A recent report by the OECD’s Pensions Unit, Strengthening Asset Backed Pension Systems in a Post COVID World, argues that pension funds in the 38-member country organization can invest to support the post-pandemic economic recovery in a way that also provides long term returns for beneficiaries.

Pension funds in OECD countries are already seasoned and diversified investors and their scale and long-term horizon allows them to consider illiquid investments. They should increasingly invest in less liquid assets like infrastructure and SME financing to boost economic recovery, it argues.

For example, surveys on the impact of COVID-19 on SMEs shows that more than half of SMEs faced severe losses in revenues. Pension providers could complement banks to help SMEs cope with these urgent liquidity needs, but pension providers’ engagement in SME financing remains limited.

Obstacles

However, obstacles impede greater involvement by pension providers in supporting economies by investing in illiquid assets. These include a lack of investment opportunities, regulatory barriers, and limited investor capability to handle complex investments, raising fears of the risk of poor investment decisions in illiquid assets. Investing in these assets may also cause investors to deviate from their strategic asset allocation to seize investment opportunities, say the report authors.

Other challenges are also blocking pension funds’ ability to invest in illiquid assets. For example, members of defined contribution pension arrangements can switch providers. This means individual savers are freely able to switch investments, reducing pension providers’ appetite for illiquid investments, particularly those without a readily ascertainable market value, such as infrastructure.

Beneficiaries can also choose from a range of investment options with varying risk profiles, and transfer between the different options available within certain limits. This means that pension providers may be exposed to significant outflows, reducing the expected duration and investment horizon of their investment strategy. Pension providers may hold more liquid and short-term assets to accommodate for unexpected outflows, reducing the amount they can invest in long-term assets.

Another limit on the ability of pension funds to invest in illiquid assets includes the fact investments may require specific skills and expertise that some pension providers may lack. Several risks are typically more relevant for alternative investments alongside illiquidity like integrity risk, operational risk, limited transparency, valuation weaknesses, control issues, counterparty risk and conflicts of interest, lists the report. Finally, measures taken by governments to grant contribution holidays and help members access their savings during the COVID crisis may reduce room for investment in illiquid assets.

The ability to give employees and employers short-term relief may create liquidity constraints and reduce pension providers’ capacity to invest in illiquid assets, continues the report. Pension providers need to hold cash and liquid assets in their portfolios to address liquidity demands from regular benefit payments and exceptional withdrawals. They also count on contribution inflows to manage liquidity needs. However, certain countries have allowed employers and/or employees to defer or even stop contributions to asset-backed pension arrangements to provide them with short-term financial relief.

In addition, members who have lost their jobs or experienced a reduction in working hours can more easily access their savings early to weather financial hardship in several countries. Not only may this force pension providers to act pro-cyclically by selling assets in falling markets and materialise losses, but it also increases liquidity demands. These measures jeopardise the capacity of pension providers to invest in long-term, illiquid assets, such as infrastructure, as they need to keep a larger share of the portfolio in liquid assets. These measures may also create a precedent for future withdrawals, so that pension providers might not trust that assets will be locked away for the long-term going forward, further reducing their appetite for long-term investment.

The report urges policy makers to carefully consider the effect that policies granting early access to retirement savings accounts have on investment policies. Not only do such policies pose adequacy concerns, but they also limit pension providers’ capacities to invest in long-term, illiquid assets. Pension providers need to hold more cash and liquid assets to face potential withdrawal requests. This leaves less room for other illiquid investments that could support businesses and boost the economy.

Encouraging illiquid investment requires safeguards and appropriate investment structures, write the report authors. Strong governance and well-defined investment and risk-management strategies are necessary to prioritise the interest of members when engaging in new investment opportunities. Policy makers can also facilitate the mobilisation of private capital to long-term investment through public-private partnerships, financial incentives, or special vehicles for alternative assets.

 

 

Peter Branner, chief investment officer of the giant APG, is always looking to develop and implement technology that supports the firm’s investment goals. Since his school days, he has been interested in information technology and now as APG Asset Management CIO, he is hands-on involved with the firm’s multi-million investment programme in new technology.

Investment that is enabling APG to extract information from big data, share it efficiently among the investment teams and remain at the forefront of responsible investing. The programme also aims to develop digital talent, automate the most labour intensive parts of the investment process and allow further client-led segregated mandates.

