The Ledger
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Gilmore: AIGFP had great people and Joe Cassano was super smart
“One of the things that really impressed me was the quality of the people at AIGFP. They had really good people. I thought a lot of Joe Cassano, who ran the place. He was super smart, very knowledgeable across many things.”
Gilmore: CalPERS historically destroyed value through pro-cyclical de-risking during crises
“One of the things that has attracted value from the CalPERS experience has been a tendency to be too pro-cyclical. If you think back to the time of the financial crisis, Various assets were liquidated. Risk was taken off. That was done in part because of conce…”
Gilmore: A simple stock-bond mix closely tracks most complex pension portfolios
“You can take a simple combination of equities and bonds, and it will track the actual portfolio very closely. And that'll be the case for most pension funds.”
Gilmore: CalPERS recommended a 75/25 reference portfolio with 400bps active risk
“We've recommended a 75% equity, 25% bond portfolio. We've recommended an active risk range around 400 basis points.”
Gilmore: National security concerns make government capital controls quite possible
“One thing that I wouldn't like to see would be forms of capital controls, but that's quite possible.”
Gilmore: Total portfolio approach captures hybrid investments that SAA buckets miss
“If you're sitting there with a strategic asset allocation, and you've got all these asset classes, it could be that you've got a hybrid, where does it sit? Or there could be something that's new, and you don't have a bucket for it. It's hard to do. With the to…”
Gilmore: Total Portfolio Approach enables more concentrated asset class portfolios
“When you're thinking about its contribution to the whole portfolio, you should be much more comfortable in having a more concentrated asset class portfolio because it gets diversified away at the whole portfolio level.”
Gilmore: NZ Super won via heavy bet sizing, not a high win rate
“If you look at all the different investment strategies, when I first looked at the analysis, I thought, well, actually the hit rate or the banning average is pretty ordinary. That's not that unusual, but the slugging average was amazing. The areas that it did …”
Gilmore: Smaller Teams Are Better Positioned to Adopt TPA
“It's probably smaller teams that are better positioned.”
Gilmore: Non-US allocators will struggle to diversify away from US markets
“There's a desire to diversify away from the US. That's probably going to be Difficult because the other capital markets aren't as deep.”
Gilmore: AIGFP halted new super senior transactions in late 2005
“In the case of FP, They stopped entering into new super senior transactions of that elk from late, 2005, well ahead of the final denouement in 2007, 2008. It wasn't soon enough.”
Gilmore: CalPERS' legacy SAA permitted ~450 bps of active risk
“What we did was to look at how much that variation would aggregate up to in terms of the leeway management had been delegated. We estimated that that amounted to around about 450 basis points of active risk using all the policy ranges.”
Gilmore: CalPERS seeks deployment flexibility rather than increased active risk
“With the transition to a total portfolio approach, we weren't asking for that much active risk. We were asking for more flexibility in how we used it.”
Gilmore: Total Portfolio Approach stabilizes institutional risk appetite over time
“One of the big advantages of having A total portfolio approach with the reference portfolio is you tend to have a more stable risk appetite through time, and it'll be transparent if risk is taken up or down.”
Gilmore: Reference portfolios improve pension management accountability
“With our proposed approach for the total portfolio, the board adopts a reference portfolio, and that corresponds to a particular amount of risk, but it's the management that is using its initiative to propose the portfolio and to invest the portfolio. The mana…”
Gilmore: CalPERS compensates staff on total portfolio results, not asset classes
“Some years earlier, Marcy had changed the compensation structure so that everyone got rewarded on the basis of the whole portfolio, not their asset class.”
Gilmore: CalPERS will limit direct private investments and expand public market activity
“I don't anticipate that we will be particularly active direct privates apart from co-investment, but I expect that we will become more active in the public markets given the balance sheet management and our improved liquidity management.”
Gilmore: Scenario analysis should replace simple correlation in measuring diversification
“Rather than simply looking at historical correlations, one needs to be thinking about multi-dimensional scenarios and to think about how the portfolio behaves given those scenarios.”
Gilmore: CalPERS equity and fixed income teams generated strong unscaled information ratios
“The equity team, the fixed income team have been good at generating good information ratios, but it hasn't been scaled, which I found interesting because there have been constraints on the active risks that can be taken and sub-constraints.”
Gilmore: CalPERS must invest bulk of capital through larger managers
“The reality is that the bulk of capital is going to be invested through larger managers because of the size of our portfolio.”
Gilmore: Total Portfolio Approach Allocators Tend Toward Higher Private Market Exposure
“And if you look at the TPA adherence, they tend to have a bigger exposure to private markets.”
Gilmore: Bridgewater Sits Between Discretionary Macro and Price-Signal Funds
“Other macro funds are perhaps either more discretionary or they are more reliant on the signals that come from price movements. So Bridgewater is somewhere in between.”
Gilmore: Future Fund Benefited from 2008 Crisis Due to Low-Risk Entry
“The Future Fund has actually been one of the beneficiaries of the financial crisis because it had a low risk portfolio going into the crisis. So it had a lot of cash to invest when assets were very cheap.”