The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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McCusker: Pure institutional, RIA, and retail channels will vanish within 20 years
“I would say, 20 years from now, there's not many purely institutional, or purely RIA, or purely retail players. Everything is blended together, whether it's asset managers, advisors, or the end participants, even.”
McCusker: Allocators will negatively view well-capitalized managers taking SBA loans
“For a lot of well-established, well-capitalized managers, that's not an appropriate use of that pool of capital, and In some ways, they're taking from small businesses on Main Street that can really deserve it, and I believe that list is going to be made publi…”
McCusker: More Institutional Firms Will Merge With RIA Platforms
“The other thing is this is going to continue to happen. I don't think these are the last two firms that are going to tie up with RIA platforms.”
McCusker: Markets are more likely to experience a short-term downward snapback
“In the short term, I think it's just Really hard to look at things and say, all right, we're moving forward and markets are going up and we're going to buy more when it feels like the market's gotten a little bit ahead of itself and we're more likely to see a …”
McCusker: Business Travel Will Return to Normal Quickly Post-Pandemic
“While some are saying this is a breakthrough, and we're going to be a lot more flexible working from home, I think we're going to go back to normal pretty quickly, and we're going to be road warriors once again. So it's actually, I'm not answering the question…”
NEPC is pounding the table to rebalance out of US equities
“We've been talking about over the last year, and US equities have continued to do pretty well, but I think we're really pounding the table now that that's a place where we want to rebalance.”
NEPC lets fund managers decide capacity allocations across clients
“We take that twenty million dollars, put it in a list, and we give that back to the manager, and they make the decision of how they want to allocate, so we're not making the choice of one client over another. We're not choosing OCIO over advisory. They all go …”
The bottom 50% of the US economy saw no wage growth
“And the bottom 50% of our economy hasn't seen a wage increase in over 50 years.”
Investors should avoid passive indexing in emerging markets
“You don't want to be passive in emerging markets. Even if it can be a challenging benchmark to beat, you want to be active there. You want to be trading there and not just stuck with what the benchmark offers you. And we see some skill there, too. We see that …”
McCusker: RIAs Lack Full Investment Engines Built by Institutional Consultants
“You see the RIA space that is growing, that's going through a different kind of consolidation with all these smaller independent RIAs, but you see this tailwind of new wealth coming in there, RIAs needing a lot of investment help, and these platforms that have…”
McCusker: Investment consulting is inherently unscalable without hiring more people
“If you have two great consultants with 10 clients each, you get to that 21st client, you've got to add another great person. So since it's not a super scalable business model, it's always somewhat inorganic.”
McCusker: Distributing through Hightower's RIA platform provides scalable growth
“If we can bring solutions to Hightower's RIA platform and have them invest in it, that's a more scalable model than we've been able to create historically.”
McCusker: Hightower acquiring 100% of NEPC was a deal-breaker
“A really important part of our culture is having ownership in our business, being really well aligned, and then being able to pass that ownership on to the next generation. So that was a deal killer if they wanted to go 100%.”
McCusker: Inaccurate acquisition rumors are ideal because they can be cleanly denied
“There was a moment where there was a rumor out there that we were being bought by one of our competitors, which if you're going to have a rumor out there, having it be the wrong rumor is actually ideal because you can deny it and you don't have to give any mor…”
McCusker: TH Lee will face another Hightower transaction in a few years
“Hightower is owned by TH Lee. It's been a very successful investment for them. They've rolled it into a continuation fund. That continuation fund has a life on it, and they'll have to figure out something. There will be another transaction a few years from now…”
McCusker: Next-gen RIA leaders prefer planning over in-house investment management
“They are under allocated to private markets. There's a generational transfer happening within the RIA leadership where you have folks who led their RIAs from an investment perspective, and the next generation wants to be more planning oriented and wants to han…”
McCusker: NEPC avoided an auction because Hightower terms were fair
“It just felt wrong to bring in other players at that point, and we felt like having the external advisor validate that the financial terms were reasonable and at market just gave us some comfort that we were only going to screw things up if we brought other pe…”
McCusker: BlackRock's SIO fund runs high tracking error for fixed income
“Within a fixed income allocation, It's a pretty high tracking error strategy when you think about what most fixed income strategies deliver for tracking error.”
McCusker: NEPC 10-year assumptions project 6-7% equity returns versus 0.6% Treasuries
“We just went through a full rerunning of all of our assumptions, and we've got equity assumptions in the sixes, the sevens, even higher for emerging markets, and then a treasury assumption at . Six percent right in line with the yield right now. And you run th…”
McCusker: Credit yields are attractive enough to compensate for upcoming defaults
“And that's true for credit as well, where sure, again, just like equities, there could be another leg down, but the yield is pretty attractive and should compensate you fairly well for the default cycle that we're likely to go through.”
McCusker: 2020 Vintage May Offer Best PE Opportunities in Years
“This could be some of the best opportunities that come along in years for new private market funds.”
McCusker: Solve Denominator Effects Through Multi-Year Repacing, Not Sudden Cuts
“You work your way out of it over time through repacing year over year and not by making a dramatic move in one year.”
