YouSaid · the spoken record

Matt Whineray

lines on the record: 87
first: 2019-09-09
most recent: 2019-09-09
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“The first year of work after you get out of uni is really not that important for where you end up. So don't feel that you've got to rush into whatever is the first job that you manage to get. Go and spend some time overseas and get some life experience. And I would strongly recommend that to my kids and anyone else. Just get out there and live a little because you'll find 10 or 20 years down the track that actually whether you've done that or not doesn't make any difference. And in fact, might enhance where you've ended up because you've learned a bit more about yourself.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Destroy the evidence You've got to take the last biscuit in the packet, get rid of the packet. They know it or know that the packet was even there. So that was just be careful”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“I am always smarter for having read something from Cliff Asmus. And I think he, especially he's been over the last year or so, his values had a hard time, in fact, has had a difficult time. And he's written some really good stuff that has been quite pithy. That's quite useful for dealing with the board, I find some good ones which are around how do you assess strategies which aren't performing well. What's the process you go through? What are you trying to achieve? You're trying to achieve resilience. You're not trying to achieve some level of sort of disinterest. And how do you do that?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it probably comes down to when you're receiving pictures people have what I think I was kind of imaginitis around the lack of volatility of private market assets. So you get this bit which is, oh, these things aren't volatile. It's like, okay, well, why is that? Well, the best evocation of that I've seen is, you know, if you imagine a bat flying and the bat is quite jerky and it's flying all over the place, then it flies into a pipe. And then it flies out the other end of the pipe. And what these people who think about this volatility of illiquid assets would have is that the fat is actually flowing in a straight line from one end to the other because that's where they've measured it at the start. I think you'll really find out how volatile those things are when you're going to try to sell them in a difficult market.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was talking to my wife about this, and she pointed out my biggest one is the absence of the keys from where they ought to be. The key is not being in a consistent place when you go looking for them.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Snowboarding. The deeper the better, definitely snowboarding. When you get some deep snow, and I have done a little bit in the last few years of Halle skiing, so in Alaska, when you get left at the top of a ridge and the helicopter goes away and it's all silent and you've got this completely untouched pitch in front of you, it's just fantastic. It really is marvelous.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Values are we stand strong, and that goes a little bit to the way we use frameworks, the basis of our approach, our long horizon, our ability to withstand the swings of markets. Our decisions are principle-based. We support each other, which is just a humanistic more value. We're future focused, which is really focusing on the long run and again the swings and roundabouts of markets. Team Not Hero is the final one, so that our focus is on the broader team and not heroes. And actually what we've done is we've created a set of cartoons that go with those because those cartoons are evocative. And so also what those cartoons do is provide a little bit of constructive ambiguity because these things mean slightly different things to different people, but ultimately are really important to how we all operate. So that was quite a neat part of the continued.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“People into New Zealand, which is a long way away from the big global financial markets, and we've got to provide a really good proposition for people to come here. And so that culture is fundamental and is an ongoing part of what I'm looking to do.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“That we've been active on for a long time is around culture, but more recently since I took over, we've run a values project to, I guess, be clearer about what our values are as an investment organisation, which was quite a neat project where we got, we just gathered stories, we said to everyone, give us a story about a time when you've been proud to work with the organisation or you haven't been proud to work for the organisation, or you've had some difficult decision to make and how you've done that. We got this really great set of stories 120, 120 stories out of 130 people, something like that. And we were then able to go through that and pull out the themes from those, which revealed the value. So you're not going to someone saying, oh, what are you value? You're going to someone say, tell us a story. And those stories are really powerful. And we got great engagement with it and came up with a new set of values for the organization. Because ultimately good.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“So fast forward six, seven years, we could be $80 billion. So then we've got a question which is okay, what does that mean for our active investment strategies at the moment? What does it mean for the likes of portfolio completion? Can we scale these things? Because not all these things scale well. Direct investment is a challenge to scale. Some things are, strategic tilting is easy to scale, but some things aren't. And so we've been working a lot on that. And that's leading to a discussion with the board, which is around investing in our strengths. Where do we want to add resources in the next two to three years, which will support that growth in assets under management and allow us to continue to generate the active returns that we've enjoyed in the past? And then, of course, with that growth comes the impact on the support functions, on operations, on IT, on finance, and all of that. So there's a conversation going on around that at the moment. The other bit of work that we've been doing.