Foreign Diversification Questioned: Data Show Benefits Make It Worthwhile
Chapter 3 The Ever-Evolving Uses of Indexing: Why the Active versus Index Debate Is Over
This chapter covers the growth of indexing from its humble beginnings, which were described in Chapter 2. We highlight the debate over indexing’s appropriateness for different market environments and various asset classes, discuss the advantages of index products, and describe the factors that have contributed to their meteoric growth. We examine indexing’s performance in both rising and falling markets and explore the claims that while indexing may be appropriate for U.S. large-cap equity investing, it somehow isn’t appropriate for U.S. small-cap or international equities. The myths and conventional wisdom about the latter are discussed in detail. While there is a brief discussion of index derivatives and ETFs, these subjects receive more thorough analysis in Parts Three, Four, and Five. The focus in this chapter is on how investors use indexing in increasingly sophisticated and creative ways, and how indexing should be a key part of an overall investment strategy. We stress that the active versus index debate is (or certainly should be) over. Instead, indexing needs to be part of a mosaic in a holistic investment strategy
Active Index Investing: Maximizing Portfolio Performance and Minimizing Risk Through Global Index Strategies
In the context of portfolio management, the terms private client, high-net-worth investor, and individual investor are used virtually interchangeably to reference the unique challenges of managing personal or family assets. Although a more precise definition of the individual investor is elusive, the basic need to properly manage one’s financial affairs is self-evident, and the precedent for seeking professional management is well established.
Chapter 2: Managing Individual Investor Portfolios
Managing Investment Portfolios: A Dynamic Process
Scanlan spoke at a BGI news conference announcing the SponsorMatch DC annuity product, describing it as a technology aimed at bringing the best of defined benefit investing into defined contribution options.
BGI SponsorMatch / DC Annuity Product Launch
Testifying as CEO and President of Renaissance Institutional Management, Scanlan appeared jointly with former BGI colleague Carter Lyons. He spoke about defined benefit plans, arguing they offer the most robust form of retirement security due to professional asset management, reduced costs from commingling, and diversification of longevity risk, and advocated short-term DB funding relief. A noted quote: 'Retirement is an income driven process and we're living in a lump sum world.'
DOL ERISA Advisory Council Testimony on Approaches to Retirement Security
Witness (CEO and President, Renaissance Institutional Management)
Implications of the Retirement Crisis for Asset Managers
Scanlan presented findings from the BGI study at a news briefing, stating that one-half of all middle-class Americans will have one-quarter less in retirement than they realize.
Release of 'The Future Shock of Retirement' Study
Scanlan testified as Managing Director and head of BGI's Americas institutional business at the 110th Congress hearing on H.R. 3185. He supported fee disclosure by category to plan sponsors, conflict-of-interest disclosure, DOL standardized fund fact sheets, simplified participant disclosures, and bringing DB plan investment disciplines into the DC marketplace. He identified three root causes of DC plan failure: inadequate contributions; low returns with high fees; and lack of a distribution strategy.
Testimony on H.R. 3185, the 401(k) Fair Disclosure for Retirement Security Act of 2007
Trends in Private Equity and Institutional Investing
Of the three dimensions of investing - return, risk, and cost - investors have direct control only over cost. The subject here is five common assumptions about fees, which are a major component of costs. Three of the myths concern appropriate fee level and structure, fixed versus incentive, and the value of high water marks; two others concern fees in particular contexts. Do hedge funds deserve their high fees, and can investors always separate alpha from beta, and pay appropriately for each? The core thesis is that fees should not be an overriding investor concern, and high-fee products are worthwhile only if they deliver sufficiently high risk-adjusted returns.
fees, hedge funds, alpha and beta, investment management
Although finance practitioners almost universally learn in school that the Sharpe market model, which separates all returns into alpha and beta, is the starting point for a number of key investment insights, they often forget, or disregard, this knowledge once they are on the job. The five most important insights that a practitioner should hold dear, regardless of what the boss says, are 1) the importance of making alpha and beta decisions separately; 2) the zero-sum nature of active management; 3) the different criteria needed to make alpha and beta decisions; 4) the great value of alpha successfully delivered; and 5) the desirability of paying appropriate fees for each return component or, in other words, high fees for alpha, low fees for beta.
