On Wednesday, November 28, 2012, the Center for Financial Policy and the Mutual Fund Directors Forum co-hosted the Oversight of Alternative Investments Roundtable at the Ronald Reagan Building in downtown Washington DC. The program explored the unique issues that alternative investments present to fund directors, particularly risk oversight issues, and provided practical information for directors.
Nancy Szmolyan, a Senior Practice Expert at McKinsey & Company, opened the roundtable with a discussion based on “The Mainstreaming of Alternative Investments: Fueling the Next Wave of Growth in Asset Management,” a report produced by McKinsey & Company’s Financial Services Practice. She spoke about the resurgence and mainstreaming of alternative investments, the use of alternative investments for growth, and key challenges that these investments present for asset managers.
Distinguished academic speakers at the roundtable included Neil Pearson, Harry A. Brandt Distinguished Professor of Financial Markets and Options at the University of Illinois and Laura Starks, Charles E. & Sara M. Seay Regents’ Chair at the University of Texas at Austin. Neil Pearson spoke to the roundtable’s participants about valuation issues in alternative investments. He explored topics such as embedded fees and the risks associated with illiquid, one-way markets. Laura Starks presented a talk about alternative investments in retirement funds. Her talk included information about the importance of retirement plans, retirement income and risks, asset allocation choices, and behavioral opportunities and risks.
Partners from Ropes & Gray LLP moderated two panels during the roundtable. The morning panel session explored the characteristics of a variety of alternative products, including Absolute Return Funds, Long/Short Funds, Managed Futures Funds, Commodity Funds, Market Neutral Funds, Multi-Strategy Funds, and Registered Fund of Hedge Funds.
The panelists also explored key challenges for board members associated with these funds such as risk management and performance measurement. The afternoon panel session delved into board oversight of alternative investments, covering a range of topics including volatility strategies; counterparty, administrative, and legal risks; evaluation of portfolio managers; and compliance issues.
- The Mainstreaming of Alternative Investments (report by McKinsey & Company)
- Valuation Issues in Alternative Investments (presentation by Neil Pearson)
- Alternative Investments in Retirement Accounts (presentation by Laura Starks)
- Alternative Investments: What are They? (Panel Discussion)
- Roundtable Agenda