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“And then we've got the fund, and the Guardians had one mandate and one purpose, and that was fantastic. We've now got an additional mandate, which we've been given because government regards us as competent investors. So they've said, right, you can do this as well. So now we're going to run these two mandates. The new mandates, small comparatively. It's only going to be about 300 million compared to 42 billion. So you've got a lot of disparity, but actually it's going to take quite a bit of work to set that up. That's a big one is getting that going. We've got within the investment teams and then more broadly within the support functions as well, started last year, a bit of work called focused on our long-term target state. And that's because go back to December's 2017, the government restarted the contributions. And the restarted the contributions means we're going to grow faster. So we'll get a couple of billion dollars a year and touch wood. We'll get some investment returns on top of that. And so we'll grow quite a lot faster.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, the government announces its budget in May every year, and so in this new budget, the government announced a new mandate for the guardians to manage. And that is a mandate for the development of domestic venture capital, domestic venture capital market. And there's quite a chunk of work at the moment going on, okay, well, let's define what that mandate is going to look like. help with the drafting of the legislation let's deal with the entity that's going to manage that for us which is a crown entity called the new zealand venture investment fund and define what the terms of that mandate are and so there's quite a lot of work across the organisation to figure out how to do that because to date we've got the guardians which has asked that's our investment management company”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“That's early days in that engagement. We're in touch with the local entities. What we've been doing through this first few months is getting that group of investors who want to be involved, defining the basis for the engagement and really doing the work from our perspective on what the potential solutions might be so that we're in a good position to sit down and have these discussions. And that's the next phase and we'll be getting that into that shortly.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of all content and subsequent distribution. And so that's a program that's underway at the moment. We have, I think at last count like 81 investors from around the world, a big chunk from New Zealand, a big chunk, slightly more from offshore than domestically. And those investors between them manage assets of about $10 trillion. So a big group of investors who are concerned about this issue. And so that engagement is with the likes of Facebook and Google and Twitter aimed specifically at preventing that distribution and live streaming of those things.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Gets the most attention because people look at it and go, Oh, you've excluded this company, or you haven't excluded this company, and the Norwegians have, so you must be evil, you know, that kind of stuff. But actually, the exclusions are a relatively small part of what we do in ESG. On the ownership side of things, yeah, we've got an active voting program. We brought that in-house last year. We vote all of our shares globally. And then we also have an active engagement program. We do that directly with companies domestically, and we use a BMO to help us on the global engagements. But the notable one that you mentioned was post the tragedy in Christchurch, we together with another group of the New Zealand Crown investors, we got together to lead an engagement with the social media companies about the, well, aimed at preventing the live streaming of objectives.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“So ESG breaks down into two brig chunks: the integration piece and the ownership piece. And so integration is about understanding what the ESG implications of risk allocations are right from the start. So when we're doing that risk budget work, what the RI implications of a particular opportunity are. So we'll factor that into that risk allocation process. Then thinking about what happens at the access point and making those decisions where you're choosing either we're investing directly or we're using a manager, what are the RI implications? So that integration is really important at that end. And then the ownership chunk is about voting and engagement and just being an active owner in relation to those things. So that's how we sort of think about the two big bits of work. There's another bit that comes out of really the integration, I guess, which is exclusions. And that's a really small part of ESG, but it's the bit that...”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“You spend a bunch of time on ESG efforts. And why don't you walk through a little bit of the history, and then certainly there's been a more recent one with the tragedies that happened locally and the impact from social media.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“You set the whole portfolio up on basis of the theme and then some other theme overtakes it. So we haven't really applied those themes that much of late. Probably the biggest one that we've now picked up as an investment strategy is around climate change. It's a very long run change in markets, but it didn't come out of that theme activity, if you like. But the emphasis on themes has declined a bit because I think in practice it's quite hard to really implement them. I mean, you go and you look at thematic managers around the place and the records aren't necessarily fantastic, right?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, things are hard, I would say. And actually, in the last few years, we haven't done nearly as much with those things. So where we started with themes was we said, all right, so we think there are some themes which are sort of long run changes happening and things like resource scarcity and things like the development of emerging markets, those types of things. And what I guess you find with themes is that we were using them to say, okay, let's try and help the teams with finding the most sort of fruitful areas of opportunity. Where are those spaces which we think have a tailwind from a theme and therefore are sort of conducive to us finding opportunities that will get paid more for the risk than the risk that we're taking would imply? And what you find, I think, a little bit is that you can almost back any investment you like into whatever theme you've defined. Because the other dangerous...”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I know that in addition to starting with a reference portfolio and creating these risk allocations and budgets and balancing what's internal and external and all these different levers of return, you also think of themes and pursue themes in the portfolio. So talk a little bit about how you develop the themes and how you implement them in the portfolio.