Liquid alternatives investments represent a wide range of asset classes and strategies giving investors many more moving parts to understand and master than traditional investment solutions, which makes succeeding in the strategy quite a challenge, according to David Scandiffio, president and CEO, CIBC Asset Management. “Given the multifaceted playing field, experience and investment skills are keys to success. Understanding the intersection of an investment manager’s skill set, the investment opportunity and the dynamics and limitations of the market takes a considered and skilled approach,” he stated.
Scandiffio, who is based in CIBC AM’s Toronto office—the firm has in excess of C$134 billion in assets under management—will sit for a Keynote Interview at Market Group’s forthcoming AltsSEA2019 Forum in Seattle, September 17, 2019. He responded via email last week to questions from IA regarding his outlook on alternatives investing.
“Another key to success is ensuring the investor knows what to expect. Communicating what success looks like up front for these strategies helps clients understand how these investments work,” Scandiffio continued. “Liquid alternatives don’t perform directionally and are not correlated with the markets. They function as diversifiers in a well-rounded portfolio. Open, ongoing relationship management is essential.”
Regarding where he has seen the most change in the alts investment arena during his career, Scandiffio said there has been a global trend of a massive increase in the use of liquid and illiquid alternative investments by institutional investors across many sectors. “What has accelerated recently is the use of these solutions within retail segments of the market. Locally in Canada, the modernization of mutual funds and related recent regulatory changes have brought about the democratization of these types of investment strategies to a wider range of clients,” he explained.
As a result of the new rules, he said, there are many new entrants who are new to investing in this space. He noted, however, that “We have had the same portfolio leadership for sixteen years at CIBC Asset Management, and from this continuity of leadership and experience comes a continuity of investment philosophy and process. You really grow as a team and get a thorough understanding of what you are trying to achieve, and how best to do it.”
In this new territory, working closely with clients to fully understand their liquidity needs and their risk appetite is the most important factor, Scandiffio emphasized. “Since premiums for less liquid investments are attractive to many investors, the role of the investment manager to guide them through their requirements, goals and comfort levels has become even more important,” he said.
What Scandiffio likes about the alts investment biz?
“It’s been rewarding to take the skill sets and capabilities we have honed with our institutional clients over the years and be able to refine and apply that expertise and experience to a broader base, including our eight million personal banking and retail wealth clients. Ultimately, we can help more clients to achieve their ambitions, and that’s a great outcome. A highlight for our team is seeing the investment success of our traditionally institutional-only offerings having a meaningfully positive impact to our managed solutions designed to help achieve the investment goals of our retail clients, which is the ultimate measure of success for us.”