The Exchanges

Q How did you get from a philosophy major to working for labor unions? Another

A Well, in the absence of any job openings for philosophy, I, uh, cast my net wide when I moved to New York out of, out of college, and had a general and vague idea that I kind of wanted to go into the entertainment industry, not necessarily knowing what that meant, but the idea of working in labor relations generally, which is where I started my career, was appealing to me perhaps Because I enjoy debate, I enjoy negotiating, which are all skills that one learns when one studies something like philosophy. So I spent seven years on the labor side, and then was offered a job opportunity with Clear Channel Entertainment. Actually, at the time, it was part of SFX Entertainment. It became Clear Channel, then it became Live Nation, and I eventually ran Live Nation's labor relations. And I had gotten to a point in my career, I suppose, where while I still Enjoyed and enjoy labor negotiations. I wanted to do something more. I wanted to do something that was perhaps more holistic in a way, you know, fighting on either side, which a labor negotiation, unfortunately, oftentimes is, whether you're fighting for union or fighting for management, you're adverse to the party across the table in some way. And I wanted something different, something more that was more symbiotic and In my role today, as the Director of Employee Benefit Funds at the Broadway League, I have an opportunity to mostly w…

AI assessment note: “the idea of working in labor relations generally, which is where I started my career”

Q And what are the, I mean, that's, Thirteen's a lot. What are the range of dynamics that you've seen in what makes an effective board and a less effective board?

A Well, an effective board, going back to relationships with, you know, between union and management trustees, the most effective boards are those that are able to leave their union and management hats outside the door and are able to sit down at the trustee table and truly act in the best interest of the participants. And fortunately, most of the plans that I sit on Are blessed with, with that kind of dynamic. That's not the case in every fund I sit on, and it's certainly not the case in all industries in the multi-employer world. There are some, some industries where I've heard stories that, you know, collective bargaining negotiations sort of continue, and the board meetings are almost an extension of those negotiations. And, and fortunately, we just don't have that sort of dynamic in my industry, which, uh, I'm blessed with.

AI assessment note: “most effective boards are those that are able to leave their union and management hats”

Q And is there, is there sort of a repeated topic where the, the union reps and the employee reps fracture?

A Again, that question will be uniquely answered to each board. For the most part, the boards I sit on do not suffer that problem very often. I, you know, the most obvious time where it does is When the union, you know, a plan is really well funded, the union trustees come in and say, we want to, want to increase benefits. Inevitably, the increase being sought will make the employer trustees uncomfortable, and so even if the employer trustees agree that there's some sort of benefit improvement warranted given the funding status of the plan, the employer trustees are probably going to be a little more conservative in assessing how much the fund can afford to pay out. Versus the union trustees. And, you know, again, fortunately, I don't experience very often a situation where union trustees come in and look for benefit increases at politically convenient times, which, you know, I think might, might happen in other, in other industries.

AI assessment note: “most obvious time where it does is When the union... want to increase benefits”

Q And how did you weigh, there's an incremental cost to that activity versus having a consultant?

A Well, that's the little bit, again, to use a philosophical term, it's a little bit of a leap of faith as a, as a certain existential philosopher, uh, uh, once said Schopenhauer. If you're going to go into that outsource CIO relationship because it is more expensive, you better believe that that consultant is going to deliver a Alpha that far exceeds the fees you're paying them. Because you're right, relative to the traditional consultants, an OCIO could be four, five, six times more expensive, you know, but it's based on, on beta returns, right? So, so you, one has to really believe in the consultant that you're hiring and believe that they're going to be able to deliver alpha by making tactical decisions and hiring best in breed managers.

AI assessment note: “you better believe that that consultant is going to deliver a Alpha that far exceeds”

Q Walk through that, that example, sort of what derailed the relationship?