“We are looking at the investment philosophy/process evolution with a balanced respect for the past while also leaning into the future where our clients are most likely to benefit from scale, information advantage and, not least, our truly long-term perspective,” says Branner in an interview in Amsterdam with Top1000funds.com that was complete with canal views.

“We never jump on new trends without doing serious evidence-based research first. We evaluate the mega trends around us very carefully and make sure that investments are linked to those mega trends.”

The focus includes demographics, climate change, the technology revolution and the ageing population, among others.

“Others look at many of these themes too, that is no surprise. But we try to translate how these play out, so the mega trends are not playing against us, in particular in less rosy scenarios,” Branner says.

When Top1000funds.com interviewed Branner in the summer of 2021, the planning around digitalisation was taking place. This included investment in the large-scale use of (unstructured) data, workflow automation and digital analytical platforms. Now the firm is in the middle of the execution phase, with the strategy deliveries getting more tangible.

“We want to make the investor base ready and flexible for the future. Training is needed around digital tools that we are rolling out as well as for digital leadership,” he says. “We aim to educate our people to be digital investors and to identify where there’s an obvious spot to digitalise. From an HR perspective this is an enabler – that you have people that can do the job themselves.”

To deliver on client’s responsible investment ambitions, the investment teams utilize various types of ESG data, often unstructured. “This is difficult data to extract useful information from, and alongside implementing the technology required we have had to learn techniques such as Machine Learning (ML) and Natural Language Processing (NLP),” he says.

For Branner, digital leadership is about inspiring the organisation to move forward and talk about technology in a meaningful way such that it ultimately enables the value adding investment solutions to clients.

The shift started with digitalising some simple processes. For example, data previously presented to the investment committee was based on a high number of word documents and excel spreadsheets, but is now gradually available in a digital more robust form.

“It forces our people to be more structured and it ultimately frees up time to focus more on analysing the data and preparing quality investments rather than producing “use and forget” data,” he says.

The shift, for now, is culminating with the technology to enable ML and NLP and work on big unstructured data. Increasingly APG processes this in the Cloud making use of the horizontal computation scalability and the ease of data access. “The investment in our data science subsidiary Entis, has been a success story. Entis turns raw text documents into usable data networks. Obviously our quant investment teams feel most at ease using these new technologies.”

Meeting client demand with bespoke tools

But some of the other investment teams have introduced AI as well. One of those is the addition of a fully digital portfolio manager, “Samuel”, which points to anomalies, questioning where the logic isn’t consistent in analytic assumptions.

“That’s what these machines do, they question where the logic does not fit and they say here’s an investment that looks abnormal because it lags pattern recognition,” Branner says.

APG is the asset manager for ABP, the biggest pension fund in the Netherlands, and has a number of other clients as well and client demand for bespoke and tailored solutions is driving the need to use technology.

“We are implementing new tools in the front office, linked to this is our proliferation of client requests for more mandates and tailored solutions so we need technology to provide an increasing number of model portfolios as well as client specific mandates,” Branner says. “We are also creating data warehouse technology, a data lake type of set up, which people can access and use depending on the area they are working for.”

Branner is instinctively comfortable with technology, unusually so for an asset manager investment head. He grew up programming (completing his first course age 14) and has applied technology throughout his career.

“I rebuilt a small insurance company’s digital tools from scratch when I worked in London back in the mid 90s. I took all the tech and workflows, and plugged into an MS database,” he reminisces.

Later, in Luxembourg, he built a prototype multimanager technology toolbox at an asset manager, going on to hire developers to move it to a more robust platform.

And as CEO and CIO of €100 billion Swedish asset manager SEB Investment Management in Sweden, he was part of a front page story threatening that robots were taking over. He’s comfortable working with both quant and fundamental approaches. “I always thought it was silly to say one over the other. I’ve always seen technology as an enabler, never the end solution,” he says.

“Machines are very good at forcing structure, seeing historical patterns and using data in an environment that doesn’t change. As soon as there is an unusual situation or a new paradigm shift then you need smart people. And increasingly so,” he says.

Branner believes techniques such as ML and NLP, though regularly used in quant investing, can be important additional tools for fundamental investors too. “AI is an important additional tool for experts in many walks of life, and that goes for traditional asset management too.”