Five Principles to Hold Onto (Even When Your Boss Says the Opposite)
portfolio theory, exchange-traded funds and applications
In this article, Donoho, Crenian, and Scanlan report the results of their study into the cost of institutional investor impatience. Using Monte Carlo simulation techniques, the authors construct an idealized world with a universe of investment managers of precisely quantified skill, with skill levels varying among the managers. Although many institutions base manager hiring decisions heavily on the manager’s performance in the most recent months or years, the authors’ simulations show that institutions that rely on longer performance horizons of 5–10 years are more likely to find and stick with the better managers. This happens because on shorter time scales, the relatively few highly skilled managers are often temporarily outperformed by one of the many lesser-skilled managers, specifically, unskilled managers who have recently happened to simply be lucky. Hence, if a plan that previously was long-term oriented starts to hire managers based on short-term results, it will often find that the newly chosen manager underperforms both his own previous performance and also the manager previously managing the plan’s funds. It can, however, truly take patience to keep a skilled manager in a fund portfolio. In the authors’ simulations, skilled managers have deeper, longer, and more frequent drawdowns than many investors would expect.
Is Patience a Virtue? The Unsentimental Case for the Long View in Evaluating Returns
manager selection, simulations, portfolio management, multi-asset allocation
Although the theory of active management suggests that breadth is the key to a high information ratio (IR) and thus success in active management, high conviction is another route to a high IR and one at which most investment management firms are more likely to succeed. High-conviction active managers are those that develop forecasts for a small number of securities that they are willing to hold in substantial weights. Such 'concentrated active' funds deserve serious consideration by investors building broadly diversified portfolios of managers. The authors indicate how one might conduct the fundamental analysis leading to high-conviction portfolios. The principles discussed apply equally to long-only and long–short portfolio structures, although long–short investing involves risks (and thus risk-control disciplines) that long-only managers need not worry about.
No Fear of Commitment: The Role of High-Conviction Active Management
fundamental equity analysis, portfolio construction
The movement toward indexation in the past decade has left many institutional investors thinking, 'This can’t be all there is to my job. Let me learn something about active management.' In an interview with Institutional Investor Journals, Larry Siegel and Matt Scanlan urge investors to include high-conviction active managers in their portfolios and describe how to identify those with true skill. The process of building a winning portfolio of managers is akin to a high-conviction manager building a winning portfolio of a few concentrated positions, they explain. Siegel and Scanlan discuss the evolution of their thinking on this topic and reveal some personal vignettes. Siegel is Gary P. Brinson Director of Research at the CFA Institute Research Foundation and Senior Advisor to Ounavarra Capital. Scanlan is Chief Executive Officer at RS Investments .
Practical Applications of No Fear of Commitment: The Role of High-Conviction Active Management
A BGI research study using data from the Health and Retirement Study that simulated shocks to Social Security and home equity to strip out the false sense of security those assets provide. Key findings: among the middle wealth decile, 40% of total wealth comes from Social Security and home equity; controlling for reductions in government benefits and home equity, one-half of middle class Americans stand to lose 25% of their retirement wealth compared to expectations. The study identified the 'wealth effect' - counting illiquid home equity as spendable retirement wealth - as a major source of retirement insecurity, and proposed solutions at the government, employer, and individual levels.
retirement security, Social Security, home equity, defined contribution plans
Since the middle of the twentieth century, employees have reasonably expected their employers to provide a major part of the means by which they can retire. The traditional pension plan, known as the defined benefit (DB) plan, and one of the legs of the 'three-legged stool' of retirement security, is the focus of this article. All three legs of the stool are now arguably in crisis, but if you like to find encouragement in small blessings, the problems of DB plans are in principle the easiest to solve. This article examines the current crisis and makes suggestions on a plan of action to rectify it.
long-term investing, retirement investing, retirement, pension funds
Matthew H. Scanlan, Managing Director of Americas Institutional Business at Barclays Global Investors, testifies at a U.S. House of Representatives Committee on Education and Labor hearing concerning 401(k) fees on October 4, 2007.
