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Dominic Garcia

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2021-04-05
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2021-04-05
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  1. “Yeah, it's difficult 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 paybands, right? And I think they create a misalignment with what pension investment staff are trying to create. So I think you have this dichotomy. You have some plans that have nice alignment with incentives and the ability to pay folks relatively well relative to the industry. And then you have this other half who are still stuck in the past of how they pay and think of the value proposition for its investment staff employees. And so for that other half, it becomes a difficult thing to track and retain talent because you have to compete. You have to compete not only against those other fifty percent in the public pension world, but you've got to compete against endowments foundations and corporate pensions.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “And so those were the key pieces that I've seen for that were big successes for Swib and elsewhere outside of in Canada, frankly, the Canadian plans kind of have that same model as well.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Yeah, I think what I realized and learned is that governance is central to success for any institution but particularly for public pensions, and I think the governance had swib is unique in two ways. First of all, the pension system is separated into two parts. There's the pension administration organization, and then there's SWIB that's really just the asset management piece. And so it allowed SWIB to actually act in function and talk and walk more like a private asset manager. And so what that led to was having a board that was highly professionalized, small, and focused on the strategic role that they had, and having that strategic role and setting strategic goals, and then delegating down to staff and making sure that the staff had clear goals, clear evaluative metrics, and had the resources to achieve those objectives, but in addition to that, had the resources to attract and retain talent.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Kind of the gold standard from that, and I was able to take away some key pillars and some key principles of what made Swift successful, and hopefully took that to heart and hopefully others can learn from that as well. That's really what brought me back home is really understanding those principles.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “First, what factors, what macro factors are you allocating to, how much risk does a contribution, what's your left tail, and really being more of a risk manager than anything else? And I think that was number one. Number two, as I think Swib because it is such a leader and has a great model for how pensions should be managed, I learned how you should build a pension system in general, not just a portfolio, and I was able to interact with a lot of the Canadian pensions, the European pensions, and even the Australians and New Zealand pensions in comparative analysis of best in class pension building. And so I think that was maybe my greatest takeaway was recognizing that this defined benefit program is such a wonderful thing for participants, and if you manage it well, it works very well and has a lot of efficiency, and”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “income portfolio in the alpha portfolio, and after time it evolved into a role of just focusing on external alpha. And so at Swib what I really worked on was building from scratch alpha strategies and hedge funds and traditional long only strategies, but also helping out on the risk parity approach, and so I had a baptism by fire, and it was just a wonderful experience, and what I would consider just a laboratory of trying to build the best ideas, the best types of portfolios, and really separating beta and alpha and figuring out how you can optimize an alpha portfolio with internal management and external management mixed in. And so it was wonderful experience, 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. And so always having this risk perspective”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “So SWIB is, well, first of all, I was there almost a decade, and it was just a magnificent experience. 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. But my experience there at SWIB was David, I think, had a very ambitious vision, and he still is, and it's still accomplishing that to this day. I was fortunate to be an early part of that. I think what we tried to do and what they continue to do is separate beta and alpha at the very simplest level in the portfolio. And my role in building out the beta and alpha, but also utilizing internal management as kind of the core in external management as more of an alpha generating source as well. And so my role evolved over time. I started off just in the fixed income team working with the internal fixed income teams and building external solutions just to optimize the fixed”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Kind of set the floor or the foundation or help set it, I should say. And then whoever came after, they built up a lot of the allocations.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “And onto the prudent investor act, and so all three of us, all three of the funds, and particularly the pension, that started our race to ramp up to alternatives. And so being a deputy at the time was really about building the foundation for ramping up to alternatives. And as I left, I think I allocated maybe some of the first dollars into private equity and real estate and hedge funds at the time.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “So, the work I did as the deputy at Para back in those days is we lived on a legal list of investments. So what that was was in statute it basically said thou shalt invest in this and thou shalt not invest in that. And really what it meant was you can buy government bonds, you can buy US equities, and you can only buy up to 25, 30 percent of non-US equities. And so it was very restrictive and it was only publics. And so this was back in 2004, 2005. And so at that time, the big push that we had was moving from this what we call the legalist of investing to the prudent investor act, which would allow us to go into alternatives in effect. And so since I just built up some good will at the legislature here in New Mexico and moved over at the time, that was really the big push that I had kind of helped out on. We all moved off the legal list.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “I was just this green-eyed kid listening and listening and super nervous about talking and I was able to meet David Via for the first time when I was up there. And David Via is now the executive director and CIO at Wisconsin and at that time he just started and I got to know him and little did I know that he was also a native of New Mexico and so we just started talking a bit getting to know each other and I told him about how I think about portfolios what I would like to do and he was telling me about how he started at Wisconsin and what he would like to do and boy things just clicked. We took a taxi ride together to the airport when the conference is over and a couple months later I got a recruiting call and I guess the rest is history after that.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Mexico, we have two pensions, the public employees' pensions, and then the teacher's pension. And then we have a $20 plus billion dollar sovereign wealth fund that's been funded from oil and gas wells for the past few decades. And so I started just analyzing and understanding them. And boy, everything just kind of clicked for me. And 12 months later, the CIO for the public employees pension said, hey, look, why don't you come on and be my deputy? And I said, sure, what the heck? And so I did that for about three years, I want to say, until about two thousand seven. And for a very short period of time, my CIO he retired, and so I was the CIO at twenty eight, twenty nine years old for like a quarter, and the big benefit of that piece was I was able to go to Nasio, which is this big, the National Association of State Investment Officers, which is this big gathering every year where all the state pension CIOs come together and we just talk about issues.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Yeah, sure. So, yes, I am a native New Mexican, both my wife and I are from New Mexico grew up here. Families have a long history here generations. When I was young, I actually went to graduate school up in Chicago. This is back in two thousand one around there, and I went to public policy school, and while I was up there at University of Chicago, I kind of fell in love with public finance and finance, doing a lot of study between the policy school and the business school, which wasn't Booth at the time, it was just GSB. And then after graduation, my wife and I, who was my girlfriend at the time, we decided to move back to New Mexico and get married. And I did, and so the first job I landed after graduate school was working for the New Mexico legislature and working in their finance committees. I started work and my boss came to me and he said, hey look, I'm not satisfied with the amount of work we do on the pension funds and our sovereign wealth fund. Do you think you can handle this? And I was like, sure. I'll take it on. And so I jumped on.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Our conversation covers Dominic's path to the helm at Para, challenges of governance and compensation in public pensions, addressing underfunding with variable liabilities, and his risk-based investment approach that includes the separation of alpha and beta, overlays, and the selection of alpha managers across public equities, hedge funds, and private markets. Dominic has three times been named in the 40 under 40 by industry publications, and you'll soon hear why. Please enjoy my conversation with Dominic Garcia. Good to”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Hello, I'm Ted Sides, and this is Capital Allocators. This show is an open exploration of the people and process behind capital allocation through conversations with leaders in the money game, we learn how these holders of the keys to the kingdom allocate their time and their capital. You can keep up to date by visiting capital allocators podcast.com. My guest on today's show is Dominic Garcia, the chief investment officer for the Public Employees Retirement Association of New Mexico, a $16 billion pension system that serves over 90,000 members and provides $1.2 billion in annual benefits. Dominic is a native of New Mexico, began his allocator career at New Mexico Para, and returned to rejoin the system in 2017 as chief investment officer after nearly a decade at SWIFT, the state of Wisconsin Investment Board.”

    2021-04-05 · Capital Allocators · Dominic Garcia – Risk-based Investing at New Mexico PERA (Capital Allocators, EP.187) · IDENTIFIED FROM THE TRANSCRIPT · source