A large endowment – also active in raising funds – had its entire asset management outsourced to an institutional manager. The investment committee however raised questions whether the present fiduciary asset manager was still ‘best-in-class’ and whether cost advantages could be realized through for instance allocating to a large degree to passive asset management. In addition the endowment raised the issue whether its objectives could be managed in the context of a lower return environment.
‘We decided upon a solution whereby the asset manager doesn’t undertake direct investments but takes on a fiduciary responsibility whereby it keeps the oversight and selects third party managers for the investment management. The fiduciary asset manager advises the endowment on investment strategy and takes responsibility for selection and monitoring the external asset managers. As such the endowment outsources important responsibilites. As member of the Board, responsible for finance, I do have a financial background, but no specific investment expertise. You often think: ‘do I have sufficient information and insight to take the right decisions and challenge the asset manager? Can we offer sufficient critical countervailing power?’
‘That’s how we arrived at Providence Capital. A party that can give us that countervailing power. They are very good in raising the issues. They keep drilling down until they get the right picture. They highlight the issues and provide a solution. They started with evaluating the existing asset manager. Firstly they reviewed the entire market space. At the end five candidates remained. All of them were visited on site. It gets you a better picture. This is only one example of how thorough and professional they operate.’