Editorial: Pro·vo·ca·teur | Chief Investment Officer

Pro·vo·ca·teur, [pruh-vok-uh–tur]: Noun, a person who provokes trouble or incites dissension, as an instigator, fomenter, agitator, or rabble-rouser; also called ‘agent provocateur.’

The word, we think, very much jibes with the personality of aiCIO—a relatively young magazine, eager to spark strong discussion and debate within the institutional investor community. Our conferences in New York, London, and Sydney are a success in our eyes when there is at least one shouting match. We are eager to hear from readers disagreeing with angles we highlight in our news stories, and the reasons behind their strong opinions. In the same vein, we are delighted when readers email us with questions, asking for a particular whitepaper we highlight or expressing their enjoyment over stories, validating our efforts to provoke thought among the world’s largest investors.

It seemed natural, then, to create a new section of the magazine: Provocateur. These stories are titled by a single question. With multiple sides, they spark disagreement. By way of example, one issue we tackle in this inaugural section is the trend of asset managers competing with investment consultants, who are increasingly flocking toward the discretionary consulting space. In June 2011, NEPC revealed that amid growing client demand, the consulting firm was making its way into the field of discretionary consulting. Similarly, in March of this year, Rocaton Investment Advisors joined the outsourced CIO bandwagon, approving its first discretionary consulting client. “We need to be competitive,” Robin Pellish, Rocaton’s CEO, said following the announcement, acknowledging the generally low-margin consulting environment. The question: What will be the future of consultants and fund managers potentially fighting over the same turf—that turf being lucrative contracts with pension clients? Elizabeth Pfeuti, our London-based European Editor, writes, “Slight disgruntlement over a move by investment consultants to drive more revenue in the tough times of the financial crisis, when investors were afraid to move from their agreed portfolios, has turned into something altogether more bloody—and there’s no letup in sight.”

The new section is another example of our mission to seek your thoughts, opinions, and ideas—an example of our status as journalists and editors not to be removed and aloof, but to be in the trenches making sense of the investing landscape and having fun with it. Let this new section serve as a reminder to not sit back and take things for what they are, but to question, oppose, and criticize. So be a whistleblower. Call us with ideas and leads. And if you hear a viewpoint you disagree with at our conferences, stand up and—politely but with gusto—voice it. Just no shoe throwing, please.

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–Paula Vasan

A letter from aiCIO's Editor-in-Chief Kip McDaniel on the magazine's 40 Under 40 list, a representation of "the very best of our target audience’s youthful tail."

It is both easy editorially and tempting business-wise to relegate the asset owner to second-rate status with lists such as our 40 [Mostly] Under 40. While beneficial owners may defer, those wishing to sell something to those owners will almost always speak, and while neither the State of Wisconsin Investment Board nor Wake Forest nor Boeing will be placing advertisements in our magazine anytime soon, those wishing to reach those capital pools will.

You’ve undoubtedly seen the outcome of this tension in other magazines: “The Best Manager You’ve Never Heard Of,” “Fund Manager of the Year,” “Top Equity Analyst Team,” and so on. They might be interesting, but they’re often a sop to advertisers—and, I would argue, aren’t nearly as interesting as what we’ve produced here.

With our 40 [Mostly] Under 40, there are subtler details at play. Taking into account some vagaries of local situations (some asset owners are quickly becoming asset gatherers, of course), this list represents the very best of our target audience’s youthful tail. In one sense, we’re playing a long game here, betting that the value of providing peer insight is more beneficial to our audience than providing a list viewed as a potential sellout to sponsors.

There is precedent here, however, and it comes not from our fellow magazines but from the asset managers we are largely ignoring in this issue. The very best managers of the past decade (and the next one, I suspect) have viewed the courting of pension, endowment, and sovereign fund capital as a long-term enterprise. They don’t march into a CIO’s office and pitch a product that may not even fit into the fund’s current portfolio. Instead, they invest heavily in client-relations teams and in providing world-class research to the people they think of more as partners than clients. They invest in gaining the insight necessary to know a fund’s board members (those men and women who often have the final say) and consultants (the gatekeepers, although this, perhaps, is changing) and key influencers, and in customization. They are, in essence, betting that a larger investment at the beginning of the asset-gathering phase will reap outsized benefits at the end of it.

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In honor of the few who are committed to true long-term investment, perhaps we should list exemplary money management firms next. But then again, the firms themselves would likely view this as short-term thinking—the antithesis of their business models. So perhaps we won’t.

–Kip McDaniel