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SBAI Newsletter - September 2021
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In this month’s newsletter:

  • New Stakeholders
  • SBAI Appoints Paula Volent of the Rockefeller University to its Board
  • SBAI Launched its Culture and Diversity Initiative
  • SBAI’s Response to the FCA’s Discussion Paper on Diversity and Inclusion in the Financial Sector – Working Together to Drive Change
  • SBAI Responds to the FCA Consultation and Discussion Papers on ESG and Diversity 
  • Event Summary: SBAI APAC Forum
  • Upcoming Events 

New Stakeholders


The Standards Board is delighted to welcome a new addition to the SBAI family.

Investor Chapter
  • British Columbia Investment Management Corporation (BCI) (Canada)

Signatories
  • Lafayette Square Holding Company LLC (USA)
  • QVR Advisors (USA)
     
Core Supporter
  • Lafayette Square Holding Company LLC (USA)    


SBAI Appoints Paula Volent of the Rockefeller University to its Board


On 8th September 2021, the Standards Board announced the appointment of Paula Volent, Vice President and Chief Investment Officer of The Rockefeller University, to its Board of Trustees.

Mario Therrien, Chair of the SBAI stated: “We are absolutely delighted to welcome Paula to our Board. She brings a keen understanding of the challenges and opportunities in our industry and a wealth of experience and knowledge from the endowment perspective.

”Paula Volent stated, “The SBAI has a strong history of innovation, problem-solving and improving practices in the alternative investment industry.  I am thrilled to be joining the SBAI Board and look forward to being a part of this important endeavour.”

Luke Ellis, Deputy Chair of the SBAI, said, “Paula is a business leader of the highest calibre.  Her extensive experience managing large endowments will be an asset to our Board and stakeholders. Having a board with a diversity of backgrounds and experiences makes the SBAI strong and more successful.”

Paula Volent is responsible for the oversight and management of Rockefeller’s $2.5 billion endowment.  Prior to joining Rockefeller in August 2021, Ms. Volent was the Chief Investment Officer and Senior Vice President at Bowdoin College for over two decades.  Prior to Bowdoin, she began her investment career as a Senior Associate at the Yale University endowment under the leadership of David Swensen.  Ms. Volent has a BA from the University of New Hampshire; a master’s degree in Art History from the Institute of Fine Arts at New York University; a Certificate in Conservation from the Conservation Center at NYU, with a specialization in the conservation of works of art on paper; and an MBA from the Yale School of Management. 

 

SBAI Launched its Culture and Diversity Initiative


The Report:
This month saw the launch of our formal culture and diversity initiative with the publication of our first report on the topic – Principles of Culture and Diversity Strategies. Through conversations with our community of asset managers and allocators over the year, we believe there is a genuine intention from firms to improve the diversity of our industry in order to improve investor outcomes. The challenge with a topic so broad is where do you start. This report provides a framework to help structure an effective and measurable strategy based on five key principles: Leadership, Strategy, Communication, Policies, and Inclusion. Please click here to download the report.

The Launch Event:
We launched this report with an event titled “Moving Beyond the “Why?” Culture and Diversity in the Alternative Investment Industry”. The event featured SBAI Trustees (Leda Braga of Systematica Investments, Jane Buchan of Martlet Asset Management, Luke Ellis of Man Group and Mario Therrien of CDPQ) and other industry leaders, including Jase Auby of Teacher Retirement System of Texas and Philip Mayer of Oasis Management Company. The panellists discussed what diversity means to them, whether there has been genuine improvement, and what they have seen working in the industry.

Coming Soon:
We have much more on the way, including:
  • An Interactive Roundtable Discussion with Erich Gerth (CEO, Bluebay Asset Management) and Dawn Fitzpatrick (CIO, Soros Fund Management) on 14th October 1pm BST/8am EST
  • Our very first SBAI Podcast will be coming soon – Conversations on Culture with Amanda Cherry (Director of HR, Aspect Capital) and Barbara Bernstein (Chief HR Officer, Magnetar Capital)
  • The SBAI Culture and Diversity Working Group continues exploring the topics of diversity at smaller firms and how allocators can increase the diversity of their portfolio.

For any further information or to get involved please reach out to us at info@sbai.org.
To read the press release in full, please click here. Additional information about the SBAI’s Culture and Diversity initiative can be found on the SBAI Toolbox webpage.

 


SBAI’s Response to the FCA’s Discussion Paper on Diversity and Inclusion in the Financial Sector – Working Together to Drive Change


As part of our regulatory engagement efforts. We have responded to the FCA’s discussion paper on diversity and inclusion in the financial sector.

Below are some of our key observations included in our response:
  • Quantitative vs Qualitative Data: On the theme of our next focus area in the C&D initiative, we observe that disclosure solely based on metrics may not be appropriate, as it can be difficult for smaller firms amongst other reasons. We also recommend the use of qualitative questions.
  • Regional differences: We note that global firms based in the UK may not be able to provide data for non-UK based employees
  • Proportionality: If detailed metrics-based reporting is considered in any proposed regulations, we recommend a concept of standard and enhanced reporting should be introduced with thresholds based on number of employees and other similar measures.
  • Standardisation: We recommend that the FCA consider reporting requirements and allocator questionnaires that are currently in circulation to avoid introducing additional frameworks and reduce some of the resource requirements on firms.
 