Technology and sustainability

Sustainability, or RI, is an area where APG has been leading the use of technology to extract information from big (unstructured) data and where the Entis subsidiary has played a key role.

Together with PGGM, and later BCI and AustralianSuper, APG developed the Sustainable Development Investment Asset Owner Platform.

Technology is used to sift through reams of structured and unstructured data to gauge the extent to which companies’ products and activities meet the SDGs.

“From a data perspective, APG developed the SDIs with an intuitive set up linked to the SDGs. The next step is to convert the SDI taxonomy towards Impact Investing and start to say what does it mean for the planet when you invest in an SDI,” he says.

The easiest and most obvious example is carbon emissions with a direct link to the 1.5 degree target under the Paris Agreement. Other SDGs are less intuitive for calculating true impact.

“In measuring zero hunger you could intuitively look at the production of say, milk powder and its use in Africa. What you want to achieve is zero hunger, but how much less hunger is specifically happening due to the use of milk powder is tricky to measure in a scientific, waterproof way,” Branner says.

Nonetheless RI investing will shift towards Impact Investing, it’s the next level of the investment evolution, he predicts.

“To make that transition, we have to be crisp and clear about how to justify the investments in impact,” he says. “It’s interesting to see how it will evolve as well as the intellectual curiosity around technology and how it is being used. Machines can’t work alone, we need to feed it with a framework, it is where people with ESG expertise will matter.”

The investment environment

As a large investor, Branner is occupied with interpreting the policies of central banks, especially interest rates, and how governments are managing their debt levels.

“In the past, central banks have been able to actively control the interest rate levels, and now when we see governments providing debt left and right it has become more difficult for central banks to operate alone. That’s a development I don’t see changing soon.”

In more recent times debt has been issued due to the COVID economic crisis, and now the war in Ukraine and the associated energy crisis.

“That puts more pressure on governments and the EU, I follow that intensely and with some worry for the more dark scenarios,” he concludes.

 

 

Singapore’s GIC invested more than any other SWF last year and fuelled by buoyant oil revenues, Gulf SWFs have had and are expected to continue their investment rampage. Elsewhere, hedge funds have proved one of the most successful allocations, particularly for ADIA, says Global SWF in its annual report.

Mega deals

Once again Singapore’s GIC invested more than any other SWF, deploying US$ 39.1 billion through the year – 13 per cent more than in 2021. Behind GIC, five Gulf funds confirmed their role as major global dealmakers.

In 2022, state-owned investors deployed more capital in fewer deals than in 2021. Global SWF reports a reduction in venture capital investment and an increase in mega-deals led by GIC and Temasek.

The average ticket size of the year was US$0.35 billion and compared to 2021, SWFs invested 38 per cent more, with US$ 152.5 billion in 425 transactions. “The major story of the year is the re-emergence of mega-deals, defined as investments of US$ 1 billion or more. The average ticket size increase to levels not seen since 2014, and there were more than 50 mega-deals in the year,” states the report.

In terms of industries, the activities of SOIs reflect the economic climate. Funds lost interest in venture capital investments in healthcare, consumer, and technology and grew their appetite for infrastructure (mostly transportation), energy, industrials and financials. Real estate remained constant.

Gulf Funds shine

In the global context of geopolitical, economic, and financial uncertainty, Middle Eastern funds shine more than ever. Most funds have shattered stereotypes of following hidden agendas and only hunting trophy assets and are now recognized as sophisticated, flexible, and mature investors that can move the needle at home and overseas, states the report.

The 18 Gulf SOIs manage US$ 3.7 trillion in financial capital and 7,500 personnel in human capital. Overseas, they have more than doubled their investments in Western economies, including the US and Europe, from US$ 21.8 billion in 2021 to US$ 51.2 billion in 2022. The high oil price means that GCC economies with lower fiscal expenditure will continue to have large surpluses. Expect the more liquid and internationally focused SWFs including Abu Dhabi’s ADIA, Kuwait’s KIA and Qatar’s QIA to receive significant inflows of capital, says the report.

In contrast, for those SWFs that are not oil-based, including those in China, Singapore or Korea, the investment momentum is more ominous. Even Norway’s NBIM, which could have offset the paper losses with the significant injections it received in 2022 from rising oil revenue, has been affected by currency losses.

