How have you been a change agent at your organization? What have you done that you’re particularly proud of?
Building out an allocation philosophy for my core areas of expertise that utilizes a combination of traditional methods, proprietary research, and innovative approaches. I’m also proud of the structural alpha that I’ve negotiated for SWIB’s beneficiaries by shifting fee structures to be better aligned with true alpha generated.
What is the asset class or investment that keeps you up at night, and why?
If I’m overly concerned, it tells me the investment is sized too big or lacks the conviction required in the first place. The risk factor that does concern me isn’t an asset class, but rather broad deleveraging because it is one of the most difficult factors to risk manage.
What methodologies have you adopted within your institution?
I developed a framework for evaluating equity style factors both from a risk-monitoring and return-seeking perspective.
Where do you fall in the passive vs. active debate?
Both methodologies are tools in an institutional investor’s toolbox, and there is rationale for both in the same diversified portfolio. Rather than take one side broadly, it seems appropriate to evaluate more detailed instances as to whether active or passive is the appropriate way to extract a certain risk premium. The markets contain many structural and behavioral inefficiencies that allow some portion of active managers to add value to a portfolio through excess returns or portfolio utility.
What are the changes you’d like to see the institutional investing community make in 10 years?
Think more creatively and rationally about sources of returns across beta, alternative beta, and alpha. An allocator’s job of constructing a portfolio to hit a certain return and risk mandate is easier and more consistently repeatable if they think of their beta and alpha separately rather than simply looking at absolute returns.
Who is a manager you don’t currently work with whose brain you’d like to pick?
James Simons. I’ve had the ability to get to know a few of the leading quantitative firms, but one I haven’t spent as much time with is Renaissance, and his background is intriguing.
Ideally, where would that meeting take place?
Ideally Augusta National, but I’ll settle for any golf course.
What is a software investment tool that helps you most?
Our holdings-based risk aggregation system. Every risk system has limits, but once those limits are understood, we can get a better picture into portfolio positioning and risk than any ex-post information can provide by itself. When used in conjunction with ex-post data, the result is more accurate and timely expectations for risk and return.
What would improve the relationship between you and managers?
Better communication from both sides. Allocators need to be more forthcoming with their philosophy and objectives such that managers can better understand what is expected of them, and better tailor strategies towards meeting those objectives.
Why did you choose your current path?
Being an allocator is particularly interesting because I get to see and learn from so many different styles and strategies (good and bad). Investing presents a continually evolving challenge, which keeps me coming into work every day.