Survey: Institutional Investors Flock to Private Equity, Demand More Transparency

A new report by SEI and Greenwich Associates shows that institutional investors, fund managers, and consultants plan to increase their private equity allocations or recommend increases to their clients over the next year, but they are urging greater transparency in the asset class.

(September 1, 2011) — A new report suggests that while institutional investors, fund managers, and consultants are increasing their allocations to private equity or recommend increases to their clients over the next 12 months, they are calling for heightened transparency, reporting, and risk management from providers.

The survey from SEI and Greenwich Associates, titled “The Logic of Fund Flows,” found that 26% of investors plan to increase their private equity mandates in the next year. However, investors and consultants differed on their investment objectives regarding private equity. Approximately two-thirds of investors (68%) pointed to return potential as their primary objective as opposed to 10% of consultants. Fifty percent of consultants, meanwhile, said diversification was their primary investment objective as opposed to only 18% of investors.

“As investors are looking to achieve higher returns in an increasingly challenging return environment, private equity is coming back, but standards are higher across the board,” said Greenwich Associates Managing Director Rodger Smith.

SEI’s Phil Masterson added: “This survey confirms what we’re hearing from our clients–investors are demanding more from managers across asset classes.”

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Commenting on the survey findings suggesting that the criteria for evaluating managers have become more demanding, SEI’s Ross Ellis said: “Managers have reason to be encouraged by investors’ renewed enthusiasm for private equity; however, in exchange, more is expected of them. Managers are facing greater performance pressure, greater fee pressure, and greater transparency expectations.”

Meanwhile, the survey showed the secondary market for private equity was “thriving as investors are buying or selling to meet liquidity demands or pick up deals at deeply discounted prices.”

The survey of 411 institutional investors, consultants and fund managers, conducted in April and May, is the first of a three-part series of survey reports on private equity. The following report is scheduled to be released in early October, followed by another one in early November.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

In Surprise Move, BNY Mellon CEO Quits, Successor Named

Gerald L. Hassell will replace BNY Mellon's Robert Kelly, who has stepped down as CEO a result of "differences in approach to managing the company."

(September 1, 2011) — Gerald L. Hassell has been appointed the new chairman and CEO of BNY Mellon, replacing Robert P. Kelly, who resigned “by mutual agreement with the board of directors.”

“It has been an honor to serve BNY Mellon, its management team and its employees during the past four years,” said Kelly. “We have navigated tremendously difficult markets and built one of the world’s premier financial institutions. I am confident that under Gerald’s leadership of the firm’s strong management team, BNY Mellon will continue to flourish going forward.”

A news release from the company — one of the largest trust and custody banks — cited “differences in approach to managing the company,” as the reason for Kelly’s departure. Hassell, BNY Mellon’s president and a longtime board member, has been with the firm and before that with Bank of New York for three decades.

“Over the course of his more than three-decade tenure with BNY Mellon and its predecessor company, The Bank of New York, Gerald has led nearly every major division of the company,” Wesley W. von Schack, lead director of BNY Mellon, stated in the news release.

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Kelly’s departure comes just a few weeks after the firm said it will cut about 1,500 jobs, or 3% of its work force, due to growing costs — a move that followed a similar decision by its competitor, State Street.

BNY Mellon has also been the target of multiple accusations in recent months of having overcharged pension funds for foreign exchange trades by failing to charge the funds the rates that the bank paid. Instead, the firm is accused of forcing them to pay the highest rates of the day. In June, for example, Massachusetts State Treasurer Steven Grossman claimed that BNY Mellon overcharged the state’s Pension Reserves Investment Management (MassPRIM) more than $30 million on foreign exchange (FX) trading since 2000. The figure upwardly revised an original accusation of $20 million in overcharges announced at a June 13 press conference. The $50 billion pension fund had hired a consulting firm to review MassPRIM’s currency transactions after allegations surfaced that custody banks were actively overcharging public pension funds on their FX trades.

“Given our initial findings, we wanted to take as comprehensive a look as possible at past foreign currency exchanges done on our behalf,’’ Grossman, who is chairman of the state pension board, said in a statement. “It’s imperative that pension beneficiaries and taxpayers are treated fairly and that banks do not profit disproportionately at their expense.’’

MassPRIM allegedly uncovered the $10 million in additional overcharges by expanding their review of FX trading back until 2000. The initial $20 million in overcharges allegedly occurred from 2011 to 2007.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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