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Are Institutional Investors Falling for AQR’s Liquid Alts Gimmick?

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Heavily pitched as a portfolio diversifier to traditional fund products, clever fund marketing professionals developed new solutions to entice institutional investors known as liquid alternatives (liquid alts). Since 2006, the number of liquid alternative mutual funds in the United States went from less than 20 to over 120 – counting funds reaching over US$ 50 million in assets under management. These liquid alts vehicles tend to charge higher fees compared to traditional products. In 2018, many liquid alternative funds felt tremendous pain in performance, especially after the “red October” equity fall. According to SWFI research, 2018 common pivots fund managers take when performance suffers is announcing a dedication of firm resources to artificial intelligence or pounding of the dream that we are “in it for the long-term.” Truly alternative products are meant to have low correlations to traditional assets.

One of the banner heads of the liquid alts business is Greenwich, CT-based AQR Capital Management, LLC. AQR is not the only asset manager offering liquid alternatives – other major firms include Schroders, Franklin Templeton, Goldman Sachs Asset Management, and Standard Aberdeen Investments. AQR’s CEO Cliff Asness is touted in numerous publications mentioning that liquid alts have seen tough times in 2018, but may be rewarded in being patient. Yes, institutional investors have a long-term orientation; however, should these institutional public pools of capital question if market neutral funds or so-called absolute return funds are really delivering on their promises? In recent years, many of these alternative risk premia funds, have performed worse than traditional equity indices like the S&P 500 or Russell 3000 index. Is moving money in and out of cash a better option, than alternative risk premia, when adding up fees and portfolio losses?

AQR’s selling point is its large academic base of employees, coupled with research papers submitted to a plethora of investment research journals. AQR touts its academic rigor, having 45% of its employees possessing advanced degrees, including 84 Ph.D.s, according to its website. Other quantitative firms use a similar marketing strategy or storytelling technique.

Asness wrote in his September 7, 2018 blog post called Liquid Alt Ragnarök?, “Recently, the quantitative factor-based liquid alts that we favor at AQR have had tough times. Every time any of our strategies go through tough periods, we take a step back and consider specific hypotheses as to whether the recent returns are a harbinger of the future. Has the world changed such that these strategies are now “broken”? Are they too crowded or costlier to trade now versus the past?”

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KIC to Manage a Portion of Korea Post Assets

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In late February, the Korea Investment Corporation (KIC) inked an agreement to manage some of Korea Post’s global assets. KIC also seeks to provide investment training and research to Korea Post.

“As part of effort for Korea Post to allocate part of global investment assets to KIC, both agencies agreed to discuss details during the first half of this year, including the manner in which joint investment and asset allocation will be made,” KIC said in a statement.

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Singaporean Sovereign Wealth Capital Participates in DoorDash Series F Round

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San Francisco-based DoorDash Inc., a food delivery company, raised US$ 400 million in a Series F investment round. The investment round was led by Singapore’s Temasek Holdings and San Francisco-based Dragoneer Investment Group, LLC. Post-raise, DoorDash has raised US$ 1.4 billion in equity capital. This gives DoorDash a post-money valuation of US$ 7.1 billion. DoorDash competes against publicly-traded company Grubhub, Postmates, and UberEats, a service of Uber Technologies.

Other investors in the Series F round include SoftBank Vision Fund (managed by SoftBank Group), DST Global, Coatue Management, Singapore’s GIC Private Limited, Sequoia Capital, and Y Combinator.

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CPPIB and Sterling Partners Exit Livingston International

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Canada Pension Plan Investment Board (CPPIB) and U.S. private equity firm Sterling Partners are exiting their investment in Livingston International Inc., an international trade-services firm based in Toronto, Ontario, which specializes in customs brokerage, freight forwarding, and trade consulting. Livingston International is Canada’s largest customs broker and third-largest entry filer in the United States.

U.S. private equity firm Platinum Equity is buying Livingston International from CPPIB and Sterling Partners. Platinum Equity is a private equity firm founded by Tom Gores in 1995.

Livingston International was founded in 1945 by Gerry Livingston. In 2002, the company went public after backing from CAI Capital Partners. In 2010, CPPIB and Sterling Partners acquired the company for US$ 324 million. On May 8, 2012, Livingston International acquired New Orleans, Louisiana-based M.G. Maher & Company, Inc. and MCLX, Inc. Maher is an international freight forwarder, customs broker and logistics provider. In 2013, the owners of Livingston International refinanced debt raising US$ 555 million in senior secured credit facilities.

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