Need an expert on public pensions? Meet Kristen Doyle. She can be found at state investment meetings advising multi-billion dollar pension clients on asset allocation, investment policy, manager selection—you name it. All while setting Aon Hewitt’s broader investment philosophy as it relates to public plans.
How do you defend investment consultants in face of critics?
Investment consultants play a critical role in managing institutional portfolios. Given that we as an industry advise on trillions of dollars and hundreds of clients across many market segments, we have a unique perspective that is valuable. When we build strong partnerships with our clients, really good things happen and really good ideas are formed.
Describe the weirdest interaction you’ve ever had with a client or potential client.
I work with a state plan and we meet with the board of trustees in a very formal cabinet meeting setting. The first time I presented, one of the trustees asked me why I live in Illinois with our high taxes and cold weather. It caught me completely off guard. After that it became a running joke that finding a clever answer became the most difficult part of those presentations for me.
Design a hypothetical portfolio: An existing foundation in your home country has been invested in a 60/40 portfolio since its inception and is looking to clean the slate. The fund has US$3 billion in assets with an annual target return of 7.5%. The annual spending rate is 5%, and the fund receives an average of $70 million in annual inflows. Given today’s markets, how would you allocate the assets?
I would go 100% passive in global equities and fixed income. Then I would take all my active risk in three ways: opportunistic investment ideas, diversified strategies, and private markets. I would take advantage of the illiquidity that as a foundation you can withstand and use those three areas to earn the return that I need.
What is your least favorite part of being a consultant?
My husband would say the travel. What’s actually the most challenging, as someone who works mostly with public pension clients, is when investment decisions are made based on factors other than investment merit.
What is the single most exciting investable idea you see in the market right now?
Options-based strategies. They take advantage of the dislocation in the options market that is driven by human nature and fear of loss, and can reduce portfolio volatility while maintaining a strong return.
Name your favorite food & drink.
Mexican food and Four Roses single barrel Bourbon.
The trend of consulting firms moving into outsourced-CIO (OCIO) is…
A logical evolution in a world where investment decisions need to be made more quickly and alpha is sought in areas different from traditional public-market investing.
What will be the biggest innovation in your industry in the next 10 years?
I hope we’ll see huge innovation in participant-directed plans. We know there are flaws in that particular model—people aren’t saving enough, options are still expensive, and participants don’t make good investment choices. There’s a lot of work to be done and I hope our industry can be a leader in driving solutions because we need to solve the retirement crisis in our country—and do it quickly.