Adjust the umbrella, dig your toes into the hot sand, and sip that pina colada. It’s the weekend, which means... the news:
- Mr. Clean: The new CEO of Stanford Management Company, Robert Wallace, is reportedly cleaning house. According to some reports, there are only five investment professionals left over at SMC from the John Powers era. This is undoubtedly a significant shakeup. And it has clearly struck a nerve with many, as I’ve had about 10 emails asking what’s up. My entirely uninformed take on the situation: It’s reasonable that Wallace — a person with a rather different philosophy and approach than Powers — would look to build a team with capabilities specifically oriented to his model. Wouldn’t you? Cut the guy some slack. As my inbox clearly demonstrated, the world is watching him right now.
- Expected Returns: I’ve seen a lot of sensational stories this week fretting over CalPERS’s big performance miss: it returned 2.4% in 2014, which was 5.1% off from its annual target. A single-year performance number for a long-term investor doesn’t actually worry me. But while we’re on the topic of worries, I’m freaked out by the prospect of public pension funds seeing this slowdown in performance and turning to “creative” products that can help them hit nutty return expectations in the years ahead. I’m afraid of under-resourced funds moving into riskier and riskier assets.
- You Had One Job: The Australian Future Fund was outed by some intrepid reporters for dodging a bunch of taxes via offshore accounts. This story was made all the more interesting by the following point: The Australian SWF did not actually owe any taxes. At all. To anybody. So, the very premise for the story, which has resulted in articles around the world, was wrong. (Sigh, you had one job.)
- In-Sourcing I: It’s taken 10 years of hard work by many people to make this article happen: SWFs are officially evolving from client ... to competitor.
- In-Sourcing II: The Abu Dhabi Investment Authority is apparently outsourcing the easy, passive stuff and in-sourcing the hard, active stuff. That’s an approach to direct investing you don’t see every day.
- Drawdowns: Singapore’s Government is changing its constitution in order to use more of Temasek’s capital to fund important governmental projects.
- Northern Exposures: Finland’s €45 billion Keva will begin diversifying into non-domestic real estate for the first time. In addition, Iceland’s Central Bank will relax rules that prevent local pension funds from buying overseas currencies (and thus investing internationally).
- Collaboration: TIAA-CREF has apparently launched another new investment company with its frequent peer-partners, CDPQ and AP2. If you recall, the last company they did together was focused on agriculture, but this company will target timber.
- Emerging Markets: Temasek seems to be going all in on India. After having ramped its presence in the country over the past three years, it just deployed $1 billion in the past three months!
- Condolences: The former CEO of Alaska’s SWF, Mike Burns, has died at 68. He retired abruptly last month due to health concerns. Mike was a long-time supporter of my research center and a kind man.
On that note, I’m going to spend some extra time enjoying the company of friends and family this weekend ... See you next week.