SBAI Responds to the FCA’s Consultation Paper on Enhancing Climate-Related Disclosures by Asset Managers, Life Insurers, and FCA-Regulated Pension Providers


We also have responded to the FCA’s Consultation Paper on Enhancing Climate-Related Disclosures by Asset Managers, Life Insurers, and FCA-Regulated Pension Providers. 

Whilst we are generally supportive of enhancements in disclosure and risk management processes, we raised the following points:
  • Climate Focus – Climate is a subsection of the environmental considerations in ESG risks and there are other facets of ESG that are material to the investment process. Climate will therefore have varied financial materiality depending on strategy, time horizon, and traded asset classes of the product, amongst other considerations.
  • Lack of reliable ESG Data – whilst this is improving, the availability of data and agreed methodologies for the calculation of carbon-based metrics will be a substantial obstacle for the next few years. This will increase the risk of information-based gaps and potentially reduce accuracy. These challenges are more acute for non-equity asset classes and in some cases for equity assets outside of developed markets.
  • Lack of Differentiated Standard and Enhanced Reporting – all asset managers above the specified assets under management threshold are in scope for product level metrics-based reporting. This is inconsistent with other enacted and proposed regulations which typically have a concept of enhanced reporting for “ESG” labelled funds.
  • Level of Transparency Required in Reporting – product level reporting is mandatory for all in scope asset managers and full details of underlying holdings are required to be provided to a client on request. This level of transparency is inconsistent with similar proposed and enacted regulation and is likely to be inappropriate for commingled funds where it could give one investor more information than another.
  • Inconsistency between Issuer and Asset Manager Regulations – issuers can report on a comply-or-explain basis, but full reporting will be mandatory for all in scope asset managers. Asset managers are subject to the same initial reporting deadlines as issuers. These points may present challenges for asset managers in collecting data from issuers and meeting the reporting deadlines.
 

Event Summary: SBAI APAC Forum


The SBAI held its first hybrid APAC Forum marking the start of its return to in-person events. Delegates gathered in Hong Kong to hear from global senior industry leaders discuss a range of topics, including responsible investment, Alpha in APAC, and bridging the gap between China onshore managers and offshore investors. Attendees also participated in multi-region brainstorming discussions.

Highlights from the two-day event included:
  • Regulatory Priorities from ASIC, HKMA, Hong Kong SFC, and Japan FSA, including financial stability, sustainability, initiatives to increase the attractiveness of local markets, short selling, and cyber security.
  • Responsible Investment in APAC: Allocators discussed where we move beyond collecting metrics, including assessing for greenwashing and understanding where any claim to ESG Alpha comes from.
  • Alpha Opportunities in APAC: The variety of regional alpha was discussed alongside Hong Kong’s role in China and how China’s net zero effort will impact capital and innovation.
  • Bridging the Gap between China Onshore Managers and Offshore Allocators: Issues surrounding multiple track records and cultural and regulatory differences.

We would like to thank all our panellists, hosts, and refreshment sponsors for helping us make our first two-day event a great success. 
 

Upcoming Events

  • 6 October 2021: London, Annual General Assembly (virtual and in person)
  • 13 October 2021: SPARK - New Holland Open Discussion on Due Diligence Expectations for Emerging Managers
  • 14 October 2021: An Interactive Roundtable Discussion on Culture and Diversity with Erich Gerth (Bluebay Asset Management) and Dawn Fitzpatrick (Soros Fund Management)
  • 2 December 2021: Montreal, Annual Institutional Investor Roundtable
APPENDIX
British Columbia Investment Management Corporation (BCI)
With approximately C$200 billion of managed assets, British Columbia Investment Management Corporation (BCI) is the provider of investment management services for British Columbia’s public sector, which includes over 30 clients including pension plans, insurance funds, and various special purpose funds. 

Based in Victoria, British Columbia, BCI is a long-term investor that invests across a range of asset classes: fixed income; public equities; private equity; infrastructure; renewable resources; real estate; and commercial mortgages. 
Lafayette Square Holding Company, LLC
Lafayette Square is an impact investment platform working locally to create an inclusive American economy. The company’s mission is to be the leading provider of impact-driven capital and its strategy is place-based, putting underserved communities at its center. By investing locally, Lafayette Square can drive impact outcomes specific to the community at hand. 
 
Lafayette Square currently has three divisions: credit, real estate, and renewables. Its localized credit platform invests non-dilutive capital into non-sponsored middle-market businesses. The real estate strategy focuses on deploying long-term capital in affordable housing, workforce housing and local real estate projects. The renewables division invests in community and small-scale solar projects.
QVR Advisors
QVR Advisors is a U.S. SEC-registered investment advisor managing quantitatively-driven, options-and volatility-focused strategies across absolute return and custom solutions business lines. QVRs Absolute Return focuses on capacity constrained alpha strategies which they believe exhibit low correlation to traditional assets, are market neutral and all weather. QVRs Absolute Return strategy is not a long volatility, tail or high bleed approach. QVR seeks sources of alpha from price insensitive end users of derivatives (corporates, overwriters, hedgers, retail). The market impact potentially compensates relative value traders such as QVR for providing liquidity, warehousing basis risk and potentially owning mispriced convexity. QVR also has a Solutions business which designs custom mandates for large institutional investors. For example, tail hedging and opportunistic exposure. QVR Advisors was founded by Benn Eifert, Scott Toyama and Tae Hong in 2017. QVRs Absolute Return business launched in August of 2017.
  
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