Alyson Velati


The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (1)

Courtesy of Dave McMillan, Victoria Vodolazschi, Dulari Pancholi, and Christopher Walvoord; Insider

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  • Investment consultants act as the gatekeepers between hedge funds and institutional investors.
  • Insider identified the top consultants that have influence over billions going in and out of funds.
  • Investors told Insider the strategies they're eyeing to protect portfolios from volatility.

As volatility in the market rises, so does interest in hedge funds.

Big investors like pension funds, endowments, and foundations, which have hundreds of billions to put to work, are jumping into hedge funds to protect their portfolios.

A December report from the Alternative Investment Management Association found roughly half of institutional investors in the US planned to increase their hedge-fund allocations over 2022.

"In an environment where beta is not the primary driver of performance and where there is significant volatility across asset classes, it's critically important to have a quality hedge-fund portfolio," Eric Costa, the global head of the hedge-funds-investment group at Cambridge Associates, said.

In 2021, according to AIMA, hedge fund net flows hit $25 billion, compared with outflows of $15 billion in 2020. Family offices, foundations, and endowments were the top investors in hedge funds, according to the report.

Coalition Greenwich data from November indicated roughly 75% of institutional investors relied on investment consultants to help them oversee their investment portfolios and make decisions on the funds to write big checks to. These gatekeepers typically act as liaisons between a hedge-fund manager and large institutions like pension funds and endowments.

Institutional investors have hit challenges with hiring staff internally, so they've been increasingly reaching out to consultants for support and guidance for their asset allocations, said Davis Walmsley, the head of investment management at Coalition Greenwich, which helps asset managers with marketing and distribution strategies.

"As it relates to hedge funds and real assets, especially for those organizations that don't have the in-house capability to evaluate those types of investments, they are relying more on consultants to make those determinations on allocations and who they should be putting their money with," Walmsley said.

Insider has identified eight top executives at investment-consulting firms who oversee hedge-fund research and make recommendations to their institutional-investor clients on which strategies they should invest in.

The consultants told Insider the types of funds they've been hunting down for their clients. They declined to comment on specific hedge funds and declined to name specific clients.

Chris Walvoord, global head of alternatives portfolio management and research at Aon

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (2)


As the head of Aon's global alternatives business, Walvoord uses skills he acquired during his days as a portfolio manager to hunt for the best opportunities for the investment-consulting firm's clients, which are mostly corporate and public pension plans.

Lately, Walvoord has found that institutional investors have been attracted to event-driven and convertible arbitrage strategies. Over the past couple years, there's been a lot of issuance of convertible bonds, which will likely continue, he said.

Walvoord and his research team are also looking at opportunities in "small, niche, falling-between-the-cracks kind of strategies," he told Insider.

"Things that don't fall neatly into a bucket," he said, like managers that invest in mortgage-servicing rights, which make up just a sliver of the mortgage market and could stand to make money in a rising-rate environment.

Before Walvoord became a gatekeeper in 2016, he was a portfolio manager at William Blair's hedge-fund unit, a partner at the hedge fund of funds firm Guidance Capital, and a money manager for Northern Trust's unconstrained short-duration fixed-income portfolios.

Aon had $149.5 billion in assets under management as of December 31, according to a regulatory filing. Consultants typically separate the assets they advise on and the assets they manage, basically acting as an outsourced chief investment officer and making investment decisions on a client's behalf.

Victoria Vodolazschi, director of hedge-fund research at Willis Towers Watson

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (3)

Willis Towers Watson

When Vodolazschi was living in the Soviet Union, she always wanted a "meaningful" education but never thought she would end up as a gatekeeper.

Before working for one of the largest investment consultants, Vodolazschi worked in JPMorgan's investment bank and as a hedge-fund researcher at Tremont Capital Management and Bainbridge Partners. She spent about eight years at Northern Trust as a portfolio manager within the firm's hedge-fund unit before joining Willis Towers Watson, which is now known as WTW, in 2015.

Vodolazschi's primary responsibilities at Willis Towers Watson include making decisions related to investment portfolios on behalf of their institutional clients like pensions, endowments, and foundations.

When she began at the company, she focused more on advising clients on which types of managers they should invest in. WTW, like many other investment consultants, has shifted largely to overseeing clients' assets on a discretionary basis, which means consultants execute investments on behalf of clients. The company's delegated business runs $186.8 billion in assets under management as of December 31, 2021.

Clients are mostly looking for diversifying strategies, since most of their portfolios are mostly made up of equities and fixed-income strategies. Those strategies can be anywhere from "plain vanilla" hedge funds like long-short equity strategies to more "innovative, esoteric" opportunities like carbon markets, she said.

Eric Costa, global head of the hedge-funds investment group at Cambridge Associates

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (4)

Cambridge Associates

Any hedge fund that wants a piece of Cambridge's clientele, which mainly consists of endowments and foundations, needs to get past Costa and his team first.

Costa oversees 15 researchers and leads Cambridge's investment committee that's focused on hedge funds.

Cambridge, which had $161 billion in assets under advisement as of December 31, according to its website, has had more growth from pensions and ultrawealthy clients, too.

The investment consultant has been attracted to hedge-fund managers that are investing in startups and private opportunities. While Costa couldn't disclose manager names, many major hedge funds like Tiger Global and D.E. Shaw have ramped up their private-market bets.

