‘They Got It Wrong’: Manager Pushes Back on Watch List Status Linked to Political Run

By Justin Mitchell – July 19, 2023

The lead partner at $21 billion fixed income manager Garcia Hamilton & Associates is at odds with investment consultant NEPC for putting his firm on watch because of his political campaign. 

While the consulting firm was not obligated to meet with Garcia Hamilton & Associates before placing it on watch, it might have been a good idea, said Christopher Cutler, president of Manager Analysis Services, a search consultant and due-diligence provider. 

“Best practice would absolutely be to reach out to [Garcia Hamilton] and talk about all the potential concerns and the reasons they might need to change [the firm’s status] to a hold,” he said. 

However, NEPC’s action is just a hold, not a recommendation that clients sell their holdings, Cutler added.

“I don’t think that’s a terrible route to take,” he said. “Probably, they could have communicated that better to Garcia [and] earlier in the process, so he wasn’t surprised.”

Hedge Funds Take a $23B Hit as Outflows Surge

By Lydia Tomkiw  July 5, 2023

Chris Cutler discusses allocators’ growing substitution of capital between lower volatility hedge funds and private credit strategies in FundFire:

Investor interest has increased in other areas outside of hedge funds, such as private credit, said Chris Cutler, president of Manager Analysis Services.

“I think there is some substitution among hedge funds and private credit going on,” he said. “Allocators that are reluctant to pay hedge fund fees may be willing to pay somewhat diminished fees in private credit.”

And while multi-strategy hedge funds remain attractive to investors, it may be “difficult” for fundamental hedge funds to attract additional capital, Cutler added.

Asset Manager OCIOs Face Conflict Questions from Search Consultants

by Sam Heller | FundFire April 17, 2023 [Manager Analysis Services strongly prefers conflict-free OCIO models] – OCIOs are not blind to the concerns around their investment strategies, said President of Manager Analysis Services Chris Cutler. Many of the coverage teams at OCIOs will work with clients to avoid these conflicts altogether, he added.

“There are many very high-quality coverage teams at those firms,… and they proactively avoid any conflicts,” he said. “I’ve seen these cases where they have already avoided all the internal products just because they don’t want these conflicts.”

You Can Meet Interesting People in Crypto

LinkedIn, by Chris Cutler – DEC 2022

You Can Meet Interesting People in Crypto

While managing my own investment due diligence firm for the last 20 years, I also probe ahead to understand the next great investment themes. The ever-expanding crypto market was an obvious potential candidate from 2016 to 2019.

My initial read of this market was that the hype about replacing “fiat currencies” with cryptocurrencies detracted from the true opportunity: accessing incredibly cheap venture capital money.

How so? Consider the investors’ terms for investing in a cryptocurrency vehicle, of which over 20,000 have been launched. Investors typically receive no explicit rights to earnings, distributions, voting, nor other investor protections. They profit only if later investors are willing to pay higher than the original purchase price. In addition to these deficiencies, the regulators [particularly the CFTC] assert jurisdiction, but its oversight has proven ineffectual.

I have reviewed many venture LPs and I have never seen such unattractive investor terms in the mainstream venture markets. Cheap capital doesn’t get any cheaper than in crypto! However, that’s not to say all crypto ventures are flawed. Some of the capital from crypto launches have funded new and interesting technologies, and some excellent crypto-related businesses. Along with a handful of crypto enthusiasts, I wrote a white paper to create just such an innovative technology in the field of payments systems. However, after almost two years probing the crypto community, I decided the crypto landscape was too squirrelly for me to launch a venture or concentrate my business. Here’s why.

Venture Investing as a Reference Point for Crypto Investing

Venture Capital is a useful reference point when thinking about crypto market investments, since venture is like a midpoint on the diligence continuum between crypto and private equity investing. Venture investors incur risks that would be simply unacceptable to private equity, hedge fund, or traditional investors, yet venture investing can be tremendously successful. Venture managers seek to back exceptionally talented venture founders, from the creation of their nascent companies until their ultimate IPO or sale.

On the other hand, private equity managers will focus on existing businesses, conducting much more rigorous reviews of assets, earnings, management, and operations of the companies they purchase. Venture diligence practices would never work in private equity markets, yet both markets provide excellent investment opportunities.

In our business we see many talented venture managers–reviewing venture managers is one of the most interesting activities in our diligence business. We have also seen many problems. In the public arena, we are truly puzzled by Andreeson Horowitz’s backing of WeWorks founder Adam Neumann, for example.

Privately, we have rejected about half of earlier-stage venture managers brought to us and already reviewed by our talented institutional-investor clients, often because our additional digging found the venture managers misled about their backgrounds and track records in ways that are far more egregious than anything we’ve seen recently from private equity or hedge fund managers.

Crypto vs Venture

The crypto market’s key challenge is to rise first to the level of venture investing, and then to institutionalize the marketplace. There are big hurdles, and they make venture investing look easy. Crypto ventures have even less regulation than venture capital managers. Unlike in mainstream venture, crypto ventures are rarely audited, and they often do not have effective independent board directors or independent controllers. Insider trading is common, and usually no separation exists between executives and control functions.

However, crypto’s worst enemy may be the unbridled arrogance of a full generation of young crypto programmers who actually believe their work displaces principles developed over centuries about banking systems, currencies, and macroeconomic principles. Risk managers? Credit risk controls? AML controls?

