2021 Knowledge Brokers

Jeffrey MacLean

Nominated by a respected CIO because he “has been outstanding for our plan from a governance and portfolio perspective,” Jeffrey MacLean, CEO of the consulting and management company Verus, has more than 33 years of investment and consulting experience. Often speaking at investment forums regarding the macroeconomic environment, asset allocation, risk management, alternative investments, and industry trends, he joined Verus in 1992 and has worked with all asset classes for a range of clients, including corporate defined benefit (DB) plans, public institutions, multiemployer trusts, endowments, and foundations.

While managing the firm as CEO, MacLean also chairs the firm’s management committee, as well as the investment committee, which provides strategic guidance on research initiatives and vets investment manager recommendations. He also is a member of the outsourced chief investment officer (OCIO) investment committee and a majority shareholder of the firm.

Earlier in his career, before joining Verus, MacLean was vice president of Shurgard Realty Group, a real estate advisory firm, and a consultant for Arthur Andersen & Company.

MacLean is an active volunteer for Children’s Hospital of Los Angeles, and he also serves on the advisory board for the University of Washington Foster School of Business. He has a Master of Business Administration from the Darden School of Business at the University of Virginia and a bachelor’s degree in business administration from the University of Washington, where he served as student body president in his senior year.

CIO: What new qualities do you look for in a manager/service provider given the pandemic’s financial and economic impact?

MacLean: The pandemic has made us focus more on two areas. First, the pandemic has been a challenging test of a manager’s ability to assimilate new information in a quickly changing environment. Second, it’s been interesting to see how managers have been able to adjust their workplace, process, and environment.

When it comes to the ability to assimilate new information, a core part of our normal process is evaluating a manager’s edge, or its ability to exploit inefficiencies in the market and its peers. Early in the pandemic, many managers evaluated the likely impact of the virus using a SARS model. Our internal investment team discussions quickly determined this was not an appropriate model to use, and we were more skeptical of managers that relied on that framework for too long. We have seen varying degrees of nimbleness in reacting to rapid changes of information and have identified managers that have been successful at possessing a more notable edge. Conversely, the pandemic highlighted some managers that were slower to recognize a nonmarket event and its ability to frustrate models more heavily based on fundamental or economic data.

Regarding managers and their workplace, process, and environment, we have been able to observe managers’ remote-working abilities directly as they adjusted to more virtual meetings. While we have always focused on succession planning among investment teams, the pandemic gave us another lens into how investment professionals overcome the difficulties inherent in remote working environments, and how they ensure continuity in implementing their stated process in a sensible and repeatable manner.

CIO: What changes are you making to your asset allocation advice?

MacLean: The global economy and markets have changed considerably since the spring of 2020, and, in this unique environment, many investment concepts have been turned upside down. For example, the idea of traditional fixed income as providing both strong diversification and preservation of capital may be diminished, which calls into question some of the foundational concepts of a “60/40” portfolio. Americans are also seeing a notable jump in inflation for the first time in decades, and inflation fears abound.

We work hard to take these market changes into account in our advice, updating our capital market assumptions accordingly and trying to identify parts of the investment landscape where the changes are structural, not temporary. The basics of asset allocation advice remain the same though: Focus on the long term and base your asset allocation on the long-term drivers of return and the risk tolerance of the client. Know what every part of your portfolio is doing, and subject each part to a skeptical analysis, particularly when complex solutions are being used. Rebalance regularly and focus on the big, long-term decisions. None of these principles change in the current environment—and it’s important we don’t get distracted from the long-term realities by short-term market movements.

CIO: What do you think will be the biggest innovation in your industry in the next 10 years?

MacLean: The biggest innovation will be the rigor and quality surrounding continuously updated position-level total portfolio risk applications delivered to institutional clients. Data requirements, disparate analytical solutions, opaque investments, and the difficulty in bringing all this together to support portfolio construction, investment strategy, and governance remains challenging and costly. Over the next decade, these systems will become table-setting requirements for more and more institutions, and consultants will play a primary role in delivering these innovations to clients.

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