"Companies are staying private longer," Costa said. "And so it gives us great opportunities to really outperform on the long side, when you have managers looking at both public and privates — where the value is and where the innovation is occurring.

"It's a nice model for really, truly understanding the disruption that's occurring in some of these subsectors."

Since the pandemic began, there's been so much volatility in the markets, which has made a strong environment for uncorrelated strategies like discretionary global macro and managed futures, he said.

Costa began working at Cambridge in 2010 as a researcher in its hedge-fund group after spending a decade as a portfolio manager at Ramius Fund of Funds Group.

Dave McMillan, chief investment officer of hedge funds at Mercer

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (5)


McMillan has been honing his skills as a gatekeeper for over 20 years.

McMillan started out researching hedge-fund managers at the investment consultant Hammond Associates before it was acquired by Mercer. For the past 11 years, he's helped build hedge-fund portfolios for Mercer's pension, endowment, foundation, and hospitals clients.

Lately, McMillan and his team, who manage dozens of commingled and customized hedge-fund portfolios, are most interested in opportunities and strategies that perform well in an inflationary environment and protect against volatility or sharp declines in the equity market. He told Insider he's eyeing commodity-oriented strategies, as well as hedging strategies like short only and long volatility.

"There are other hedge funds that are really, frankly, built for generating high rates of return," he said. "And that's fine. It just may not be the best vehicle for diversification."

Mercer had $415 billion in assets under management as of December 31 and $17.3 trillion in assets under advisement as of June 30, according to a spokesperson for the company.

Joe McGuane, senior vice president in Callan's alternatives-consulting group

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (6)


McGuane leads Callan's hedge-fund-research efforts, a role he started less than a year ago.

Before he joined Callan in July, he was responsible for investment-manager research for credit and multistrategy hedge funds, hedge funds of funds, and global tactical asset-allocation funds for the investment consultant Marquette Associates.

Over the past few months, McGuane has seen clients flock to lower-beta strategies like multistrategy managers and macro strategies because of rising interest rates and inflation.

Institutional investors are looking at managers who specialize in macro strategies because they have the ability to "trade across multiple asset classes globally and get those call rights," McGuane told Insider.

Long-short equity managers focused on tech, media, and telecoms have also had a good run over the past few years, he said.

"We've seen some volatility there, so we've seen folks kind of looking at more broader base long-short equity, maybe with more of a value tilt versus a growth tilt," he said.

Callan had $4.4 trillion in assets under advisement as of March 22, according to a regulatory filing.

Paul Kreiselmaier, director of hedge funds at Verus

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (7)


When hunting for managers, Verus' Kreiselmaier and his team look for old-fashioned stock pickers.

"We want to find managers that can differentiate between stocks. They're going to win versus lose," he said. "With equities, it's been tricky because I'm sure you've seen all the headlines where tech-oriented companies were the market darlings through maybe six months ago. Now, tech has sort of sold off."

Kreiselmaier oversees investment strategy, manager due diligence, portfolio-construction recommendations, and relationship building with hedge-fund managers.

Before he joined Verus in 2017, he worked as a senior research analyst at Russell Investments conducting due diligence on long-short equity and quantitative hedge funds.

As of September 30, the firm advised on over $664 billion in client assets through consulting and discretionary outsourced-chief-investment-officer services.

Dulari Pancholi, head of credit and multiasset investments at NEPC

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (8)


As head of credit and multiasset investments at New England Pension Consultants, Pancholi is responsible for hedge-fund research and due diligence for institutional clients.

She also specializes in impact investing and is a cohead of NEPC's impact-investing committee.

"We have seen significant interest in environmentally focused hedge funds" from institutional investors, Pancholi told Pensions & Investments in 2020.

"Pension funds are more interested in the environmental and governance aspects than the social factor, while endowments and foundations tend to be equally interested in all three areas as part of their mission alignment," she said at the time.

Pancholi started working at NEPC in 2006 after a stint as the vice president of operations at the hedge fund Venus Capital Management.

NEPC had about $1.4 billion in advisory assets and $66 billion in discretionary assets as of December 31, according to a recent regulatory filing.

Brian Dana, director of marketable alternatives at Meketa Investment Group

The behind-the-scenes power players of the hedge fund industry: Meet 8 investment consultants whose recommendations can help make or break a fund (9)

Meketa Investment Group

Dana leads research for hedge funds and helps Meketa Investment Group's clients with setting up their asset allocations and constructing their investment portfolios.

Dana's group looks at hedge funds from a risk perspective and then separates those strategies into two groups: risk-mitigating strategies like long volatility , discretionary macro, or relative value funds. The second group is risk-seeking strategies, which include equity hedge, event-driven, fixed income and credit, or commodities funds.

"When we build programs like this, it's to help mitigate something that is crucial to the outcome of the pool of capital. If you're a pension fund, or an endowment, or foundation, there are certain liabilities that we need to pay — sometimes, they're more explicit in the pension world and more fungible in the endowment and foundation world," he said.

Since the firm's inception in the 1970s, Meketa has largely served multiemployer pension plans but has grown out its endowment and foundation businesses.

Before he joined Meketa in 2006, he worked as an analyst at the University of Florida Investment Corp, which manages the university's endowment, foundations, and research endeavors, for a year. He was with Citigroup from 2000 to 2004, where he was an associate on an institutional fixed-income-sales and trading desk.

Meketa had over $26.5 billion in discretionary and nondiscretionary assets as of September 30, according to a March regulatory filing.

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