investment style that considers medium-term trends that they believe will dominate the market for up to seven years. According to Brenan, TIFF has been more active over the past year in response to the changing market landscape.
“Everyone gets that the whole world has changed,” Brenan said, pointing to the first bout of inflation in the past 40 years, coupled with significant interest rate increases, backsliding globalization, and a push toward clean energy.
“You ask some people what they’ve done in their portfolio and they say nothing, I’m a long-term investor,” Brenan said. He and his team believe that’s a fundamentally flawed approach.
In response to 2022’s shifting market conditions, TIFF went to its managers and asked them to set up separate accounts for investments in the biotech and payments sectors — both of which were hit hard in early 2022.
“If you think about activeness, that’s us saying what’s a good place to be for the next three-to-seven years,” Brenan said. “They [biotech and payments] have both done well.”
The organization also is reassuring clients that private equity is still poised to perform well. This work has recently been particularly focused on the effect of the banking crisis on the markets and PE. With holding periods of up to 12 years, investors are concerned about the future of the markets. TIFF clients typically hold about 65 to 70 percent across listed stocks and private equity.
TIFF is still putting capital to work at a steady pace in early-stage venture and lower middle market PE.
Across asset classes, Brenan said the ongoing market volatility has uncovered opportunities for some and inflicted pain on others. “Some banks are winning, Some asset managers are winning. There are real winners and losers,” he said.
