Crain Currency: Dos and Don’ts for Family Offices Getting into Direct Investments
NEPC’s Karen Harding was recently quoted in a Crain Currency article, where she shared insights on the importance of thorough due diligence and setting realistic expectations when family offices pursue direct investments. Visit Crain Currency to read the full article.
As more family offices shift toward direct investments in private companies, experts say success depends less on capital and more on preparation, discipline and knowing what not to do.
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“Is direct investing right for you?” said Karen Harding, partner and private wealth team leader at Boston-based advisory NEPC. “It might or might not be the best approach — it depends on their asset class and their interests and goals, as well as their staffing and skill set.”
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Relationships should be approached strategically, not casually. Harding and Lee both warned about what Lee calls “country club” investing — informal deals made through social ties, without diligence.
Click here to continue reading the full Crain Currency article.
Pensions & Investments: Financial advisory firms go from ‘among the worst to first’ for 401(k) rates of return. Consultants weigh in on why.
NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article exploring the standout performance of 401(k) plans in the financial advisory industry in 2023. He offers perspective on the factors behind the industry’s strong returns and participation rates. View the article on Pensions & Investments’ site here.
It’s not easy to jump from the near bottom of the list to the very top, but the financial advisory industry did just that in the rates of return their 401(k) plans delivered for their employees.
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Bill Ryan, partner and defined contribution team leader at NEPC, is skeptical that more aggressive plan menus — or those offering more equity investment choices — played a role in the ranking.
“Despite some industries offering a broader spectrum of investment choices, the number of options doesn’t determine how participants invest,” he said, citing NEPC research that while 74% of employers offer 11 or more core investments, participants choose only three to five.
“A large menu doesn’t necessarily equate to an aggressive plan,” he said, adding that some core menus offer more than 20 equity options.
In Ryan’s view, a more likely explanation for the outperformance of financial advisory firms is that some industries are simply more risk tolerant than others and therefore see greater returns during market upswings.
“Professionals in finance, accounting, law, engineering and medicine tend to exhibit a greater comfort level with the short-term fluctuations inherent in equities,” Ryan said.
Click here to continue reading the full Pensions & Investments article.
Barron's: The Fed Has 3 Tools to Fight Tariff-Related Inflation. All Have Drawbacks.
NEPC’s Jennifer Appel was recently quoted in Barron’s, offering her insights on how inflation pressures and tariff policies could shape the Federal Reserve’s interest rate decisions. View excerpts below or visit Barron’s to read the full article here.
The Federal Reserve has spent the past three years proving it can bring inflation down through tighter monetary policy. But President Donald Trump’s sweeping Liberation Day tariffs could spark a new kind of inflation that the Fed is less equipped to handle.
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If inflation persists and expectations start to drift, the Fed may be forced to act anyway, tightening policy not because of confidence in its ability to bring prices down, but because failing to act would do more damage to its credibility.
But that decision won’t be easy. “Tariffs have brought about so much uncertainty on both ends of the Fed’s dual mandate,” says Jennifer Appel, principal and senior investment director at NEPC, an investment consulting firm. “If we start to see those job losses come through, there is a risk the Fed will already be behind the curve.”
PitchBook: Elite University Endowments Confront a ‘Parade of Horribles’
NEPC’s Colin Hatton was recently quoted in a PitchBook article exploring how elite university endowments are facing pressure from underperforming private markets, rising costs, and political scrutiny. He highlights the need for diversification and suggests endowments may need to adjust asset allocations as private equity returns decline. View excerpts below or read the full article on the PitchBook site here.
Endowment investment teams at top universities are exploring options to cash out of some of their public market investments, primarily through hedge fund redemptions, to compensate for federal funding cuts and prepare for potential tax increases.
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“With greater levels of uncertainty, you want to understand what your liquidity needs are going to be,” said Colin Hatton, a principal at LP consultant NEPC, where he advises endowments and foundations.
Hatton said his firm is advising clients to keep sufficient capital in safe-haven assets, and in some cases, to take out lines of credit on their portfolios for more liquidity.
FundFire: How Michigan State’s Endowment Outperformed the Ivies
Kristin Reynolds of NEPC was recently quoted in a FundFire article offering a cautionary perspective on MSU’s tech concentration, noting potential risks from overexposure to large-cap U.S. tech stocks amid rising market volatility. View excerpts below or read the full article on the FundFire site here.
Michigan State University’s investment returns beat many elite endowment peers for the fiscal year ending June 30, 2024.
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“Endowments with high public equity U.S. tech exposure performed exceptionally well over the past two years but are likely facing challenges in the current market,” said Kristin Reynolds, a partner at NEPC.
NEPC has diversified U.S. tech exposure with value-oriented stock, Reynolds said. “Conversely, non-U.S. equities have been performing better,” she added.
Pensions & Investments: TIPS making a comeback for ETF investors
NEPC’s Phillip Nelson was recently quoted in a Pensions & Investments article highlighting TIPS as a key tool for real rate exposure, notes that breakeven rates are currently high, and says clients are increasingly looking to TIPS for diversification and liquidity. View the full article on Pensions & Investments’ site here.
Amid heightened volatility and economic uncertainty, the market for exchange-traded funds holding Treasury inflation-protected securities has rekindled after three consecutive years of outflows.