McCusker: PE Capital Calls Will Drop by at Least One-Third
“Our expectation is that calls and distribution will both be lower. I think when we analyzed it, calls and distributions were down by a third to half through the global financial crisis, and that's sort of our base case right now that we can expect At least a t…”
McCusker: Due diligence will stall briefly before surging in distressed credit
“I actually think it'll be slow right now, and right now being the next One to three months, call it. And then I think it's going to ramp up like crazy. One, it'll be a little bit of a backlog. And two, what we were talking about earlier, some of those credit o…”
Institutional boards are increasingly delegating manager selection to staff
“As that dedicated staff is billed out, boards or investment committees seem to be getting more and more comfortable with giving those staff members some authority, if not full authority, but authority to make manager decisions, hiring and firing decisions, but…”
Quantitative filtering reliably predicts persistent manager underperformance
“It's very predictive on the bottom half. The managers that are drifting down towards the bottom tend to continue underperforming. So it allows us to say, cut the universe in half.”
Room dynamics reveal true decision-makers over named portfolio managers
“I think the people part to me is the most important. It's not just who they are, but it's how they work together, how they interact, and sometimes that's more subtle things. Sometimes, sometimes there's a named portfolio manager, but you get a group in the roo…”
Fixed income managers are naturally dour; equity managers are perpetually optimistic
“You're going to expect to have more Dour and conservative people and on the fixed income side of things that the world's always ending and everyone's going to default versus the equity guys that think everything's going to go on forever.”
Mid-sized endowments drive venture capital demand over large public funds
“The large public funds aren't doing much in venture. So it's, We definitely think it's worth it. I'd say there's more of an appetite for venture from our smaller and medium sized endowment clients. A 500 or billion dollar endowment can make a five or ten milli…”
China produces roughly twice as much AI research as the US
“If you look at the publication of AI research, probably two X has come from China as opposed to the US.”
China will reach negative population growth in the 2030s
“In 2030, or sometime in the 20 thirties, China is going to move to negative population growth.”
Passive investing in high-yield debt is counterproductive
“You don't want to be passive in high yields. And, you know, even if you just want to get exposure, you still want to be active there. You don't want the biggest bonds in your portfolio to be there just because the company's issued more debt.”
Clients undermine long-term views after just three months of underperformance
“We're setting five to seven year views, and if they're not working in the first three to six months, we've got all of our consultants and clients saying, why do we do this? How do we not see this? And I think Behaviorally, we all fall victim to it, so I fall v…”
McCusker: OCIO Has Been Major Growth Tailwind for Consulting Firms
“The tailwind that has helped all of us the last decade is the OCIO channel. And that has been a great source of growth for us and many others.”
McCusker: Large PE firms built 100-person sales teams for RIA market
“We looked at some of the big private equity firms starting to raise hundred person sales forces to attack that market, and we thought, well, that's not really implementable for any PC, so let's keep it on there, but we don't really have anything right now.”
McCusker: NEPC hired an investment banker for market education, not auctioning
“We engaged an investment banker to help us not so much scan the universe and bring in other potential suitors, but just help us understand who are the other players besides Hightower. Where does Hightower fit in terms of how they work with their advisors”
McCusker: All 350+ NEPC employees receive bonuses upon deal close
“We made sure that all of our 350 plus employees are getting something out of this transaction. There's a bonus for every single person who's employed when the transaction closes.”
McCusker: Hightower Has Acquired 140 Advisor Teams
“Hightower has gone through a lot of acquisitions. They've acquired a 140 advisor teams.”
McCusker: BlackRock's Strategic Income Opportunities is NEPC's most notable BlackRock allocation
“So we do think highly of them and we use them in a lot of different ways, but Rick's strategic income opportunity strategy is probably the most notable one that we use.”
McCusker: Corporate LDI clients saw the most direct benefit from rebalancing
“If they had an LDI allocation, which most of them do, They saw some of the biggest gains from fixed income, and they were probably the earliest to rebalance, because rates fell very quickly, and it was actually a positive basis mismatch for them if they had an…”
McCusker: Asset managers across strategies are exploring the TALF credit opportunity
“Everyone is looking at the TALF opportunity now, so we've got everything from long only liquid Managers talking about that.”
McCusker: Video calls reduce informal competitor intelligence gathered during manager meetings
“That may be one of the things that we lose by not having the in-person meetings in the office. I think that can often be part of the conversation at the beginning or end of a manager meeting, kind of the casual chit chat of, hey, what are you hearing from othe…”
Public pension asset allocation changes take three to six months
“On the other end of the spectrum, we can go to a, say, a public plan, and we've got to go through the governance process, we've got to go through monthly meetings, we've got to think about what that means for their discount rate and have conversations about th…”
NEPC's bespoke OCIO business manages over $20 billion across 50 clients
“So we have what is now a large OCIO business with probably over twenty billion dollars, over 50 clients. Every portfolio that we build is bespoke.”
NEPC maintains an approved list of up to 400 long-only managers
“I think we have about 350 to 400 managers in long only overall, so probably 200 or so of those, or 150 to 200 are equity.”
Most NEPC client large-cap US equity dollars are passive
“If I go by dollar count, it's much, much higher because many of our large public funds are passive in U.S. Equities and often running it internally for cost management purposes.”