Change through Crisis: Highlights from the Hispanic Heritage Foundation Investors Forum
On the surface, 2020 has introduced a plethora of challenges ranging from the COVID-19 pandemic and subsequent shut down of much of the world economy, to racial and social unrest brought about by numerous recent interactions between the Black community and law enforcement which have ended in tragedy.
At the 2020 Hispanic Heritage Foundation (HHF) Investors Forum, many of these themes bubbled to the surface. Founded in 2014 by Emanuel Pleitez, Co-Founder at East Los Capital, the HHF Investors Forum provides a platform for institutional investors to exchange knowledge, build relationships, and share investment strategies. More broadly, the Hispanic Heritage Foundation is a non-profit that identifies, inspires, prepares, and positions Latino leaders both in the classroom and in the workforce.
At this year’s June 10-11 conference, investors expressed concern for today’s reality, but there were also many lessons and ideas rooted in optimism that emerged from the two-day remote sessions. Although this virtual conference focused on a variety of topics, four main themes emerged:
- Continuing importance of private equity in asset allocation,
- Investments in technology to develop a competitive edge,
- Pathways for underrepresented populations to access finance professions, and
- Relationship development opportunities in the “new normal.”
Despite recent instability, private markets still reign supreme. Throughout the conference sessions, institutional investors repeated their intention to commit capital to private equity despite market turbulence. Many institutional investors are focused on obtaining a targeted ~7.5 % return. But as Thomas Clancy, Chief Investment Officer of Pennsylvania Treasury, shared during the HHF conference, achieving this goal is hampered by the fact that risk is increasing each year. Due to interest rate levels, funds cannot depend on a fixed income portfolio and many managers are reevaluating their asset allocation strategies. Jesús Argüelles, Director of Investments at the James Irvine Foundation, pointed out that some of the best deals of the 2008 Financial Crisis era were venture-funded. And although the current situation is not identical, investors can use this case study to inform their portfolio strategy. Through private equity and earlier stage venture capital, managers can obtain a higher alpha and meet required return targets.
It cannot be said enough: technology investments are necessary to be competitive. Currently, many investors are navigating a complex ecosystem impacted by low interest rates, a suspiciously strong stock market, and the threat of stagflation. In order to stay abreast of the rapidly changing environment (and to develop a winning strategy), investors are taking a hard look at the technology used to perform analyses and venturing into new offerings. For example, once a staple of hedge funds, alternative data or “alt data,” is becoming more popular with banks, asset managers, and government organizations as the pandemic creates a vacuum of real-time information. Going forward, technology tools will continue to be important in helping investors distill and analyze data that will ultimately drive strategies and returns.
More than ever, diversity hiring remains mission critical. Today, diverse candidates are still grossly underrepresented in finance and many other professions. It is difficult for many candidates to access the networking and training opportunities that lead to securing these opportunities. And even if they manage to break in, many face discrimination on the job. During the HHF Investors Forum, many managers expressed dismay at not receiving many resumes from Latino candidates and other underrepresented individuals. This points to the underlying issue that pathways are not sufficiently developed to provide these job seekers with the mentorship, training, networking, and other resources which have become prerequisites to entering the investing world. In order to get to “a diverse majority” as Scott Chan, Deputy Chief Investment Officer at California State Teachers’ Retirement System (CalSTRS), expressed, it takes organizations like HHF to provide access to opportunities, investment firms to develop effective hiring programs, and internal and external support to help these candidates excel in a role once they break in. Conferences like the HHF Investors Forum create a platform for conversation, and the next step is translating conversation to action.
Lastly, our “new normal” has also created opportunities to win in other ways. While the stereotype is that institutional investors are laser-focused on producing returns alone, the pandemic has highlighted a need to excel in other capacities. During the Investors Forum, Dana Johns, Senior Portfolio Manager of Private Equity at Maryland State Retirement and Pension System, discussed the need to use new-found time to reflect and rekindle relationships. Now more than ever, managers should reach out to old contacts and prospective clients to check in and inquire how to best be helpful. In the usual day-to-day, often these conversations are swept aside, but now can be the perfect time to cultivate true empathy with stakeholders.
All in all, the HFF Investors Forum provided a compelling overview of salient topics in the institutional investor landscape. The topics were numerous and the discussions rich. However, the role of private markets, technology optimization, call to improve diversity hiring and development practices, and need to cultivate emotional intelligence during difficult times imbued many of the conversations. In today’s world, it is essential to both address underlying systemic discrimination as well as develop adaptive strategies for acute and unprecedented market shocks. Much work still needs to be done, and these are the topics that will surely shape conversations, policies, and investments in the months to come.
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