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Excess returns in that space have compressed as well. So that's the thing for us to be a bit realistic when we're allocating to these things to say, well, where is the real source of excess return? What is it? Is it a manager skill thing? Is it a leverage? Is it a luck? Is it something that there's just inefficiencies in the market that mean that managers are able to find these things? We have to be reasonably honest with ourselves about what the source of that return actually is.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“So now there's this sort of list there. Where are the ones where it's sort of a little bit newer? I think farming and agriculture is still earlier in the life cycle one. I think that because it's just hard to get scale in that, right? So whereas in a, you might be able to buy a billion dollar forest. You can't buy a billion dollar farm. You come to New Zealand, you want to do dairy farms, you're going to do them $10 million at a time or $20 million at a time. So I think that one still there's barriers to getting into it for the large institutional investors. You think about others like private equity, it just feels like there's just more and more allocation to that and that market, which might have been much more inefficient for unlisted companies in the two to three to four hundred million dollar range a few years ago just feels like it's much more intermediated now and there's competitive bids for everything and it just feels like”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“About sort of forestry forestry, I think you go back from an institutional investor perspective maybe 10, 15 years, started the TMO started and institutional investors started to allocate timber and then you had all this big trade where all of the timber assets went from the integrated forest product companies to investors who had lower cost of capital. And then now there's just a lot fewer of those big things. So I would look at forestry and say I think there's been a, that has moved through the life cycle. I think of other ones, I think life settlement's probably a little bit like that. So life settlements is a shorter time frame, but a lot of capital allocated to it and the big trade was large insurance companies selling these books to mostly these private managers and those big tertiary books are kind of done, right?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. And this may be tied to this belief about understanding that there's a life cycle of asset classes. As you look at the markets today, where do you think we are in a variety of different asset classes in their life cycle?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Income market active managers in those listed spaces. And that's really because we look at those and we say in those really large developed markets there are lots of really smart people trading with each other and we don't think that there's a persistent production of excess return. Contrast that with the New Zealand where we think there is although that might also be declining over time and we think what's happening in the New Zealand market is that the New Zealand market is made up of retail investors international institutional investors some international strategic states and the New Zealand Active Mund and the relative proportions of those mean that generally speaking within the New Zealand Active Equity Managers manage to trade off those other groups and get their alpha off them whereas you go to the US market there's a lot of active managers in there and on average the whole market is paying fees but not generating alpha.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“We don't see that many, to be honest. So we do think that in New Zealand. So the New Zealand Active Equity Market is an interesting one in the sense that the median manager has been able to generate alpha or excess returns over time. Why is that? Is that because there's a bunch of real special managers or is that because there's something about the benchmark or is there something about the structure of that market? So we think that the New Zealand market is one of those that's conducive to it. So as a result of that, we have actually relatively few listed market active managers. So I could count them pretty much one hand. We've got two managers in New Zealand that run active equities. We've got one global merging markets active manager and that's it. So we don't have any developed markets, active managers, we don't have any fixed”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'm going to circle back to two of the beliefs you talked about and really bring them into the present market. So, one is the notion of markets that are conducive to active management and the ability to generate alpha. Where are you seeing those markets today”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“So there's about 50 in the investment group. There's about I think in the portfolio the overall portfolio completion. So maybe we're in the sort of the 55, 60 somewhere around there.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Locations and markets. So, yeah, four teams under Stephen, two teams under Mark, and the whole lot represents our investment funct”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we've got two GMs involved. So, Steven Gilmore is the chief investment officer, and he looks after the investment group. And within the investment group, there are four teams. There's responsible investment team. There is a team called External Investments in Partnerships, and that's our external manager team in large part. There is a direct investment team, and there's an asset allocation team. So we've got what we tend to call them as access point teams. Our access point teams are the external investments and partnerships team and the direct team. And then so outside of Stevens group, there's a group called the Portfolio Completion Group, so that's headed up by Mark Finell, who is the GM of Portfolio Completion. And that has within the portfolio completion team that does all the market trading, and another team called Portfolio Investments, which is generally running out internal credit mandates and a strategy we call a direct arbitrage strategy, which looks to take advantage of.