Pacific Center for Asset Management

Every worker deserves to live with confidence that their hard-earned savings will support a full retirement. But many pension funds are underfunded and may struggle to meet their future commitments. In a very similar way, many foundations and endowments struggle to meet the needs of their beneficiaries. High-quality, independent research on the major concerns facing asset owners (including retirement funds, foundations, endowments, and sovereign wealth funds ) has not been available.

This incomplete picture informed the creation of the Pacific Center for Asset Management (PCAM), a first-of-its-kind research center housed at UC San Diego with research that impacts and benefits asset owners across the globe. PCAM is the only academic research center in the world where the research questions are chosen by industry leaders.

Created in 2019, PCAM's mission is simple: Make asset-owner research topics mainstream in academic research. PCAM will align asset owner’s most critical investment questions with high-quality academic research in order to solve potential economic threats to beneficiaries' nest eggs. PCAM’s strategy is guided by a focus on social good and improving living standards for beneficiaries. It acts as a bridge between academia and industry to generate salient research that asset owners use to serve the needs of their beneficiaries.


Our Work

Each year, PCAM produces at least three major research projects that are focused on the needs and questions of large asset owners and their beneficiaries. These questions are developed by CIOs who collectively hold more than $1 trillion in assets.

 

Past research projects include:

Real effects of environmental activist investing (2021)

There is increasing pressure on pension fund managers to consider more socially activist investing. This work studies the real effects of environmental activist investing. Using plant-level data, the authors find preliminary results that targeted firms reduce their toxic releases, greenhouse gas emissions, and cancer-causing pollution. Overall, the study will examine if engagements are an effective tool for long-term shareholders to address climate change risks.

 

The case for actively managed funds (2021)

Should pension funds invest in more actively managed funds? The purpose of this study is investigating the efficacy of different management structures of pension funds. The authors intend to use both public and proprietary datasets in their analysis. The goal is to provide timely research that informs major pension funds.

 

Environmental externalities of hedge fund activism (2021)

Pressure on investors to practice environmentally sensitive investing makes sense only if it has a desirable impact. The authors propose to study how improving economic efficiency interacts with corporate environmental behavior and sustainability through the lens of hedge fund activism. Using plant-chemical level data from the EPA, they find evidence that activism campaigns are associated with a 17 percent drop in emissions for chemicals at plants of targeted firms. This decline in emissions is present in both chemicals that are known to cause harm to humans and those known to have adverse effects on the environment. These findings suggest that the benefits of activism are not necessarily confined to shareholders, but may also extend to other stakeholders (e.g., the local community) affected by firms’ emissions.

 

Strategic Asset Allocation (2020)

This project analyzed the design of a strategic portfolio that is exposed to multiple risk premia and is resilient across multiple economic cycles. Long-term investors rebalance their portfolios given their views on the investment landscape. Portfolio tilting is often implemented using investors' views on point estimates of asset expected returns which are notoriously difficult to estimate and lead to unstable portfolio weights. Using data on equities, bonds and commodities, they show both in simulation and empirically that the approach generates stable portfolio weights and a performance that is minimally affected by forecast errors.

 

Pension Fund Allocations to Private Equity and Portfolio Risk and Return (2020)

Investing in private equity is becoming more prominent in institutional investing, but performance evaluation is difficult. This work provides a method to evaluate private equity investments by using investor-specific stochastic discount factors. The method allows a direct way of answering the question of whether a given investor could benefit from investing in private equity.

 

Diversity and Inclusion and Portfolio Returns: Is there a tradeoff? (2020)

Pension funds and public investors have re-evaluated the diversity of managers that invest their funds and the firms they invest in. This project focuses on analysis of alternative ways to gain exposure to a D&I factor and the effects of this on portfolio risks and returns. The authors create a new data set on “emerging managers” returns.


Our Impact

By law, the sole duty of a CIO is to earn returns so they can pay benefits for retirees. As a result, they need to be careful when making decisions based solely on social good. PCAM's purpose is to give these CIOs findings and research reports based on evidence that helps them with their decision making. With research from PCAM, CIOs can go to their board of advisers and say, here's what we should do, here's why we're going to do it, and here's the evidence to support that decision.

PCAM has already delivered on that promise and has no end in sight. Work underway has yielded groundbreaking research benefitting pension funds that CIOs can use to help them and  their boards guide investment decisions, such as a nudge for pension funds to allocate more to private equity and results that emerging manager performance compares favorably with industry performance.

 

Our Team

The Pacific Center for Asset Management is a collaboration across many important entities. Located at UC San Diego, the center is managed by the Rady School of Management in partnership with the Division of Social Sciences. The PCAM Advisory Council is composed of influential asset owners (typically CIOs of large pension funds) and distinguished academics, many from outside the University of California. The council comes together annually to discuss, debate and define the PCAM research agenda over the near future.  

The center is co-directed by Michael Melvin, executive director of the Master of Finance program at the Rady School, and Social Sciences Professor Graham Elliott from the Department of Economics. Joe Sturtevant is the PCAM program director.

The research itself is conducted by individuals from all over the globe. PCAM asks for research proposals on an annual basis, and those proposals are reviewed by the PCAM Advisory Council to select the projects to be supported. 

 

CIO Advisory Council

Chris Ailman
Chair
CalSTRS

Maggie Davis
BCI

Rod June
LACERS

Molly Murphy
OCERS

Steve Sexauer
SDSERA

Betty Tse
ACERA

Amit Prakash
AIMCO

Jeff Wendling
HOOPP

Academic Advisory Council

Andrew Karolyi
Chair
Cornell University
Johnson Business School

Rob Engle
New York University
Stern Business School

Itay Goldstein
University of Pennsylvania
Wharton School of Business

Wei Jiang
Columbia University
Columbia Business School

Kathleen McGarry
UC Los Angeles
Economics Department

John B. Shoven
Stanford University

Laura Starks
University of Texas
McCombs Business School

 

To learn more, please contact program director Joe Sturtevant at jsturtevant@ucsd.edu