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“From an allocator’s long-term perspective, TIPS is a favorite asset class for real rate exposure,” said Phillip Nelson, partner and head of asset allocation at investment consultant NEPC. “As a rough target, we look at TIPS holdings equal to the size of a Treasury allocation or relative to investment-grade exposure.”
Nelson has observed, however, that 5-year and 10-year breakeven rates are “currently a little rich.” Breakeven rates are the spread between nominal Treasuries and TIPS at constant maturities.
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“Over the last month and a half, we’ve received a lot more questions on TIPS given the uncertainty of the tariff regime,” said NEPC’s Nelson.
“Within our OCIO business, clients want to know if they have enough liquidity to meet cash flow needs. They are looking to get more diversified, add fixed income, and allocate slightly more to TIPS.”
Click here to read the full article on the Pensions & Investment site.
Business Insider: 3 trades keeping investors in the green this year as the S&P 500 corrects
NEPC’s Head of Asset Allocation, Phill Nelson, was recently quoted in a Business Insider article to provide insights on the S&P 500 correction last week. View the full article on Business Insider site here.
- The S&P 500 has shed 4% since the beginning of the year as Big Tech stocks decline.
- However, previously unloved areas of the market like healthcare are rebounding.
- Gold and European stocks are also rallying.
Tariff volatility, mounting recession fears, and uncertainty around the AI trade have rocked markets this year — pushing the S&P 500 into correction territory last week.
But amid the stock-market sell-off, there are still pockets of outperformance.
“Anything with a more moderate valuation profile to start the year has done well,” Phillip Nelson, head of asset allocation at the investment consulting firm NEPC, said. “Areas less impacted by the headlines associated with tariffs seem to have weathered some of the uncertainty of the last several months.”
Pensions & Investments: Consolidation in the Retirement Industry Leads to Better Services and Greater Rivalry
NEPC’s CEO, Mike Manning, was recently quoted in a Pensions & Investments article to provide insights on the consolidation of DC plans and plan sponsors. View the full article on Pensions & Investments’ site here.
Consolidation of record keepers and other vendors to defined contribution retirement plans is a positive trend that leads to better services for participants, according to four speakers at Pensions & Investments’ Defined Contribution East conference March 10.
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Mike Manning, managing partner at NEPC, and Bob Oros, chairman and CEO of wealth management firm Hightower Advisors, agreed, saying consolidation leads to a better customer experience, lower fees and better participant outcomes.
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NEPC’s Manning said the trick is understanding how plan sponsors want to work with record keepers, advisers and other providers.
“It’s all about how that we can work with the data in such a way that it makes it easy for advisers to serve their customers,” Manning said.
Manning also urged plan sponsors to “put pressure on their record keepers to work with all the other folks in the ecosystem.”
Click here to read the full article on the Pensions & Investment site.
Pensions & Investments: Managed Account Offerings in Retirement Plans Shrink as Employers Wait for Better Deal – NEPC
NEPC’s DC Plan Trends and Fee Survey data was recently featured in a Pensions & Investments article which covers the decline in managed accounts in retirement plans, citing concerns about provider benefits over participants and advocating for participant-aligned, subscription-based pricing models. View the full article on Pensions & Investments’ site here.
The number of employers offering managed accounts in their workplace retirement savings plans has shrunk, according to NEPC’s “Defined Contribution Plan Trends and Fee Survey” released March 4.
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“We believe managed account providers can and do construct efficient investment portfolios, but plan providers, as fiduciaries, should push for more improved outcomes for their plan participants through negotiating lower fees and seeking to better align the interests of the managed account providers with those of participants,” Mikaylee O’Connor, principal and head of defined contribution solutions at NEPC, said in the news release.
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“By implementing a lower-based fee for less engaged participants, providers can offer an entry-level option, while more engaged participants could access expanded investment options through tiered subscription offerings,” O’Connor said.
O’Connor proposed a single-digit base fee for less engaged participants and a series of subscriptions for additional services and/or investment exposures for individuals who engage with the accounts and want the additional features.
Click here to read the full article on the Pensions & Investment site.
InvestmentNews: Managed Accounts Have Hit a Wall in DC Plans, Finds Survey
NEPC’s DC Plan Trends and Fee Survey data was recently featured in an InvestmentNews article which highlighted our findings on the increased demand for customized solutions in pension plans and the shift towards passive management in target-date funds. View the full article on InvestmentNews’ site here.
A new report from NEPC offers new insights in the workplace retirement savings space, particularly when it comes to the use of managed accounts and target-date solutions.
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“We believe managed account providers can and do construct efficient investment portfolios, but plan providers, as fiduciaries, should push for improved outcomes for their plan participants through negotiating lower fees and seeking to better align the interests of the managed account providers with those of participants,” Mikaylee O’Connor, principal and head of defined contribution solutions at NEPC, said in a statement revealing the results.
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To improve uptake among plan members, she suggested sponsors could offer a subscription-based model with lower base fees for less engaged participants, while providing more investment options for those more actively involved through tiered subscriptions.
“This approach allows for flexibility in costs and features, catering to diverse participant needs and engagement levels,” she said.
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“Analyzing this year’s survey results through a long-term lens, we are excited by the ample opportunity for industry innovation, personalization, and increased accessibility in the defined contribution marketplace, especially across areas like alternative investments, managed accounts, TDFs, and retirement income solutions,” O’Connor said.
Click here to read the full article on the InvestmentNews site.