Matthew Scanlan is an investment executive with 40+ years of CEO-level experience across indexing, quantitative, active, and private equity strategies. He currently serves as Strategic Operating Partner at Valeas Capital Partners and as a board director of Adams Street Partners and Exos Financial Group. He previously held CEO positions at RS Investments, Renaissance Institutional Management, and Barclays Global Investors' Americas institutional business.
13G SEC Filing for The Guardian Life Insurance Company of America
Coverage of Scanlan's appointment to the Adams Street Partners board.
Adams Street Hires Matthew Scanlan for Board of Directors
Adams Street Partners adds board directors
Adams Street Partners Adds Board Directors
Reports Scanlan, as managing director and head of BGI's Americas institutional business, describing a new DC annuity product as a revolutionary technology, with BGI filing 14 patent claims on the process.
Barclays adds annuity feature to 401(k)s
Covers the BGI SponsorMatch product launch, quoting Scanlan on trying to bring the best of defined benefit plans into a defined contribution option.
Barclays Adds Annuity Feature to 401(k)s
Renaissance Technologies, the black-box hedge fund founded by the mathematician James Simons, has hired Matthew Scanlan of Barclays Global Investors to run its institutional unit.
Reports Scanlan's departure from Barclays Global Investors to Renaissance Institutional Management.
Charles J. Yang, CFA, Elected Chair of CFA Institute Board of Governors
Notes Scanlan's CFA Institute C. Stewart Sheppard Award, his service on the candidate curriculum committee advisory board and chairing of the executive advisory board, and his role as head of BGI's Americas institutional business.
Class Notes 1981 - Kellogg World Alumni Magazine
Feature on the defined contribution market quoting Scanlan, head of BGI's Americas institutional business, on bringing the best of defined benefit investing to DC plans; notes BGI's $188 billion in defined contribution assets.
Guardian Life Insurance 2012 Annual Report
Matt Scanlan Becomes CEO of RS Investments
Press release announcing Scanlan's appointment to the Adams Street Partners Board of Directors, with quotes from Bon French and Jeff Diehl.
Matthew H. Scanlan Joins Adams Street Partners Board of Directors
Renaissance Technologies LLC, the multibillion dollar hedge fund that uses complicated computer models, hired a new president and chief executive officer for its institutional business. The fund firm, which manages roughly $20 billion, hired Matthew Scanlan to replace Stephen Robert, who retired. Scanlan joins the firm from Barclays Global Investors where he worked for 12 years and was most recently the company's head of institutional business in the Americas.
MOVES-Renaissance, Fidelity, CastleOak, Oppenheimer
News report confirming Scanlan's appointment as CEO of RS Investments, independent of the company press release.
Identifies Matthew Scanlan as client contact and Blake Grossman as chief investment officer at BGI, confirming Scanlan's senior client-facing role at least as early as 2002.
Profiles of the Top 50 Global/International Managers
Matthew H. Scanlan has joined Renaissance Technologies LLC as Renaissance Institutional Management LLC's President and CEO, the New York firm announced.
Renaissance Institutional Management Taps Scanlan as New Chief
Highly secretive Renaissance Technologies Corp., hit by performance problems and huge redemptions in its largest open hedge fund, may concede greater transparency in the strategy for large institutional investors.
Renaissance taps Barclays Global Investors for chief executive
Coverage of the BGI 'Future Shock of Retirement' study co-authored by Scanlan, with verbatim quotes on the severity of the retirement savings shortfall.
'By transitioning the GNR Team to SailingStone, we are able to ensure that our clients will continue to benefit from the GNR strategy while primarily focusing our in-house strategies on our broad investor base,' said Matthew Scanlan, CEO of RS Investments.
