Deals & People July 7, 2011

Wesley Chan Joins Acadian

Wesley S. Chan will join Acadian Asset Management LLC as Director of Research Operations.
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As Director of Research Operations, Chan will lead Acadian’s bottom-up research effort alongside Malcolm Baker, a finance professor at Harvard Business School, who consults with the firm.  

Chan comes to Acadian from Goldman Sachs Asset Management, where he served as a Vice President in the Quantitative Investment Strategies group; he was a lead member of a team responsible for tens of billions of dollars in global equity investments, developing alpha themes, and implementing new signals. Prior to Goldman Sachs, he was a partner and lead equity researcher at AlphaSimplex Group in Cambridge, Mass. Chan earned his A.B. in Economics from Princeton University, and a Ph.D. in Financial Economics from MIT Sloan School of Management.  

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“Wes brings with him a wealth of knowledge and deep understanding of investment markets, as well as innovative ideas in applying quantitative models to add value for our clients,” said John Chisholm, Acadian’s Chief Investment Officer. “His ties to members of our investment team go back a decade or more, and we believe he will make significant contributions to our future investment success.”

In Practice July 7, 2011

PSNC 2011: Misbehavioral Finance

There’s always a lot of talk about how to improve participant behavior in a retirement plan, but sometimes it’s the plan sponsor that “misbehaves.”
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At the PLANSPONSOR National Conference in Chicago last month, panelists discussed ways in which plan sponsors might struggle in fulfilling their fiduciary duties. Even sponsors with the best intentions may be doing unintentional harm to their plan and their participant’s likelihood of having a secure retirement if they fall into some of these traps.   

Tim Black, Senior Vice President at Mosse & Mosse Associates pointed out that in the last five years, there has been a big institutional push to fix participant behavior with auto-features. But plan sponsor problems, such as a “herd mentality,” “analysis paralysis,” or “recent-cy bias” are often ignored. The “herd mentality” is when everyone on the investment committee just wants to stick to the norm and no one wants to be the one to suggest any changes. “Analysis paralysis” sets in when investment options are being over-analyzed and the committee is incapable of making any decisions, and alternatively, the “recent-cy bias” occurs when the committee too swiftly changes their plan with the changing forecasts.   

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Diane Gallagher, Vice President at J.P. Morgan Asset Management, has extensive experience in dealing with participant communications. She said that plan sponsors need to leverage the power of communications as much as possible “to make it hard for people to fail.” She pointed out that implementing a strong plan design is critical, but it must be communicated to the plan participants for the plan to truly succeed.   

Jennifer Flodin, COO and Co-Founder of Plan Sponsor Advisors, a retirement benefits consulting firm, said that plan sponsors need to take a more active approach in “re-engineering” their plans. “You need to take a step back and think about what this plan is intended to do; are you getting any [return on investment] on it? That can help you refocus your responsibilities.”  

Lastly, Kristi Mitchem, Head of Global Defined Contribution at State Street Global Advisors, said there is a consistent fear among investment committees of receiving a negative reaction from the participant base if any action is taken regarding the plan.    

“That is a classic 'misbehavior,'" she said, adding that we tend to “over-extrapolate” the power of the small percentage of participants that would bother to vocalize their concerns.  “Usually only five or 10% would be vocal. We are scared that that percentage is representative of the entire participant base. So we delay making change for fear of upsetting the whole. But this is not realized,” she concluded. 

A second common mistake Mitchem has seen is “not thinking big enough.”  She contends that the retirement plan health of an organization needs to be looked at in tandem with the organization’s health as a whole; engaging participants with their plan will likely lead to them being more engaged with the company.  This is a very persuasive method when trying to convince C-level executives to agree to strengthening the plan. 

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