“Phil is one of the true leaders of our investment team. From a business perspective, he fully grasps both the technical aspects and the dynamics of the market, often coming up with approaches that some of us may not have considered. He’s also the consummate collaborative team player, serving as a mentor to many of our junior colleagues. Above all, and without question, Phil has an unwavering commitment to always acting in the best interests of MassMutual’s policyowners and customers.”
— Drew Dickey, Head of Alternative & Private Equity, MassMutual
Phillip Titolo has been a hallmark in MassMutual’s investment office after paving the way for a slew of insurance investing developments, in addition to keeping the company’s investment portfolio and capital base healthy through his work on the firm’s $180 billion general investment account.
Titolo joined MassMutual after spending a few years as assistant vice president of hedge fund investments at Hartford Investment Management, while at the same time serving as the treasurer for the Hartford (Conn.) Area Habitat for Humanity and a local chapter president of the Boston College Alumni Association.
Philip’s accomplishments and innovations earned him a spot in this year’s NextGen series, and he was happy to discuss his opportunistic strategies formed by diligently studying areas of investable opportunities that others may not be paying close attention to at this stage of the credit cycle.
CIO: What makes 2019 an interesting investing climate? How are you handling it?
Titolo: Each day, we are one step closer to the end of the current economic cycle. I am a long-time, avid observer of the Fed and yield curve, and I think the warning signs being signaled by the bond market do not mirror the strong recent returns in the equity market. Our team is attempting to handle this discrepancy by focusing on each potential investment’s long-term fundamentals and trying to build a more durable, diversified, and holistic portfolio.
CIO: After this year, what are the largest opportunities and the largest threats you see on the horizon?
Titolo: I typically see the biggest opportunities and the biggest threats in the market as really one in the same. I look to dig deeper in areas where I believe others may be missing a critical element in their analysis. The largest threats I currently see are complacency in the high-yield market and in passive benchmark investing, without regard for the underlying fundamentals. I also see some bubbling weakness in the auto sector, as well as with some software-as-a-service (SaaS) technology companies.
CIO: How did you arrive at your current position? And why did you choose this part of the
financial services industry?
Titolo: I was fortunate to start my career at United Technologies as a pension investment analyst just before the 2008 financial crisis. I learned early on that focusing on asset-liability management is critical to being successful in an institutional investment portfolio. Corporate pension plans and insurance general accounts are both rooted in the same core ALM principles. I enjoy investing with a greater sense of purpose, which comes from knowing what the liabilities represent to our stakeholders. The liability is not just a number for pension plans and insurance companies; it actually means something tangible to a group of our constituents. At MassMutual, a mutual life insurance company, we are owned by our policyowners, of which I am one. That pride of ownership drives a greater sense of purpose for our team on a daily basis.
CIO: What was the most important strategic allocation of your career?
Titolo: I firmly believe that the most important allocations an investor makes are ones that he or she learns something from after it didn’t work out as expected. One of the most important allocations in my career came in a prior insurance role, when our team elected to allocate to hedge funds. After making this allocation, I came to find that the low yield and low volatility of hedge fund strategies do not justify the large amount of capital reserves required to invest in them. You can’t “eat” a high Sharpe Ratio. I learned that while certain asset classes might make economic sense to a portfolio in theory, each type of institutional investor might have specific considerations that make that asset class impractical. What may work for some, won’t work for all investors.
CIO: Tips for money managers who want to work with you, especially what not to do.
Titolo: The managers with whom I’ve had the most successful relationships tend to believe I’m quite direct early on in our discussions. The best thing a manager can do is to mirror that honesty and transparency from the beginning. Managers should also be sure to do their homework on the company they are pitching. Coming into a meeting not knowing how we approach investing is a big mistake—one that, unfortunately, we see all too often.
CIO: Biggest goof a money manager has made with you?
Titolo: I’m fortunate in that I have the opportunity to deal with mostly high-quality and knowledgeable institutional relationship managers across the board. Yet one story to the contrary comes to mind. Many years ago, in an introductory meeting with a private equity manager, the investor relations representative made the basic introductions and then actually fell asleep in the corner of the room for the duration of the meeting. If a manager’s IR point person is not a key player throughout the investment, that particular manager is missing an important connection opportunity with his or her investors.
CIO: Who in the financial world would you like to have lunch with and why?
Titolo: I’d have to say either of two former Federal Reserve Chairmen—Alan Greenspan or Paul Volcker. These two men have had more influence on our global economy since the 1980s than almost anyone else. Such influence is typically reserved for elected politicians, but interestingly, neither were elected. Their views on the evolution of the Fed and its critical role in today’s financial markets would be interesting to discuss with both firsthand.
CIO: What are changes you’d like to see the institutional investing community make in 10 years?
Titolo: Definitely more openness within the investor community. Too often, investors don’t make the time to openly share ideas with other like-minded investors (or worse yet, they view them as the “competition”). Most institutional investment teams are lean on resources, so the more idea-sharing and collaboration that takes place, the better the LP community will be. A great example of this in practice is the Institutional Limited Partnership Association (ILPA), an organization with which I am involved, and where advocacy of LPs is front and center on a consolidated basis.
CIO: What are your hobbies not correlated to work?
Titolo: I really enjoy snowmobiling, tennis, and trying to keep up with my young twin boys. Little known fact: in the not-too-distant past, another NextGen, Joe Fazzino, and I were in a cover band together. I’ll let you guess who played what instrument!
