NAIC study finds 16% IRR among participating firms

Firms in NAIC's performance research generated a 16% internal rate of return, about 700 basis points above the study's benchmark, according to a report the National Association of Investment Companies published Nov. 5.

Those results have not produced proportionate institutional allocations, NAIC said. The report attributes the gap to sourcing practices, familiarity and organizational resources in addition to track record, and it asks allocators to test whether their selection criteria surface the strongest managers or confirm existing relationships.

For an allocator running an emerging-manager sleeve, the 16% IRR is the number to compare against the program's own returns, with the caveat that NAIC measures it against the study's benchmark.

Diverse managers account for approximately 30% to 40% of GCM Grosvenor's annual private equity investment activity, according to Jessica Holsey, a managing director at the firm. The report describes GCM Grosvenor as a global alternative asset management solutions provider with about $97 billion in assets under management.

“Any notion that diverse necessarily means concessionary is easily dispelled here,” Holsey said. The report attributes GCM Grosvenor's commitment to years spent building institutional support for differentiated strategies rather than relying on individual advocates.

NAIC argues that wider access to differentiated managers is a portfolio-construction question rather than a diversity concession. Answering it means looking at where performance originates and which characteristics predict success, which puts the burden on emerging firms to convert investment expertise into institutional credibility, durable partnerships and consistent distributions.