RS Investments Announces Formation of New Investment Adviser, SailingStone Capital Partners LLC
RS Investments has appointed Matthew Scanlan as chief executive officer. Scanlan was previously president and CEO of Renaissance Institutional Management, and in a prior role, headed Barclays Global Investors' institutional business.
RS Investments Names Chief Executive Officer
RS Investments ready to take bigger piece of pie
Profile of RS Investments as a $26 billion firm, quoting Scanlan on seeking opportunities to increase scale; credits him with adding hundreds of billions to BGI's institutional business.
RS Investments Ready to Take Bigger Piece of Pie
'The addition of Tyler and Denny will allow the RS Value Team to provide deeper analysis of companies within the rapidly changing energy and technology sectors,' said Matthew Scanlan, CEO of RS Investments. 'We are pleased to have attracted such high caliber research analysts to RS. We believe our clients will benefit from the near 40-years of combined investment experience they bring to the platform.'
RS Investments Strengthens Value Team with Addition of Key Energy, Technology Analysts
Coverage of Scanlan's appointment as CEO of RS Investments.
Scanlan's BGI departure is a symptom of rough times
Frames Scanlan's departure from BGI as illustrating the difficulty large, troubled financial institutions face in retaining top money management executives.
Scanlan's BGI Departure Is a Symptom of Rough Times
Masters in Management in Finance, Accounting, Management Policy
Recognized expertise in DB and DC plan design, fee disclosure policy, and retirement security; congressional and DOL advisory council testimony on these topics.
Defined Benefit & Defined Contribution Retirement Plans
Decades of leadership in institutional asset management, including running BGI's Americas institutional business and serving as CEO of multiple asset management firms.
Co-author of the award-winning 'Five Myths About Fees' on fee structures and risk-adjusted returns.
Investment Management Fees & Cost Analysis
Operating executive and strategic operating partner roles in private equity (Golden Gate Capital, Valeas Capital Partners), focused on financial services.
Masters in Management, Finance, Accounting, Management Policy
Launch of BGI SponsorMatch, a defined contribution annuity product; 14 patent claims filed on the process
Defined benefit and defined contribution plan design; retirement security; short-term DB funding relief
U.S. Department of Labor advisory council
Kellogg School of Management Asset Management Practicum Spring 2011 to Winter 2012
Kellogg School of Management, Northwestern University
Retirement security research; risks to middle-class retirement wealth from Social Security and home equity assumptions
401(k) fee disclosure and retirement security; bringing defined benefit investment disciplines to defined contribution plans
Room 2175, Rayburn House Office Building
Kellogg School of Management Asset Management Practicum Spring 2021 to Winter 2022
Matthew Scanlan is a Strategic Operating Partner at Valeas Capital Partners, a role he assumed in 2024 to advise the firm and its portfolio companies in the financial services vertical. His career in the investment management industry spans more than three decades and includes chief executive officer positions at several asset management firms.
Member of the Board of Directors of Adams Street Partners, a leading private markets investment firm headquartered in Chicago.
Member of Board of Directors at Adams Street Partners
Led the Institutional Business for the world's largest institutional investment management firm. Managed 80 professionals across San Francisco, Boston, Chicago, Montreal, Toronto, Brazil, and Mexico City. Managed five major account relationships, all ranking among the top ten revenue-generating clients in the firm. Served on BGI's Americas Executive Committee and Technology and Operations Executive Committee.
Managing Director & CEO of Institutional Business
Managing Director & CEO of Institutional Business at Barclays Global Investors
Operating Executive focused on investment opportunities in the financial services sector.
Operating Executive at Golden Gate Capital
Internal Fund Manager responsible for managing funds in select portfolios. Developed and programmed a proprietary computer stock index arbitrage trading program for proprietary trading accounts, which achieved superior performance in all periods managed.
Internal Fund Manager at O'Connor & Company
President and CEO of Renaissance Institutional Management, the institutional subsidiary of Renaissance Technologies, based in New York. Led client management and product development; reported directly to James Simons.