Hedge funds

Hedge funds have been one of the few bright spots for sovereign investors, managing to avoid huge losses and gaining some momentum. ADIA’s US$ 60 billion hedge fund portfolio makes it the world’s largest allocator to hedge funds. The Abu Dhabi fund was a pioneer in the asset class when it started trading through commodity advisors (CTAs) back in mid-1980s.

In 2019, the alternatives portfolio was restructured from the traditional products into two main strategies comprising Diversifiers and Return Enhancers, in addition to an Emerging Opportunities mandate outside of the main allocation. However, a year later, ADIA decided to merge them into a single pool. The department employs 50 staff but most of the investment is outsourced. Since 2020, the team has been actively looking to benefit from a highly disrupted market and has added new managers across most strategies.

New SWFs

In another development, the research notes a jump in the number of new SWF funds. “In the first three years of the 2020s decade, we have already seen 13 new SWFs being set up, and 10 others saw significant progress and could join the club soon,” it states. In 2022, sovereign investors opened 10 more offices overseas in four continents as well as the appointment of new CEOs. However, it notes “the developments in Kazakhstan and Kuwait are worrisome in terms of governance and stability.”

Some of the new SWFs like Azerbaijan’s AIH or Ethiopia’s EIH were conceived as umbrellas of some of their countries’ most important assets. Others like Cape Verde’s FSE and Namibia’s Welwitschia were designed as fiscal stabilization mechanisms. A third group including Israel’s Citizens’ Fund and Australia’s Victorian Future Fund were developed as savings tools.

The latest country to join the SWF discussion is the Philippines, following the proposal to create the “Maharlika Investment Fund.”

The report states that last year proved one of the most difficult years for state-owned Investors in recent history. 2022 was the first year ever that the size of the SWF industry shrank in value. The scale of the drop is debatable as most SWFs report with significant delays, if at all – but Global SWF estimates the impact totalled US$ 1 trillion.

The major challenge of 2022 was the simultaneous and significant correction of bonds and stocks, which had not happened in 50 years. The global listed benchmarks for private markets also dropped significantly, with infrastructure and private credit being the most popular refuge.

 

 

 

Although the Teacher Retirement System of Texas’s $11.2 billion risk parity portfolio has struggled of late, the pension fund remains committed to the strategy that it forecasts could perform better in the economic environment ahead. TRS, which manages around $170 billion, treats risk parity like an asset class and has increased the allocation over time in terms of both the risk level within the different buckets and size with the portfolio currently targeting an 8 per cent trust level allocation. The strategy of balanced risk exposures is designed to perform well in most market environments and is implemented both internally and via external managers.

Speaking at the Risk and Portfolio Management division’s annual update to the board in December, James Nield, chief risk officer, and Mark Telschow, director, RPM Portfolios, reported a difficult year for government bonds and risk parity, although risk parity has performed better in recent months. The problem, Telschow explained, is that virtually all assets apart from energy investments have declined and the strategy suffers when all assets perform badly. Something other investors like Denmark’s PFA say has caused them to lose faith in risk parity.

“When all asset struggle, risk parity is going to struggle,” said Nield. He also noted that risk parity does best when cash is unattractive, yet cash is currently outperforming other asset classes. “Risk parity is going to struggle as it is short cash,” he said.

Looking ahead, falling growth and rising inflation are likely consequences of Federal Reserve tightening. This could create an environment where risk parity does better. Moreover, risk parity tends to compound returns faster than in other allocations, so drawdowns are shorter and the acceleration better.

The team attributed the few bright spots in risk parity’s performance to successful manager selection (TRS uses Bridgewater, AQR and Invesco) and asset mix selection whereby the portfolio held fewer government bonds. TRS actively manages the risk parity tracking error to reduce the range of relative outcomes through both risk level and asset mix. Telschow also noted that cheaper internal management of some of the allocation created a tailwind.

The board heard how risk parity is complicated by the wide range of opinions regarding different risk and design models; what assets to include in the buckets and what risks to balance – whether that balance should be based on risk contributions or economic regimes, for example. Design decisions result in different portfolios and influence the outperformance or underperformance mean reverse over time. However, Telschow and Nield said there is not a huge amount of informational edge in design decisions.