A Well, in one instance, we had, again, it actually surrounded private equity in no small part. We had a consultant that we had asked to do a private equity search for us, and actually it took us probably nearly six months for them to actually start that education process, even after we had asked. For some reason there was a resistance, either because they didn't They weren't experts in the asset class themselves or whatever the reason. So once we finally got to the point where we had gotten the education, the RFP process and the discussions that went on between the consultant, the union trustees and the employer trustees created an environment where one side wasn't trusting the other side. And it might've been actually each side might've felt that the consultant was Treating the other side special. And so it created something of a toxic environment where it wasn't the advice that was being, it was being given by the consultant was not fully trusted by one or both sides of trustees. And once you get to that point, it's just not possible for a consultant to be effective in, in giving advice. And so that resulted in an RFP And we replace that consultant ultimately. So I don't envy the role of investment consultants. I don't envy the role of any professional that works on a Taft-Hartley board because there are politics involved. Inevitably, one of the most important functions of a c…

AI assessment note: “it created something of a toxic environment where it wasn't the advice that was being”

Q So circling back a little on the investing side, outside of being able to navigate this complex constituent of each board, what are the, what are the strengths that you've seen in the successful consultant relationships?

A Those that are successful, the consultants, the individual that's actually consulting and not necessarily the firm, establishes a good sense of what hot points exist for certain trustees, and the board generally knows how to balance between alienating trustees by pushing something or pushing something too hard, yet still being Brave enough, if you will, to bring new ideas to a board that could get shot down. The investment consulting relationships that tend to Treat the trustees as, as professionals in their own right, if not professional investment people, as professional labor leaders or labor relations people, and come to the table with that balance to educate, yet not treat the trustees as though they're, they're fools, I guess, is a, is, is a good relationship. But as I said before, it's not, being an investment consultant on Taft-Hartley plan is, is I'm sure no easy task. Um, Unfortunately, it's not something I've had to do in my career, so.

AI assessment note: “establishes a good sense of what hot points exist for certain trustees”

Q And so what was that process like Once you made the decision to look at the OCIOs, what were you looking for to differentiate one from the next?

A Well, initially, the first plan that went toward the OCIO model, we were simply doing an RFP for consultants, and we decided to throw in a couple of consultants that were more known for their OCIO capabilities, just to educate the trustees for the chance that we might do that in the future, and surprisingly, the trustees grabbed onto the idea, thought it was a terrific idea, and so we focused on that more Exclusively. What we were looking for was a consultant that had strong enough research to be able to rely on their own internal papers and their own internal data. We wanted a consultant that could have access to best in breed managers. We wanted a consultant that we knew would be able to work with us in In many different market conditions and introduce different ideas that we had previously not really explored. And when we, when we ended up with the, the final candidate, we were surprisingly not that we didn't care that much about the fact that the final candidate was not a Taft-Hartley type consultant. You know, I talk so much about consultants working well with boards. One would maybe assume that Those that work best with Taft-Hartley boards are those that have relationships with Taft-Hartley boards to begin with. And we interestingly did not, uh, do that our first foray into, into OCIO model, but we were confident that they would work well with us.

AI assessment note: “What we were looking for was a consultant that had strong enough research”

Q And, and what happens when you, in reading and talking to people, come up with an investment idea?

A Trying to think of an example, bank loans. When, when I go to a Conference. And there's a panel talking about a particular investment strategy or someone's hyping up bank loans, which was, you know, that's probably a couple of years old at this point when everyone was talking about it. I would go back to my boards or I really go back to the consultants and ask, ask the consultants to take a look at it. Sometimes it had to do with a particular manager in an asset class or, or just the asset class generally. And have the discussion, probably me with the consultant first, and then if it seemed that it made sense, then with the board. This sort of initial, the genesis of an idea on boards could fall flat, or it could be something, it's really, even after doing this for 10 years, it's impossible for me to know or to say. Another good example is social investing, or There's some boards, all boards like the idea that I sit on, but some boards are less interested in spending the amount of time and energy it takes to, to go there. Some boards are more willing to just accept the basic social investing formula or, or over overlay.

AI assessment note: “I really go back to the consultants and ask, ask the consultants to take a look”

Q So let's talk about both of those. Well, first of all, let's, let's start with Taft-Hartley plans in general. You've mentioned to me that they are rife for change. What's wrong with your average Taft-Hartley plan, and what needs to change?