President & CEO at Renaissance Institutional Management (Renaissance Technologies)
Chief Executive Officer and Chief Investment Officer of RS Investments, a $20 billion San Francisco-based investment management firm. Also served as President and Trustee of RS Investment Trust and RS Variable Products Trust. Served on the Senior Leadership Team of Guardian Life Insurance, New York.
Chief Executive Officer & Chief Investment Officer
Chief Executive Officer & Chief Investment Officer at RS Investments (RS Investment Management Co. LLC)
Developed and marketed financial planning models for wealth management clients. Marketed directly to senior institutional wealth advisors and family office legal staff. Taxation specialty for large multi-family trusts.
Financial Advisor at Sanford C. Bernstein & Company, Inc.
Personally managed portfolios and provided investment counseling to large institutional and trust clients. Managed over $3.5 billion of client funds across various portfolios. Specialized in quantitative asset allocation, equity diversification, structured products, and management of concentrated low-cost tax basis portfolios. Principal speaker at Northern Trust's Family Financial Forum and the Goldman Sachs Equity Workshop.
Vice President & Senior Portfolio Manager, Structured Equity Group
Vice President & Senior Portfolio Manager, Structured Equity Group at The Northern Trust Company
Advises the firm and its portfolio companies in the financial services vertical.
Strategic Operating Partner at Valeas Capital Partners
Served on the Board of Governors of the CFA Institute, chaired its executive advisory board, and served on the candidate curriculum committee advisory board (concurrent with later BGI years).
Board of Governors; chaired executive advisory board; candidate curriculum committee advisory board
CFA charterholder. Served on the Board of Governors of the CFA Institute, chaired its executive advisory board, and served on the candidate curriculum committee advisory board.
Served on the Finance Board of City College of San Francisco (confirmed in 2007 congressional testimony introduction).
Member of the Kellogg Private Equity Advisory Council.
Member of the Board of Trustees of the Mechanics Institute in San Francisco.
Member of the board of the Marshall School of Business at the University of Southern California.
Barclays Global Investors Research Study (not a journal publication)
The Journal of Portfolio Management, Vol. 32, No. 3, pp. 56-64
Member of the Board of Directors since 2018.
Former employer; Scanlan headed the Americas institutional business for approximately 12 years.
Global CEO / CIO counterpart at BGI throughout Scanlan's tenure.
President & CEO of Guardian Life Insurance; a 2011 chance meeting led to Scanlan joining RS Investments as CEO.
Former employer; Scanlan was an Operating Executive focused on financial services.
Matthew and Joseph have collaborated on a number of efforts ranging from asset management to technology
Parent firm of Renaissance Institutional Management, where Scanlan was President and CEO.
Founder & Chairman of Adams Street Partners; Kellogg '77 MBA; co-presenter with Scanlan at the Kellogg Asset Management Practicum; appointed Scanlan to the Adams Street board.
Outgoing CEO of RS Investments who recruited Scanlan as his successor and stayed on to assist the transition.
Current employer; Scanlan serves as Strategic Operating Partner. Co-founded by Rob Little and Ed Woiteshek, former Hellman & Friedman executives.
J.L. Kellogg School of Management, Northwestern University
University of Southern California (Marshall School of Business)
Former BGI Managing Director who testified jointly with Scanlan before the DOL ERISA Advisory Council in 2009.
Direct report at BGI (MD, U.S. DC Group); co-presented the BGI annuity product launch and testified on a successor 401(k) bill.
BGI colleague (Global Head of Equity Research) and co-author of 'Five Myths About Fees.'
Director of Research at the Ford Foundation Investment Division and co-author of 'Five Myths About Fees.'
Matthew Scanlan is an investment executive with 40+ years of CEO-level experience across indexing, quantitative, active, and private equity strategies.
Bernstein Fabozzi / Jacobs Levy Award - Best Article (Jacobs Levy Equity Management / PM Research (Journal of Portfolio Management), 2007)
C. Stewart Sheppard Award (CFA Institute, 2006)