Fordham University Taps Geeta Kapadia as CIO

Kapadia succeeds Eric Wood, who had been the university’s CIO since 2011.


Fordham University has named Geeta Kapadia as CIO of its $1 billion endowment, effective August 22. She succeeds Eric Wood, who had been the university’s CIO since 2011.

Kapadia joins Fordham from the nonprofit Yale New Haven Health System, where she has been associate treasurer for investments since 2009. There she led a team that oversaw the academic medical center’s $5.7 billion in assets and the system’s $3.8 billion in defined contribution retirement assets.

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Prior to Yale New Haven, Kapadia was also a senior investment consultant with Mercer Investment Consulting in the U.K. from 2005 to 2008, and in 2004 was an investment analyst and director of marketing for Capital Metrics and Risk Solutions in Pune, India.

Kapadia earned a bachelor’s degree in mathematics from the University of Chicago, a master’s degree in financial markets and trading from the Illinois Institute of Technology and an investment management certificate from the U.K. Society of Investment Professionals. She is a member of the CFA Institute and has served on its disciplinary review committee.

According to Fordham, the CIO collaborates with the board of trustees’ finance and investment committee and Fordham’s senior leaders in the finance area to create the university’s investment strategy.

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Downsides of Direct Indexing: Tracking Error and Less Diversification

Research Affiliates assesses how tailoring indexes to investors’ tastes carries its own weaknesses.




Direct indexing is a tricky proposition. A Research Affiliates report gauges the weaknesses of how different portfolio constructions, such as those omitting certain types of stocks from a traditional index, lead to different levels of tracking error and diversification.

 

The paper further examines how these stock-picking arrangements fare under an array of investing philosophies: a straight-up market cap index, one using fundamental measuring and others focused on value and deep value.

 

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Direct indexing has found favor with institutions that seek to tailor traditional indexes to their own preferences, perhaps orienting them more toward tech or knocking out companies they deem undesirable for political or other reasons. The process seeks to create its own hybrid indexes, because investors form them, as opposed to the usual off-the-shelf index products for the S&P 500, Russell 2000, etc.

 

One variety of direct indexing is to exclude the so-called sin stocks: in weapons, tobacco and gaming industries. Another shuns fossil fuel stocks, the paper explains. Then there are portfolios constructed according to companies’ carbon intensity, which goes beyond merely snubbing fossil fuel producers. These focus on greenhouse gas outputs from all companies; a steel maker would have larger carbon emissions than a semiconductor outfit, for example.

 

The firm also measures the performance of four different types of funds that weigh companies by 1) market cap (much like the S&P 500 and other such legacy indexes do); 2) fundamentals (such as value, quality and so forth, an approach Research Affiliates helped pioneer); 3) cheap stocks (value); and 4) even cheaper ones (deep value).

 

On that scale, deep value has the highest carbon intensity (37.1% of the portfolio is composed of high emitters), trailed by value (30.1%), fundamentals (22.2%) and market cap (15.3%).

 

Excluding sin stocks doesn’t change portfolio carbon scores much, as weapons makers and the like are a small minority of the investing universe.

 

Overall tracking error, measuring how much the new portfolio differs from the underlying index, is greatest for the value and deep value ones (7.06% and 9.67%, respectively). The fundamentals have a 3.76% tracking error. The cap-weighted one, which mirrors the indexes, has 0%, of course.

The customization tends to create more concentrated, hence less diversified, collections of stocks. Carbon intensity portfolios are the most concentrated.

The report concludes that “investors need to understand the portfolio characteristics, expected risk, and expected returns of the strategies they are considering. Direct indexing is no exception.”

 

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