Opinion
Druley: Only 100 to 200 hedge funds merit institutional capital
“What I would say is hedge funds is an asset class not worth the money. That said, there's seven, 8000 hedge funds. We think there's a hundred to 200 that actually do merit institutional capital and continue to merit institutional capital.”
Opinion
Druley: Only a few percent of 10,000+ managers merit institutional capital
“We think about the 10,000 plus managers that are out there. There's a few percent that actually merit any of the capital of our clients and asset owners.”
Insight
Druley: Co-investments only generate strong returns within a manager's sweet spot
“And what they found out is that when you did co-invest with the managers we like, if you did it in their sweet spot, the sweet spot being either sector or industry expertise or size deal, that co-invest worked out very well. When you did the co-invest outside …”
Opinion
Druley: Cambridge still finds significant active value-add in liquid equities
“We are still finding the ability to generate significant value add in the liquid markets, specifically the liquid equity markets. There's pockets of those markets which are harder to generate value add, but in the most part, we're still finding the ability to …”
Insight
Druley: Investors should capture at least 65% of a manager's alpha
“We want a fair sharing of the alpha, meaning we think asset owners should get 65 to 75% of the alpha, at least, and that it's fine for the manager to have 20 or 30%.”
Assertion Contradicted
Druley: Cambridge Associates holds up to 60% of endowment advisory market
“So on the endowment and foundation side, as I think probably most of our listeners know today, we have significant market share. In most cases, we're 50, 60% of the market.”
Prediction Not checkable as stated
Druley: Less active management could make markets less efficient
“In some ways, it may provide us even additional opportunity if you have less people actually pursuing active management. It could make the markets a little less efficient, if you will.”
Insight
Druley: Portfolio risk tolerance is bounded by the client's time horizon
“That said, I will say one of the main lessons I learned from that time is that your risk tolerance has to be the lesser of my risk tolerance in time horizon or the asset owners.”
Insight
Druley: Managing institutional portfolios solely through quarterly meetings does not work
“Running money with four quarterly meetings and not having people like managing the portfolio daily, that's not going to work. This is too complicated.”
Disclosure
Druley: Cambridge Associates takes zero money from investment managers
“We don't take any money from managers either, which is somewhat unique in our industry.”
Opinion
Druley: US equities and sovereign debt are richly valued
“You have pockets of assets that are richly valued. We think U.S. Equities, sovereign debt.”
Assertion Partly supported
Druley: Impact investing demand is larger in Europe than the US
“And it's as big as it is in the U.S., it's even
A bigger deal in the UK and Europe.”
Insight
Druley: Cambridge favors concentrated managers because it can diversify idiosyncratic risk
“Tend to many cases to have a bias towards concentrated high conviction managers. We can diversify out their idiosyncratic risk, and we've had great success in identifying those managers”
Insight
Druley: Investment edge today is decision-making and synthesis, not information access
“It's not so much what information you get. It's how you synthesize that information and how you make decisions. It's the edge today.”
Assertion Partly supported
Druley: No firm holds over 2% market share in private client advisory
“And then private client side is just very fragmented. No one has more than two percent of the market.”
Insight
Druley: Active management in aggregate delivers net negative returns after fees
“In aggregate of all the people going through the effort, is it worth it? No. Because we know that after fees, in aggregate, it's gonna be a negative return relative to the index, if you will.”
Disclosure
Cambridge Associates conducts 6,000 investment meetings annually across asset classes
“You take these three things and it allows us to go out and do 6000 meetings a year across the globe, across asset classes.”
Disclosure
Druley: Cambridge Associates walks away from managers with operational red flags
“On our side, the fundamentals, we could think they're going in the right direction, but if the operational due diligence shows red flags, that's it. I mean, we'll walk away. Now we will give the manager feedback and say, we have issues with these things. We th…”
Disclosure
Druley: Cambridge Associates does not sell proprietary investment products
“And to this day, we still have no product, which is still important to me, and it's important to my colleagues.”
