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Multi-strategy SMAs let institutional allocators borrow at Fed funds plus 20bps
“The real unlock when you think of an overall plan like UTIMCO or SWIB, you're implicitly borrowing money at Fed funds plus like 20 basis points.”
Fink: Lower mid-market private equity offers better return opportunities than mega-caps
“We actually are pretty big believers in lower mid-market funds, but we think that the opportunities in lower mid-market, if you've got the skill to really go in and assess people, we think the opportunities for returns are better.”
Fink: Delegated investment authority gives SWIB a major partnering edge
“So we have delegated authority, which is great because it means we can move fast. We can speak for investments. We don't have to say, well, we'd like to invest, but talk to us in a month after we've talked to our investment committee and we'll let you know. So…”
Fink: Neutralizing underlying hedge fund beta is operationally impractical for allocators
“What we don't do is try to take out the betas underneath. Partly we haven't done it because operationally it's difficult, and then partly because if a manager tells us at the end of the month or even the end of the week that they're along something, by the tim…”
Fink: Other states lack trust needed for SWIB-style shared-risk pensions
“And in fact, other states would love to set up a similar system, but there's just not enough trust between the pension participants, the taxpayers, and the investment professionals to set that up.”
SWIB reduced portfolio leverage to 12% amid an inverted yield curve
“We're currently at about 12% leverage, so we have 112% invested for every dollar that we have in assets, and that used to be higher when the yield curve was not inverted. It makes much more sense to do this when the yield curve is more normal, so we used to ha…”
Fink: Managers leaving pod shops no longer face negative selection bias
“Part of the reason that we did a separately managed account platform now and not in the past is we feel like now that there's not negative selection bias on the talent. So what we're finding is there's a lot of folks who are high quality managers often worked …”
SWIB's hedge fund portfolio uses $10 billion in internal financing
“I'm the biggest consumer of the fleet rate at SWIB right now, and I borrow a 10, eleven billion dollars.”
Managed accounts cut SWIB's diligence timeline from months to weeks
“Our typical write-up is about 40 pages plus and probably takes us Three months to get a deal done in our main hedge fund portfolio. Here, if we find somebody we really like, we could probably get three, four weeks, a 10 to 15 page write-up, and it's much more …”
Almost all portfolio managers prefer identical terms over custom institutional mandates
“And in 99.9% of the cases, the PM doesn't want to do anything special. They want everyone to be on the same terms and the same strategy.”
SWIB uses a 17-manager managed account platform as a talent incubator
“We came up with this heuristic, so we have 17 PMs, and we're managing like it's a portfolio, but if we get confidence in that manager enough, they can graduate and become their own line item in our hedge fund portfolio. As we get more and more confidence, we c…”
Fink: SWIB Uses Trigger Funds in Distressed Debt to Avoid Idle Fees
“We're doing more in MEZ, more in distressed, and a lot of the distressed people that we're working with, we're giving them trigger funds, so that we'll give you a certain amount of money today, and if there's a real proper distress cycle, we'll give you more, …”
SWIB allocates 20% to 25% of public equities to passive index strategies
“So we do have about 20 to 25% of our portfolio in passive, mostly because we want to do all of our rebalancing in passive space. So we're also very rigorous about rebalancing each month, and we want to be able to do that without hitting our active managers all…”
SWIB applies whole-plan leverage to lower baseline asset risk
“We do a little bit less risk in terms of the assets that we own, and then we add back a little bit of risk through levering the entire plan.”
Fink: Extension strategies help active managers navigate highly concentrated stock markets
“Particularly last year with the magnificent seven and the stock market being so dominated by seven companies, it's been hard to be active because so much of your allocation gets eaten up by just even having a market weight in those seven. So what we find by lo…”
Fink: SWIB runs local Wisconsin venture portfolio with standard return hurdles
“One is we have a Wisconsin venture portfolio. So we have a portfolio that Is designed to either invest in managers that are based in Wisconsin or ones that spend a lot of time with Wisconsin companies. Now, unfortunately, I don't have a lower return hurdle for…”
Fink: SWIB offered $25M top-ups to close PE funds for better terms
“So we had some managers where we had made an initial allocation and we went back to them and said, OK, you're having trouble getting to your final close. What if we give you another twenty five million that'll get you Close enough. And in exchange for us givin…”
Fink: SWIB exits hedge fund managers showing persistent beta bias
“What we do look, though, is over time, does anybody have a bias? And if they tend to have a beta bias, then they're probably a candidate to leave our portfolio.”
Fink: SWIB uses hedge funds strictly as a portable alpha overlay
“So we have a very distinct way that we use them, which is portable alpha. So we do not actually, and you'll notice when I gave you the allocation, there were no hedge funds in there. It's because we actually think of the hedge funds as almost an overlay. So we…”
Fink: SWIB's 112% asset allocation spans 38% equities, 26% fixed income, 30% privates
“But we're about 38% in equities, 26 in fixed income, 19% in tips, 30%, give or take, in privates. So that's 10 in private real estate and 20 in private equity and private debt. And that gets you to about a 112.”
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.”
Fink: SWIB often makes year-one investments and occasionally day-one investments
“We have on occasion done day one, but we will often do year one investments, and we are willing to work with managers on what they're looking to achieve from a business perspective and what we are looking for as well.”
Fink: SWIB's venture capital portfolio is about $2 billion
“So our portfolio is relatively smaller. It's about two billion dollars.”
Fink: SWIB writes $5M to $10M checks for toeholds in venture
“Particularly in venture where we will do, we prefer not to, but we will do five or ten million dollar checks to get A toehold with somebody and then try and grow it over time.”
SWIB helped seed a secondaries strategy for favorable economic terms
“So we recently helped a group get a secondary strategy up and running, and in exchange got really interesting economics out of that.”
Fink: SWIB is actively growing its private markets allocation
“We're actually growing our privates allocation at the moment, and we're happy to
Do that.”
Fink: SWIB invests across hedge fund strategies, excluding only long-biased funds
“I don't think there's any strategy that we don't do other than long biased. So we do have long short equity hedge funds. We do have macro funds. We have quant funds. We have multi strats. We have some relative value. And then we also do a little bit of special…”
Fink: SWIB and UTIMCO co-anchored multi-pod SMA platform spinout
“Another thing that we've done is we partnered with one of our multi pad hedge funds. They basically spun out their technology and created a separately managed account platform. So us and UTIMCO together basically anchored this new manager, and as a result of t…”
SWIB manages approximately half its portfolio internally and half externally
“So our default position is to do things internally, but then there are three reasons that lead us to do things externally, and they're pretty reasonable, such that the portfolio ends up being about half internal, half external.”
Fink: SWIB enforces an information barrier between internal and external managers
“Our internal teams don't see what the positions that our external managers have, so let me be clear about that. There is a Chinese wall there.”
Fink: SWIB can respond to co-investment opportunities within weeks
“When we're shown, for instance, a co-investment, we can respond within a couple weeks.”
SWIB runs roughly half its assets internally and half externally
“Here at the state of Wisconsin, we run about half of our assets internally and then half of our assets externally.”