A Well, from an investing perspective, as I mentioned before, none of the trustees is an investment professional or an expert. Typically, the time spent on Focusing on investment matters is at the, in, in the boardroom and maybe sometime prepping for that board meeting. So once the trustees get to the boardroom and start having that discussion, the reliance on the third party consultant is very high. Nonetheless, the trustees are in a position where they're the ones that are making the final decision. And so sometimes one sees in, in interviewing A new manager, especially in asset classes that are harder to understand, the, the trustees rely, in my view, more heavily on the consultant's view than, than perhaps they should, or would otherwise need to, given the fact that we are, you know, the buck stops with, with the, with the trustees. Right.

AI assessment note: “none of the trustees is an investment professional or an expert”

Q I usually turn to a couple closing questions and a bunch of people said to me, they sound like inside the actor's studio type questions. This is the best place to do it. Chris, what, what was your favorite sports moment?

A Well, I love the Olympics. I'm always sad that they, we wait for four years. They're here for two weeks and three weeks, and I'm sad to see them go. And of course we just came to the conclusion of, of this year's Olympics. I don't know that I have a favorite moment per se, but I'm, I'm a big skier and, uh, I, I find Absolutely remarkable. The, uh, the success that Michaela Schifrin has, has, uh, shown the world over the past four years, really five years now between being a slalom skier and then getting better in downhill. And it's just absolutely remarkable to see someone like that, who is specialized in one area, become a generalist in, in on all areas to, to kind of use investment terms, I guess.

AI assessment note: “I find Absolutely remarkable. The, uh, the success that Michaela Schifrin has”

Q But if they don't have the knowledge base to really make the decisions themselves, what other choice do they have?

A Right. Except that when we are, you know, for example, considering what to do with an underperforming manager who's underperformed for a year and a half because the markets have been not working for the thesis that, that, that manager might, the reason that we hired that manager, trustees can get impatient and we end up in that trap that so many investors end up in, which we fire them at their Nadir and Hire someone at their apex, and then we sell low, buy high. And I've seen some of that on, on my plans. I have to say that I think mostly our trustees exercise some caution and exercise patience when it comes to terminating managers. But you're probably right. If you, if you rely on the investment consultant's advice all the time, uh, you're probably in better, a better position. But the problem is we don't Rely on investment consultants advice all the time. You know, we, we do when we do, and then we don't when we don't. And another problem with it, with the governance structure really, and I think the bigger problem is the inability to act quickly in, in any given circumstance. We meet quarterly every now and then we have meetings in between our, our quarterly meetings, but by and large, if we are interested in Going into private equity and a plan. And this is a, an actual true story on one plan that it was, it was introduced to private equity about four years ago, four or fiv…

AI assessment note: “If you rely on the investment consultant's advice all the time, you're probably in better”

Q Right. Well, you know, that's the other question, right, is when you have a board that has a little bit less sophistication in the financial markets, Is there a healthy dose of reality that maybe these seven and a half percent long-term targets aren't really achievable in the next stretch of time based on where bond yields are and stock market prices?

A It's interesting that investment consultants, again, pre 2008, if the trustees even really were presented with capital market assumptions, it was very, you know, the long-term capital market assumption over a twenty-year period, thirty-year period, and, and complicating That analysis is the fact that actuaries tend to use a longer time horizon than investment consultants and investment managers. So there's not going to be total harmony between those two camps, and those are the two. It's the actuaries, the investment consultants that drive the discussions when it comes to asset allocation for the trustees to discuss. So the, the allocation discussion that takes place Today is more, much more nuanced, I guess, because we have more tools, we have more data available to us. And so today, when we talk about capital market assumptions, we break it down in, you know, what are the assumptions of the next five to 10 years versus 20 years? And it seems kind of obvious now, but we didn't do that 10 years ago. And, you know, when a diversified portfolio that is fairly aggressive, again, you know, 20% private equity and And 15% emerging markets still shows that, you know, we're looking at a six, six and a half percent return maybe over the next decade. That definitely changes our thinking on multiple levels. And even if the long-term return still is eight percent over a 20 or 30 year perio…

AI assessment note: “we need to accept the consequences of what a six or six and a half percent return”