“Antonio Rodriguez, CFA, has a deep understanding of the technology needs, strategy requirements, and tactical execution of a world-class investment office as a component of a public pension plan. He has a 360-degree understanding of the economics of asset allocation in such a system’s investment portfolio as it supports the plan’s liabilities. Antonio leads a team that created a system of investment management and analysis, supported the efforts of trustees, and coordinated with consultants across the larger NYC pension and investment system. This took a combination of investment, technology and political acumen that Antonio has built as a dedicated public sector investment executive.”
—Sanford Rich, Executive Director, New York City Board of Education Retirement System
Antonio Rodriguez, CFA, CIPM, is the director of investment strategy at the New York City Board of Education Retirement System, where he provides oversight and guidance for the city’s $7.4 billion portfolio. As a former financial researcher at a labor union, Rodriguez’s perspective on institutional investing is shapeshifted with a particular emphasis on the origin of the massive pools of capital investors are left with to allocate today; that of the hard work of prior generations of unions and unionized workforces.
Rodriguez and his team worked diligently to develop a new investment office, while simultaneously modernizing their investment processes and furnishing their portfolio development strategies into a more sophisticated fashion. Prior to his current role, he worked as a senior pensions and investment officer at the New York City Mayor’s Office of Pensions and Investments, where he learned a wealth of information on investment strategies and asset allocation for public pension funds.
Before New York, he worked on labor organizing at hospitals in Texas and worked on staffing legislation for nurses in Nevada. Rodriguez shares with CIO his thoughts on today’s market, and showcases the abilities and foresight that make a NextGen.
CIO: What did you think you understood before the COVID-19 crisis … and if, during the crisis you were proven wrong, what did you learn from it?
Rodriguez: So far, it has been the speed of the bounce back in equities between their lows in March and through April and May. I thought that we would be muddling through sideways after the initial dip. I do believe that as the dust settles and the implications for households, small businesses, and the leisure and travel industry (as examples), become more apparent, we will see another drop in equity markets. That is even before getting to the effects of a second wave of infections or lockdowns could have. What worked for us is we were longer duration than the market, although not as much as some of our sister systems in New York.
CIO: How would you build the portfolio differently now that you have gone through this massive accelerated shift in the market?
Rodriguez: Being able to be more opportunistic, which really means have structures in place beforehand, whether separate accounts for stressed/distressed credit or relationships with SBA lenders to participate in things like Paycheck Protection Partnership (PPP). Given how long our processes take, we need to always plan for the next crisis long before it happens. We have an added constraint on the percentage of assets we can invest in alternatives, so we always have to mindful of that.
CIO: ESG has been a tidal wave force behind recent innovative investment framework in our industry. How do you see the ESG framework and effort be influenced by the recent event?
Rodriguez: I think that sustainability becomes the watchword and the environmental, social, and governance framework will be couched in those terms even more. To me, it means a few things but most importantly that no matter how abstracted our business gets something real is underlying our cash flows. Someone’s job, someone’s business, someone’s home. Our actions do not exist outside of that even when we must make difficult decisions. We need to understand the tradeoffs between efficiency and robustness/resiliency in our portfolios, in our organizations, and in the companies within our portfolios.
CIO: What’s your view on the “perfect storm” that is currently impacting the oil markets, and how will that change how you invest in upstream energy?
Rodriguez: BERS rarely invests in upstream energy in our private market portfolio. In the public markets, it will strengthen the ongoing divestment movement. As with much of our political economy today, I think this perfect storm sweeps up a lot of the smaller and mid-size players, leaving integrated oil and gas relatively stronger.
CIO: What’s your view on the fate of the Euro and the EU?
Rodriguez: I will not pretend to be an expert but I believe it will muddle along even as the cliched (but very true) critique of a monetary union without a fiscal union continues to play out. A narrative of net contributors versus net beneficiaries is dangerous and undermines a union; the entire point of a union is support. If the narrative of makers and takers becomes too strong then you will see a break-up.
CIO: What are the new creative/innovative strategies that you are researching right now?
Rodriguez: This has less to do with an asset class or any one strategy and more to do with our strategic policy. At BERS, we are hitting our crossover point this year, where benefit payments will exceed contributions for the first time. I want to think about how to barbell the portfolio (cash flow matching on the front-end and then very aggressive in private markets). It is something that is just at the beginning stages, but my next project is really on understanding the shape of our cash flows and then crafting our investment strategy with our board and sister NYC systems. I have also been researching how we can better support our corporate governance work within the portfolio or, at the very least, better integrating it into our reporting for trustees.
CIO: And professionally, where do you see the most exciting areas to specialize further over the coming years?
Rodriguez: I am going to talk my own book a little, but I think that medium-sized asset owners/institutional investors offer fantastic opportunities for people who want to be jack-of-all trade types. Then the question becomes, who can make it easier to be a generalist? I think that gaining a firm understanding of the latest investor platforms, whether investment books of record, digitization platforms, and more importantly how all of your systems and platforms can speak to each other. As the largest US institutional investors start to think about Canadian model or strategic partnerships and the smaller institutional investors go to OCIO; the middle gets neglected. Go help the institutions that feel neglected.
CIO: How is the quarantine affecting the way you view teams and working environments, such as work from home, meetings, etc.?
Rodriguez: Flexibility to work from wherever you are is something that is long overdue. A work environment where someone feels comfortable is usually the best environment. If on most days that is at home where you can take a break to spend time with your children or put in a load of laundry between calls or while running a report, then that is a fantastic development for those of us who can do it. Not traveling for the foreseeable future has my team questioning the amount of travel that is necessary. One thing I do wonder and worry about are the effects this will have on on-boarding and training new staff if office time decreases drastically.
CIO: What exercises have you found useful?
Rodriguez: We talk about music we are listening to or books that we are reading just to maintain the connection we had in the office. We have also instituted “weeks of learning,” off-weeks where we all take time to just do research, learn a new skill, or a new platform that may not be related to any short-term deadline but can help the team in the long run.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Rodriguez: Saker Nusseibeh at Hermes. We would talk about ESG integration, sustainable development goals, the future of active management, and history.
CIO: And in a fantasy scenario, if money was no obstacle, where in the world would that meeting take place?
Rodriguez: At a diner, a barbecue spot, or a lazy afternoon in the middle innings of a baseball game. Somewhere comfortable where I can do my best brainstorming.
CIO: What asset class or investment troubles you most right now—and why?
Rodriguez: Real estate troubles me the most. It is the asset class where, over the medium to long-term, I see the most structural changes. Just trying to figure out the long-term implications for the changes in our relationships to office spaces in particular is difficult. From a societal standpoint, some of those changes might end up being good (after a world of hurt on the downswing), particularly if less square-footage for commercial space means potential conversions to residential. From a fully invested investors standpoint, it is one that gives me a lot of worry.
CIO: Name your four-member investment dream team for your own family office.
Rodriguez: Saker Nusseibeh (Hermes), Arun Murahlidar (AlphaEngine/MCube), James Montier (GMO), and Adeyemi Ajao (Base10).
