Client Spotlight: Fiducient Advisors

Client Spotlight

Fiducient Advisors was founded in 1995 striving to provide unparalleled and customized investment consulting services. Its clients include retirement plan sponsors, endowments and foundations, private clients and financial institutions. Headquartered in Chicago, Fiducient advises more than $260 billion in assets and employs over 200 people as of December 31, 2021.

Anthony Novara joined the firm in 2011 and is currently a Partner and Research Director, overseeing Marketable Alternatives and Capital Markets. Novara is a big classic rock fan and proudly has a growing collection of vinyl, starting with the 1960s. During the height of the COVID pandemic, he enjoyed listening to his collection from his home office.

Challenge: As Fiducient has grown, relying on Excel increasingly slowed down output and created burdensome manual processes for completing manager due diligence and portfolio construction.

Solution: Fiducient Advisors has partnered with Venn by Two Sigma to help with several key workflows:

  • Quantitative Manager Due Diligence: Streamlining efficiency
  • Portfolio Construction: One tool for building and remodeling
  • Discretionary Models: Monitoring and tracking portfolios

Venn has significantly reduced the need for Excel, enabled the ability to look at factor exposures through time, and provided a central repository for all materials related to quantitative manager due diligence. Fiducient Advisors relies on Venn to provide analytical rigor, review contributions to risk and return, and help the team tell a story about factor exposures.

Venn allows us to do several things that create efficiency in our process. On the front end, we can quickly assess a manager’s return stream and perform an easy ‘sanity check’ early on in our research process. Secondly, it can help us manage our meeting schedule in favor of strategies that pass that initial sanity check.

Fiducient Advisors utilizes Venn to model client current portfolios, as well as proposed portfolio changes to see the impacts of new recommendations.  When the Fiducient team often receives requests from clients to either raise cash or invest new capital, they can quickly construct and analyze various options in Venn to see the impact on a client’s portfolio.  

We continue to spend considerable time thinking about optimal portfolio construction across a portfolio of marketable alternative strategies as well as across a client’s entire portfolio, including benchmark-oriented strategies. Venn is especially helpful in guiding our assessment of the interactions of the underlying strategies to arrive at an attractive portfolio with as much expected benefit to our clients as possible. The analogy I would give is that the Beatles didn’t need two Johns or two Pauls – the group needed one of each along with a George, a Ringo and a Brian Epstein for the best results. If the overall result ends up being Sgt. Pepper or Abbey Road, that is what matters.

Venn’s platform provides the ability to track liquid portfolios consisting of equity and fixed income managers over time. The team is now able to monitor their discretionary portfolios, understand contributions to risk and return, and stress test them against various scenarios. 

We use Venn for ongoing monitoring of our client portfolios and underlying strategies as exposures move around with the markets.

Custom Analysis Use Case: Using Venn as the Fiducient “Search Book”

  • Venn has the capability of custom analyses and generating reports. 
  •  Fiducient Advisors can pull up three potential fund-of-funds and use a common equity index as a benchmark.
  • Novara and team seek to craft a narrative for their clients by comparing and contrasting each fund of funds using traditional analytics and more advanced factor exposures.
  •   In particular, the team can narrow in on a manager’s ability to produce idiosyncratic sources of return (which may include what is sometimes referred to as “alpha”). 
  • In addition to building the analysis reports on Venn, Fiducient can quickly export PDFs for use in client meetings.

Results and What’s Next:

Overall, Fiducient Advisors has leveraged Venn to address key workflow improvements and the team is now confident in their ability to quantify factor risk.  

Looking ahead, Novara and team are thinking about leverage and liquidity risk as much as possible as some of the key risks to consider for clients. “Our thoughts are that achieving a return target can only come from alpha, bearing a risk premium, levering up the strategy or accepting more illiquid terms. We seek to minimize and/or balance the last three as much as we can.”  

About Venn:

Venn by Two Sigma helps institutional investors of all sizes embrace a modern, quantitative, and intuitive approach to multi-asset portfolio risk management and investment decision making. Venn combines Two Sigma’s expertise in technology and investment analysis with a modern platform for data-driven portfolio decisions. 

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