Audits? Who needs them?

There are many morals to the unfolding saga of FTX, but rather than list them, we’ll just provide a sort of portrait-guide to some of the recently noted players in crypto space:

Alex Mashinsky – Founder of Celsius Network, a sort of crypto prime broker funded by crypto depositors that filed for bankruptcy in July. Banks? Regulators? Fiat currencies? Who needs them?

Steven Narayoff – Attorney charged with trying to extort additional large payments from cryptocurrency issuer-clients. Partner pled guilty. Narayoff’s pleading not guilty.

Jack Abramoff – Once one of Washington’s most influential lobbyists, just the man to trust to start an AML – compliant version of bitcoin?

SBF – FTX acted as a “custodian” but could not withstand the temptation to gamble clients’ assets.

CZ – No public audits, no obvious controls, no regulators, law enforcement interest in his activities, what could possibly go wrong?

Needs no explanation.


Investment conviction is not a substitute for independent diligence. Nothing in crypto negates the importance of having independent custodians to hold assets, independent diligence experts, independent administrators, independent attorneys, independent auditors, independent valuation, reputable international jurisdictions, and sensible investment agreements. Investors should be wary if they are solely relying on white papers or technology without the benefit of at least venture capital investment infrastructure.

You should ensure that you have the level of protection from your diligence process to evidence that you fulfill the duties that you as a fiduciary are charged with fulfilling. Even the smartest institutional investors face challenges in venture investing, and we have helped our clients focus on the more promising ventures and avoid catastrophic mistakes.

Chris Cutler CFA
Manager Analysis Services, LLC

December 16, 2022

OCIO Watchdog Calls Out California Pension for Custom Benchmark

October 31, 2022 | Justin Mitchell FundFire

Re: A Discussion of broad static v specific dynamic benchmarks

This sort of “benchmark obfuscation” comes up often, said Christopher Cutler, president of Manager Analysis Services, a search consultant and due-diligence provider, in an email.

“A detailed manager-by-manager analysis of performance against underlying benchmarks helps cut through dense fog and brings a clearer picture of alpha,” he wrote.

Aon, Blue Cross Blue Shield Pension Settle Lawsuit Over Hedge Fund Losses

October 3, 2022 | Justin Mitchell FundFire

Nevertheless, Aon’s position in the investment industry does not seem to have been adversely affected by the Blue Cross Blue Shield lawsuit, said Christopher Cutler, President of Manager Analysis Services, a search consultant and due-diligence provider, in an email.

“My sense is they escaped material damage to their business,” he wrote. Since Allianz GI appeared to be the one that covered investors’ tangible losses, that would bolster Aon’s argument that the problem lay with them, and not Aon, Cutler added.

“This approach would deflect from the central problem that Aon consultants exhibited a distinct lack of skill in understanding complex investment strategies by including Global Structured Alpha on their approved list,” he wrote.

Segal Marco Buys Milliman’s San Francisco-Based Consulting Practice

(The $623B consultant is the latest industry firm to add scale or
capabilities through an acquisition.)

July 8, 2022 | Justin Mitchell | Fundfire

Investment consulting firms are increasingly concentrating on their areas of strength, said Christopher Cutler, President of Manager Analysis Services, a search consultant and due-diligence provider.

Public sector retirement plans call for considerable specialization in that market, so Milliman’s decision makes sense, he added in an email.

“Nonetheless, clients are not the property of their investment consultants to be bought and sold,” he wrote. “Every public plan should undertake its own review of the acquirer, as with any acquisition, and consider a search. After all, they hired Milliman, not Segal Marco.”

The Short Squeeze: What’s Next for Hedge Funds in Reddit Era?

By Alyson Tomkiw February 3, 2021

“Hedge funds also will have to think about the other side of shorts and the possibility that a large group of investors just wants to undermine their position, and is not basing views on valuations or other factors,” says Chris Cutler, president of Manager Analysis Services.

“I think they are going to be much more careful about their shorts. They are already careful, but this experience shows this could happen again,” he says. And hedge funds will take monitoring social media even “more seriously,” Cutler adds.

New OCIO Launches, Targeting Clients in Smaller End of E&F Market

By Aziza Kasumov January 15, 2021

“Whether OCIOs… or hedge funds – there’s always room for spinouts and new launches,” adds Chris Cutler, founder of search firm Manager Analysis Services. However, both search consultants say there are things new OCIO firms should keep in mind.

Cutler adds he would recommend any new shop have at least an initial slate of clients lined up before the launch.

“It’s such a crowded field already that they need to have a way to distinguish themselves and not take the risk of launching and not succeeding,” Cutler adds.

Some Consultants Paid Back Their PPP Loan. Others Refuse to Talk About It

By Aziza Kasumov December 17, 2020

“We still don’t see a problem with investment consultants or OCIOs receiving benefits from the PPP, the amount of which would pale in comparison with the long-term amounts of income tax the government ultimately receives from their activities,” Chris Cutler, founder of search firm Manager Analysis Services, writes in an email. He added that the idea that the asset management industry, outside of alternative strategies, is “exceptionally profitable” is a misconception, and that his firm would “rather see OCIOs retain the PPP funds and invest in their personnel than pay back the loans.”