2021 Knowledge Brokers

Matthias Bauer

Nominated by a respected CIO for being a “math engine and allocation ace” Matthias Bauer, principal and senior consultant at RVK’s Portland, Oregon, headquarters, advises public pension and sovereign wealth fund clients on strategic asset allocation, risk management, portfolio construction and implementation, as well as policy development. He has 14 years of institutional investment consulting experience. 

Bauer previously held roles focused on quantitative portfolio modeling and continues to serve as a key member of the firm’s asset/liability team. He holds the Chartered Financial Analyst (CFA) designation, is a shareholder of the firm, and serves on the Board of Directors. He has been with RVK since 2007.

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

Bauer: The financial impact of the pandemic was relatively short-lived for the investment industry, given the swift recovery in the capital markets. However, the pandemic highlighted the importance of understanding the strength of business continuity plans (BCPs) across investment managers and service providers. 

Overall, the investment industry was well-positioned to respond to the challenges of the pandemic with stringent regulatory oversight, sophisticated information technology (IT) infrastructure, and reasonably flexible working environments. That said, all service industry businesses have grappled with how to foster morale, support the emotional challenges of uncertainty and isolation, and maintain corporate culture during an extended work-from-home mandate. A clear vision for these challenges—as well as for office reintegration post-pandemic and future workplace flexibility—will continue to be an important point of discussion.

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

Bauer: Strategic asset allocation recommendations are always bespoke for the specific investment objectives, constraints, and time horizon of a particular institution. One of the biggest issues currently facing institutional investors—along with any asset owner—is the likelihood of lower returns in the future. Fixed income yields and equity valuations both point to relatively modest future returns from traditional asset classes. With high valuation and lower prospective returns compared to history, downside risk management becomes even more important. In some cases, that has led to a preference for investments that produce income over capital gains in generating the total rate of return. 

For institutional investors with a long or even perpetual time horizon, optimizing portfolio liquidity as a means for enhancing the expected return and capitalizing on market dislocations has been a common theme. This has resulted in many clients committing incremental dollars to private assets—ranging from private equity to private credit programs—with great success. 

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

Bauer: That’s a tough call. I suspect the digital transformation that was accelerated by the pandemic will carry on. Data and technology enhancements will play a central role in providing even more timely, dynamic, and actionable information to investors. 

The integration of environmental, social, and governance (ESG) factors within the investment framework will very likely continue and even accelerate over the next decade. Client interest in this area has never been stronger than today.

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