Experimentation

Alongside running the risk parity allocation and a 16 per cent passively managed government bond portfolio, TRS’s 16-person Risk and Portfolio Management team is tasked with research initiatives and experimentation to help expand internal capabilities and reduce fees. The risk parity portfolio initially emerged from this process which has most recently focused on a new diversified and balanced commodities exposure, similar to the approach taken in risk parity. Launched in September 2022 the portfolio particularly aims to balance exposure to rising inflation.

Other tasks assigned to the Risk and Portfolio Management team include financing liquidity and setting liquidity targets, conducting repo activity, managing derivative trading, and finding the best way to source the fund’s cash needs. The team also rebalance the portfolio, optimise balance sheet and oversee securities lending, seeking additional yield where possible. Having these activities housed in one team means a tighter grasp not only on how much liquidity the fund needs, but also the best way to source it.

Asset allocation

The Risk and Portfolio Management team are also responsible for conducting an asset allocation study every five years. The last study, three years ago, led to TRS adding leverage, increasing its allocation to fixed income to add diversification, and boosting investments in private markets where TRS now invests 42 per cent of assets. Recent results show that the additional allocation to leverage has added 63 basis points of positive return, and more money invested in private markets has also been additive. However, adding to the fixed income allocation has had a negative impact.

The risk management team look at around 200 daily risk signals, reporting on macro and portfolio risks and putting in place action plans if needed. Recent action has focused on bubble signals, allocation and counterparty risks. In one example of the process at work, signals flagged risk in the asset allocation limits in the private equity portfolio vs the allocation through time. This ultimately led to raising the policy limit from 19 per cent to 24 per cent. Nield concluded that data is a key contributor to strategy success, enabling “drill through” analysis to enable more useful reporting.

 

One of our defining characteristics, and main objectives, at Top1000funds.com, is to provide behind-the-scenes insight into the strategy and implementation of the world’s largest investors. In 2022 we introduced some new projects aimed at providing a deeper understanding of best practice and driving the industry to produce better outcomes for stakeholders.

We now have readers at asset owners from 95 countries, with combined assets of $48 trillion, and we are also pleased to say that our readers are spending more time on our site and there are more people visiting, so thank you to all our interview subjects, readers and supporters over the last year. Below is a look at the most popular stories of 2022.

This year we launched the Asset Owner Directory which is an interactive tool to give readers an insight into the world of global asset owners. It includes key information for the largest asset owners around the world such as key personnel, asset allocation and performance. (All the information collected is from publicly available sources and is accurate as per the fund’s most recent annual report.)
Importantly, for context and depth, the Asset Owner Directory also includes an archive of all the stories that have been written by Top1000funds.com about these investors over a period of more than 12 years, allowing readers to better understand the strategy, governance and investment decisions of these important asset owners. This new initiative was very well received by the industry and is now the most visited part of our site.

In 2022 we were at last back in person hosting our events for the global investor community. Needless to say all our delegates were thrilled to see each other again. It was actually like a big party. We hosted events at Cambridge University, Chicago Booth University, Harvard University and Maastricht University.
Thankyou to all our speakers, spsonsors and delegates that made those events such a massive success, and we truly hope we are doing our bit to prompt the industry to shift to best practice behaviours as they take on their big responsibilities of managing other people’s money. We’re going to do it all again next year and kick off our event calendar with the Fiduciary Investors Symposium in Singapore from March 7-9 which we are very excited about.

In February 2021 we launched the Global Pension Transparency Benchmark which is  a collaboration between Top1000funds.com and Toronto-based CEM Benchmarking. In that first year we ranked 15 countries on public disclosures of key value generation elements for the five largest pension fund organisations within each country. The overall country benchmark scores look at four factors: governance and organisation; performance; costs; and responsible investing; which are measured by assessing hundreds of underlying components. We focused on transparency because we believe transparency and accountability go hand in hand and lead to better decision making, and ultimately better outcomes.

In 2022 we expanded the GPTB and publicly disclosed the individual scores for 75 of the largest funds in the world. The idea is that by publishing the underlying scores of the funds we will show really what best practice looks like and give the industry and individual funds a North Star to aim for in their quest to improve transparency and ultimately improve outcomes for their stakeholders. We’re very proud of this initiative and grateful to CEM for their partnership.

