“Emily’s passion for investing is evident daily in how she seeks new ideas for the portfolio within private equity and other asset classes. She is continually learning and sharing her knowledge with her team and colleagues, expanding her networks and seeking ways to create strategic relationships with asset management partners. Emily is a team player, models an inclusive approach, demonstrates exceptional professionalism and contributes meaningfully to the success of the organization. She proactively seeks additional responsibilities for growth and willingly tackles significant projects, such as leading our organization’s 2022 Diversity Forum.”
—Hershel Harper, CIO, UAW Retiree Medical Benefits Trust
The CIO Editorial Team shared a dozen questions with all our NextGen nominees and asked them each to pick six to answer. Their answers informed our decision to include them as a NextGen. Below are the answers from Emily Bertsche Murto.
CIO: How are you dealing with rising interest rates and economic uncertainty?
Bertsche Murto: It’s important to keep perspective: While today’s investing environment is tumultuous, there has never been a time in history where outcomes were certain. Investing is a mixture of thinking critically, examining your biases and maintaining discipline. That being said, the investing playbook that has worked over the past few decades is being rewritten in real time, and now more than ever, prior track records do not indicate future success.
To navigate this landscape, we are looking to align ourselves with managers who demonstrate both 1) the will to win (teams have proper incentives, carry is widely distributed, strong level of competitiveness); and 2) the right to win (experts in the sectors they invest, strong sourcing networks, demonstrated skill at making money).
The optimist in me tries to remember that while growth asset returns have compressed, there’s opportunity to invest now at higher rates and generate income. We want our portfolio to have both range and resiliency, and today’s investing environment tests that.
CIO: What is the best way to bring more diversity to the financial industry?
Bertsche Murto: Hire and retain more people from underrepresented backgrounds! No, really—it’s that simple. We need to improve our industry at all levels of the funnel. Part of that is recognizing that candidates with nontraditional and/or diverse backgrounds contribute to the conversation.
For diversity to improve—and at this point, I think the tide has turned and we all finally agree that it must—we need buy-in from boards and top leadership, strong mid-career managers that promote inclusion and perseverance from those young in their careers.
To have portfolios that demonstrate range and resiliency to navigate this current investing environment, we need teams of people who think differently and can respectfully challenge each other. To accomplish that, we can’t all think and look alike.
CIO: What asset classes offer the best options for avoiding or mitigating drawdown risk in an institutional portfolio?
Bertsche Murto: I have been a big believer of sponsor-focused direct lending with workout capabilities. They have the ability to scale, as well as mitigate negative outcomes. Of course, there is a trade-off in liquidity. With rates rising and the BSL market in shambles, direct lending becomes even more attractive. Unfortunately, the secret is out here.
CIO: Which component of ESG-driven investing do you think will have the most influence on institutional investing going forward, and why?
Bertsche Murto: While the E of ESG has gotten a lot of attention lately, to paraphrase Taylor Swift, good governance never goes out of style. Governance encompasses so much—cybersecurity, disclosure, transparency, pay equity—and it is hard to have an environmental or social backbone without strong governance.
CIO: What asset class or investment troubles you most right now, and why?
Bertsche Murto: Working at a health care organization, I constantly struggle with the divergent incentives of the health care investment landscape. There are managers and companies that are doing innovative things to expand the quality and value of health care to patients. We also see many PE-backed physician practice management companies that get bad headlines—and deservedly so—for reducing care and increasing its cost.
It has been great to see the attention value-based care, where patient outcomes are linked to reimbursement rates, is getting in many institutional portfolios. I worry, however, it’s becoming another buzzword, and that those companies that are generating excellent outcomes will be tarnished by bad actors capitalizing on the trend.
CIO: What new skills do you think allocators need to be leaders in the field in the coming decade?
Bertsche Murto: Empathy is the superpower more allocators need. The allocators who inspire me all demonstrate empathy.
I also think it’s important to be really careful as an allocator to guard how you view your identity. I see a worrying trend where young allocators view themselves either as “public market investors” or “private markets investors”—of course, we all have asset classes that we have more or less depth with, but we should be looking for the best overall investments that support our institutions and their missions.
