Prediction Not checkable as stated
Garcia: Bitcoin will drop to its underlying tech value without government backing
“If governments are not going to embrace it honestly, it should go down to just the technology value of it.”
Prediction Partly held up
Garcia: PERA targets 7.25% return using 10% beta leverage and 1% alpha
“What we're looking at is in our beta book, we're looking to incorporate embedded leverage in the asset classes and then about in a very modest amount, which is about 10% at the total asset allocation level. So we think we can get somewhere around a six percent…”
Insight
Garcia: Private equity should be evaluated for PME spread, not headline IRR
“The reason why you buy private equity isn't for the total return, in my view, it's the relative return to your PME, because a private equity portfolio or private equity management, let me just give you an example. Let's say they generate a 12% IR. Well, if you…”
Insight
Garcia: Private assets are active management vehicles, not distinct asset classes
“We view private assets as not asset classes. We view the private assets as another way to access active management or alpha.”
Opinion
Garcia: Hedge funds are pound-for-pound the best risk-adjusted alpha generators
“We're buying market neutral hedge funds because on a risk adjusted basis, hedge funds are still pound for pound the best alpha generators.”
Opinion
Garcia: SWIB is a best-in-class public pension in the US and globally
“First of all, I think SWIB is a best-in-class public pension on a number of fronts here in the United States, and I think even globally.”
Insight
Garcia: Institutional investors are risk allocators first, not capital allocators
“And I think some of the best things that I learned was portfolio construction and understanding that we're not capital allocators. We're actually risk allocators first.”
Assertion Supported
Garcia: About Half of US Public Pensions Offer Incentive Pay
“When you look at the public pension plan landscape in the United States, I would say about half of the pensions have the ability to pay an incentive compensation for pensions. Most are still stuck on government focused pay bands, right?”
Disclosure
Garcia: New Mexico PERA is 100% externally managed
“So we actually end up being a hundred percent external.”
Disclosure
Garcia: PERA allocates 2% tracking error to target 1% excess return
“And then, so in alpha space, we'll say, you know what, in addition to the risk we're taking in asset allocation space or beta, we want to take up to another two percent tracking error relative to that beta that we're taking. And up to that additional two perce…”
Insight
Garcia: Separately optimizing alpha and beta risk budgets improves total plan risk-return
“And so when you separate those two things, optimize them individually, and bring them back together, what ends up happening is your alpha book tends to be quite low correlated to your beta book. And so the total risk it generates is quite low. So what you're g…”
Assertion Supported
Garcia: Private equity exhibits about 10% tracking error to MSCI World
“And so private equity in general is going to have something around 10% tracking error to MSCI world over time.”
Insight
Garcia: Private asset tracking error against public benchmarks catches up over 3-5 years
“The tracking error that we're generating from our private assets, a good chunk of that is really this lagged effect relative to our public market equivalents. It catches up over a three-year rolling, a five-year rolling period, but that's really where the slip…”
Disclosure
PERA delegates all manager selection to internal staff while board sets risk
“So what our governance looks like today is our board makes three decisions. They set our overall risk tolerance, they approve our risk budget as what I've been talking about, and they set benchmarks. Everything else gets delegated down to staff. So the manager…”
Disclosure
PERA targets capturing 60% to 70% of managers' gross alpha
“So based on the gross alpha that a manager can generate, we're trying to get to 60 to 70% capture ratio of that gross.”
Prediction Not checkable as stated
Garcia: Private equity will institutionalize via quantitative analysis like hedge funds did
“I think private equity is where hedge funds were like a decade ago or so, right? It's a very more networking type industry. You kind of sign up. I think private equity and the private asset classes are going to institutionalize and mature going forward. I thin…”
Prediction Not checkable as stated
Garcia: Investors Will Use Infrastructure to Replace Fixed Income Allocations
“Given low returns on, on bonds and cash, I could see investors using infrastructure as a replacement somewhat for that, and I think infrastructure is going to be a very interesting place to be in the United States, just from a public good point of view.”
Opinion
Garcia: High-pressure 'act now' fund marketing deadlines do not sit well
“I think when marketers say, you know, you kind of got to act now, right? Like, oh, we're, our closing is, July first, and if you don't do it then, you won't get this, and I don't like act now. That doesn't sit well with me.”
