Q&A with Don Raymond of Alignvest Investment Management

February 21, 2018 9:50 pm |

Don Raymond is the Managing Partner and Chief Investment Officer at Alignvest Investment Management. Prior to joining Alignvest in 2014, Don was the Chief Investment Strategist for the $220 billion CPP Investment Board (CPPIB) where he devoted 12½ years of his career to helping build CPPIB into a leading global investment organization. He was also the principal architect of CPPIB’s innovative Total Portfolio Approach, and was instrumental in the development of the United Nations’ Principles of Responsible Investing (UN PRI), as well as their adoption by CPPIB in 2005.

Don spoke at CAIS 2018 on the panel titled “A Global Perspective From Top Allocators: Construction Allocations In A Digital World.” Don sat down with us after the panel to discuss his career and what he hopes to build at Alignvest.

Q: What drove your decision to move from CPPIB to Alignvest?

A: I had known the Alignvest founders for a while and had great respect for them. I was intrigued by the opportunity to share the knowledge I had learned at CPPIB with a larger investor base while building a great business. I felt like I understood the unique challenges of institutional investors and how to go about structuring investment products that could meet those challenges. We also felt that building institutional-grade products would meet the needs of individual investors and family offices.

I was also intrigued by the Alignvest mission, which, true to its name, is all about achieving an alignment of interests. And they back it up too. The founders committed $300 million of their own capital to start the firm in 2010 and agreed to lock up their capital for over 20 years. I don’t know of any other managers that have done something like that.

Q: What is your focus at Alignvest?

A: We have three main business lines at Alignvest:

  1. We provide seed capital for fund managers with interesting strategies. As we find managers we like, we will back them up with the Alignvest brand and provide access to our middle- and back-office resources, allowing them to focus on what they do best–managing money.
  2. We have a private equity business and we like to do a lot of co-investing deals with our investors. Thus far we have invested in The Edgewood Health Network (EHN), a mental health clinic in Canada, and KGS-Alpha Capital Markets, a mortgage broker-dealer based in New York. We have also created a couple of Specialty Purpose Acquisition Vehicles (SPACs), one of which was deployed to acquire a telecom company called Trilogy and another one for which we have raised $500 million and are now actively looking for the right opportunity to put the capital to work.
  3. We offer a multi-asset strategy that is modeled on the CPPIB portfolio in that it is long-term oriented, is very global and has a heavy concentration of alternative assets and strategies.

We are also about to launch a strategy that seeks to replicate the risk-return profile of a portfolio of leveraged buyout funds, but with greater liquidity and lower fees than traditional private equity. The strategy will invest in publicly traded securities, with a focus on small- and mid-cap companies in the same sectors that PE funds invest in and have developed an innovative tail-risk hedging strategy. We focus on cheap, profitable, stable companies and time our entry to try and avoid value traps. Such a strategy could help investors manage their target PE allocation or simply provide access to this attractive asset class.

Q: You were directly involved in the development of the UN Principles for Responsible Investment (UN PRI), as well as the CPPIB’s adoption of the UN PRI in 2005. What is the story behind how that happened?

A: I joined CPPIB in 2001. A few years later, in 2005, I met at the UN with a group of about 15 investment executives from pension funds, endowments and asset managers. Together, we came up with a document that we believed could be adopted by the mainstream financial community. By that I mean UN PRI principles are written in a risk-return context to be consistent with and supportive of our fiduciary duty.

Q: What is the role of institutional investors in pushing for change?

A: I believe investors are most powerful when they are collaborating and coordinating toward a common goal. This goal should be wrapped in fiduciary duty, but it also needs to be pragmatic. I think investors today realize the systemic risk of climate change over the long-term and are taking steps to recalibrate their portfolios in a way that accounts for that risk. But no single investor can push for change alone. It’s also up to regulators and governments to align investors with broader societal goals.

Q: How should investors be thinking about responsible investing?

A: Responsible investing or ESG investing or impact investing should be integrated across all investments, and not just part of a separate portfolio. It’s important to also have consistent data so that investors can accurately measure the risks and opportunities in their portfolio.