The Search for the New Forty

From “aged, serious, and grey” to young, hungry, and humble: CIO seeks a fresh roster of Forty Under Forty.

CIO-February-2015-Scene-And-Heard-Story-1-Victo-NgaiArt by Victo Ngai“I was wrong,” reflects CIO Editor-in-Chief Kip McDaniel. When the former managing editor first pitched the idea of profiling 40 influential institutional investors under the age of 40, McDaniel initially vetoed it. But he quickly (and rightly) reversed himself and the magazine published the first Forty Under Forty list in 2012—not without taking a jab at the usual demographic of the industry: “aged, serious, grey, and wondering how they’ll pay for retirement.”

“It turns out it was a great way to meet young asset owners who would normally be shielded from the media,” McDaniel continues. “And they had some really great ideas. I also found these younger investors more skeptical than the average bear.” This skepticism, he adds, aligns with the magazine’s (unofficial) mission: to question established ideas and uncover innovation.

And over the last three years, we found these qualities in 88 individuals who decidedly show excellence in various aspects of institutional investing. “Many of these younger asset owners are not yet CIOs, but still lead massive parts of the portfolio like hedge funds and private equity,” McDaniel says. “And oftentimes, they have tons of responsibilities, including making the hard decisions of picking strategies to pitch to their CIOs—and at a relatively junior level.”

But this year we’re clearing the bench. There will be no repeats of previous Forty Under Forty members, not only to keep the list (and the magazine) fresh and exciting, but also to meet and highlight new “youngsters.”

One such past youngster is the State of Wisconsin Investment Board’s (SWIB) Senior Fund-of-Funds Manager Dominic Garcia—someone I recently checked in with on a trip to Madison, Wisconsin.

A familiar face on the Forty Under Forty, Garcia first made the list in 2012 at the age of 34 as an “American Public Plan All-Star” for his work on risk parity and hedge funds. He made it again in2013, and last year was among the “Young + Established”—the first attempt to freshen up the list by moving persistent members into a separate category.

Garcia now acts as the quarterback for SWIB’s large-scale alpha portfolio—alongside CIO David Villa—setting big-picture frameworks, allocating resources, and helping analysts devise specific strategies to reach their goals. The Forty Under Forty veteran says not coming from a traditional MBA and CFA track has helped him be more innovative and differentiate himself from other asset owners. Garcia hails from New Mexico, but holds a master’s degree in public policy from the University of Chicago. Shortly after graduating, he became deputy CIO at the New Mexico Public Employees Retirement Association. “There is more than one way to make money and being able to explore and understand the advantages and disadvantages of these avenues can be useful,” he says. “It’s important to break away from the herd mentality of this industry, as difficult as it may be, and seek out different opportunities and options to reach your goals.”

And this idea of breaking away from the herd strongly resonates within Garcia’s team and its operations. 36-year-old Managing Analyst Derek Drummond—and a nominee for 2015’s Forty Under Forty—picks hedge funds and managers for SWIB’s alpha portfolio with a specific mandate. “The portfolio is definitely a little bit different from your regular hedge fund portfolio,” he says. “We want to generate only true alpha with no residual beta. And this is not an easy portfolio to put together.” To meet these requirements and take home at least 60% of the alpha, Drummond says he tends to look for managers who are hungry, humble, and smart—the same expectations he holds for himself. “Instead of touting SWIB’s success and performance, I think it’s important to focus on the task at hand, be aware that the success could go away as the industry gets more and more competitive, and work to best serve our participants.”

These qualities also reflect many of last year’s members’ answers to “favorite qualities in a manager”: humility and honesty. The torch may be passing to 40 new young asset owners in 2015, but the value of not only their investment success, but also their characters will be as high as ever. We look forward to meeting the new generation of Forty Under Forty… and their requests for extra copies of the feature for mom and grandma.