ESG remained a key focus for institutional investors this year (a reminder that ESG is topic du jour for the industry but Top1000funds.com has been reporting on ESG since 2009). An article by Fiona Reynolds, who was long-time CEO of the PRI, responded to the rising denunciation of ESG investing. She claims that over-thinking, over-regulation and over-standardisation is complicating what is actually a very simple investment philosophy.

We can’t look back at 2022 without acknowledging the pain and disruption caused by the war in Ukraine. Our resident academic, Professor Stephen Kotkin, warned us back in February, before the war had broken out, that it is not the war itself between Russia and Ukraine that investors should be concerned about, but the destabilising effects of Russia’s actions that could impact globalisation and harm the west. The energy and living crisis in Europe is testament to his warning and we hope things can improve very quickly.

As always we thank you for your readership, your loyalty and your continued interest in our media and events. Happy holidays and see you in 2023.

The Universities Superannuation Scheme, USS, trustees of the largest private pension scheme in the UK, withstood September’s turmoil in the government bond market for five key reasons. Speaking at USS’s 2022 Institutions’ Meeting, Simon Pilcher, chief executive of USS Investment Management, said the asset manager uses less leverage than most other UK pension funds. “Leverage has not been a problem for us,” he said. At end of September, the Valuation Investment Strategy had 16 per cent in leverage.

Pilcher said USS has also been protected because of diversification. In an important seam to strategy, USS buys US government bonds to hedge inflation and interest rate risk, no relying exclusively on UK government bonds. In a third pillar, the asset manager was also supported by its allocation to private markets which protected the downside and have less volatility than public markets.

A strategy that reduced the portfolio’s exposure to sterling also helped protect the pension fund. The investment team had observed for a while that sterling tends to perform badly in volatile markets. Fearing volatility, strategy centred around increasing the non-UK element of the portfolio, said Pilcher, adding that the team had also ensured plentiful stocks of cash and collateral in preparation for market volatility as yields rose through the year. When this was turbo charged in September, the scheme was prepared.

Finally, Pilcher credited USS’s governance for the scheme’s fortitude during September’s market turmoil. This enabled the investment team to act quickly at a time fast decision-making was critical to protect the downside and exploit opportunities.

Pilcher said the turmoil in the bond market caused UK pension funds such a challenge because of the quantum and speed of the move. “We saw daily moves five times larger than we’ve ever seen before,” he said. However, he noted that the direction of travel – aka higher bond yields – is positive for pension funds because it leads to lower liabilities and a larger surplus/lower deficit.

Hedging in the US

The portfolio is divided between a 60 per cent allocation to growth assets and a 40 per cent hedge ratio whereby USS hedges 40 per cent of the inflation and interest rate risk embedded in its liabilities.

Pilcher explained that USS has increased its liability hedge ratios for both interest rates and inflation over time. However, a large chunk of that hedging has been achieved outside the UK, mostly in US. “As bond yields have risen, it causes our hedge ratios to rise without doing anything to our underlying investments. The rise in hedge ratios is due to the market bringing it to the portfolio,” he said.

Still, he said that the investor has taken a more active approach to hedging inflation risk, seeking to add hedging when the breakeven rate has fallen. For example, USS increased hedging in the UK when breakeven rates were lower last July. “This was a cheap opportunity to acquire inflation in the UK,” he said. Similarly, the team looked for opportunities to hedge inflation exposure via the US market, given US inflation is structurally cheaper to buy than the UK. “Our actions have helped as inflation has grown around the world – hedge ratios have increased but they have been acquired at opportune times,” he said.

USS’s aggregate exposure to growth assets has been constant at 60 per cent of the portfolio. However, Pilcher said that in recent months USS has reduced that exposure given concerns about the outlook for growth assets. USS’s exposure to private markets has grown however, with a particular focus on private equity and real growth – inflation-linked assets like infrastructure. The fund hasn’t invested enormous amounts in private assets through 2022, but private assets have helped protect the portfolio and delivered well for the scheme, he said.

Indeed, Pilcher said that USS has seen a material increase in its exposure to private assets. Not via an increase in net investments but by other factors including the stronger dollar, taking the dollar-denominated private asset percentage up with it.

Stakeholders heard that USS  runs more of its allocation to private markets in-house compared to peers. Internal management has allowed USS to tailor investments more closely to its own needs – for example sourcing long-term infrastructure assets with inflation characteristics that also give an equity premium. Moreover, USS also manages to pay less to external managers than peer funds where it does outsource.