Episode 3: Governance Alpha with Chris Ailman and Ashby Monk
Nov 9, 2023
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Delving into the importance of governance in investment management, the podcast explores models of separation of duties, the potential for strong governance to improve returns, and the value of diverse perspectives. It also highlights the challenges of balancing stakeholder interests, navigating outdated governance models, and embracing collaborative innovation in financial governance.
Governance excellence is often ignored despite its crucial role in meeting long-term investment outcomes.
Strong governance structures within public pensions and endowments can potentially boost performance by 100 to 300 basis points.
Challenges in organizational governance prompt innovation and change, with crises often driving reevaluation.
Encouraging innovation alongside quality leadership is essential in unlocking governance alpha and driving performance.
Franklin Templeton's focus on acquiring best-in-class managers in alternatives has positioned them as a top player in the wealth space.
Deep dives
Importance of Alternatives in Franklin Templeton's Business Growth
Franklin Templeton Alternatives has expanded its offerings to include alternative investments, which now account for approximately $260 billion in assets. The firm focuses on acquiring best-in-class and differentiated institutional managers while maintaining their investment integrity, extending these products to the wealth space.
Evolution in Franklin Templeton's Business Strategy
Franklin Templeton's evolution towards alternatives was driven by a long-term client-first mentality, recognizing the changing investment landscape. Through key acquisitions and a dedicated distribution team, the firm has positioned itself as a top player in alternatives, focusing on execution and partnership with advisors.
Future Aspirations in Franklin Templeton's Alternatives Portfolio
Franklin Templeton seeks to fill gaps in real assets and infrastructure within their portfolio, with a strong focus on infrastructure moving forward. The firm aims to continue its success by acquiring the right managers, maintaining their investment integrity, and providing value to clients and wealth space partners.
Challenges in Governance of Institutional Investors
Institutional investors are crucial entities in modern society, funding universities, pensions, and key capital ventures. Despite their significance, there is a lack of focused study on their governance structures. This leads to challenges in decision-making and efficiency, highlighting the need for dedicated attention to understanding and optimizing governance in these organizations.
Challenges of Shifting Organizational Governance
Organizational governance faces challenges in shifting models, often requiring crises or consolidation to prompt change. Crises like pension liabilities or consolidation of organizations drive forced re-evaluation and innovation.
Value of Improved Governance Structures
The improvement of governance structures within public pensions and endowments can potentially yield enhanced performance by 100 to 300 basis points. Effective leadership and oversight contribute significantly to organizational success.
Innovation and Governance Alpha
Encouraging innovation alongside quality leadership poses a paradox in organizational governance. Quality governance structures, delegation frameworks, and resourcing play a vital role in unlocking governance alpha and driving performance.
Legal and Constitutional Aspirations
If not in the investment industry, interests in constitutional law may have led to pursuing a career in law, particularly fascinated by constitutional practice and legal intricacies.
Journalism and Pastoral Aspirations
Considering sports journalism due to a passion for writing and sports, and contemplating a later career chapter as a pastor, expressing joy in guiding and caring for others.
Most agree that healthy investment committee governance is table stakes for meeting investment outcomes over the long term and yet, it is probably the least discussed element of the investment management value chain. Why is the pursuit of governance excellence often ignored? Are there models of separation of duties between board and staff that we should be aiming for? Can strong governance actually improve or juice investment returns? Is it a source of alpha that is largely unharvested?
Introduction (0:47)
Halftime (41:47)
Guests (47:47)
Guests:
Ashby Monk, SLTI Executive & Research Director, Stanford University