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Possibly, but that's where having a bunch of them, and particularly a bunch of them who think in sort of different ways is quite useful because then you're not totally driven by a single information source or data source. You can talk to them. And what's really useful from some managers is notwithstanding that they might not be in a particular asset class, they've got sort of frameworks and structures for thinking about how they would view the retractiveness. So they can be really helpful outside of their immediate area for us for thinking about that. And the other way we try to deal with that is those risk basket teams have got a bunch of different people in them so that it's not just the person who is dealing with the manager at the access point level who is doing the target allocation. It's that team that's doing it. So you get a bit of protection against capture, if you like, through that process.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Do you run the risk that the managers as a group sort of form a consensus? And as a result, you're tilting towards a market consensus instead of as you want, a mean reverting kind of contrarian approach.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Often they are at least partially informed, but also you get quite a bit of information by their activity because generally speaking if a manager is slow from allocation perspective in terms of well slow versus what, but you know not seeing lots of opportunities, that's pretty useful information for us because that says, well, actually maybe this isn't that attractive. So you often, probably if you really looked at it, you'd say there's a reasonable correlation between the pace at which managers are allocating risk and our view on attractiveness as you'd expect because they are close to it and if they're not seeing the opportunities then our other indicators will probably tell us that we don't think it's that attractive either.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“You mentioned that you want these managers to be able to help you with the flexibility and shifts in asset allocation and strategies. How much do you come to those judgments on your own? And how much are those inevitably informed by the very managers you're giving the money to?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it tends to be like that. If you think about it from a manager's perspective, to be able to manage the allocation process that you've got to go through, if you've got a bunch of different mandates and you've got a fund, for example, and you find an asset, you've then got to say, okay, well, I'm going to give three bits to the fund and one bit to this mandate. That sort of allocation infrastructure, I think, means that they have to be bigger and more sophisticated, generally speaking. That probably pushes you more up this size.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd like a European distress mandate, and they say, Oh, we've got a fund and say, okay, well, yeah, that's great. But actually, we'd like it to be a bit more flexible so we can allocate capital to it according to our view of the attractiveness of that opportunity over time. And so you can't do that if you're turning up with a $50 million check. What we found is actually around about 200, you start to have the ability to create a flexible mandate. You can say, okay, we'll set this up so that you can draw it down. But periodically, we will reassess the attractiveness of the market. And if we say, if we really like it, we can allocate more. If we don't like it, we can just rule it off it wherever it is. It's more intensive to manage. So you need fewer of them and you want to be closer to those managers so that you're getting feedback loop as to attractiveness. That's something that we worked on. But also what we want to get out of those managed relationships is a bit more”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Fewer deeper came from go right back to when you're an SAA and you're saying, okay, we've got 5% of PE, so then we want to have a whole bunch of different managers to give us some sort of broad exposure to a world where we said, okay, under the reference portfolio, we're going to allocate to something if we think that there's really something about that market or that manager that gives us great confidence that we're going to beat the reference portfolio. In doing that, we'd necessarily become a bit more concentrated. We want to allocate more. But also what we want to do, because I talked about the confidence, we've got more confidence if we can change that risk allocation. So that fewer deeper ones said, okay, we want to try and make these flexible mandates. And so what that means is you go to a manager like Bane and you say,”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk a little bit about the external manager relationships. You did mention you'd like to have fewer of them and deeper relationships and aligned. How do you go about and how does the team go about picking those managers”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Over our liquidity management, and then also I wonder into where markets are. That team is a team that is doing all the marketing activity.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Portfolio completion team is what a lot of other organizations might call their treasury function. And so they are the team that do all of the market trading, so all of our derivative trading, all of our FX hedging, all of our transitions or rebalancing. So their job is to basically take the actual portfolio, compare it with where we want to be from a risk perspective, and then rebalance to get back to that by using those liquid ones, as well as execute the strategic tilting trades as well as do the FX heating as well as trade the New Zealand equities that we might trade internally. So that's a really important team. We created that after the GFC. So going into the GFC, all of our stuff was outsourced. And we didn't have great views of almost anything, liquidity or risk or any of that. So it was a big program to create some critical functions which allows us to have visibility and control.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Budget for tilting at the moment is about 2.5% active risk at the fund level within a total active risk budget of 4%. But of course things don't add up because they're not necessarily correlated with each other. So it is definitely the biggest chunk of active risk that we've got.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“We have a view on what we think the overall information ratio is, what we can make in terms of active return versus the risk that we take. Then we have individual views on the different markets, how confident we are. So there's a sizing thing going on within tilting about how much we allocate to equities versus bonds or currencies versus each other's or whatever. For strategic tilting itself, strategic tilting is the biggest chunk of our active risk budget. And that comes from being really consistent with our beliefs and our endowments and us having a lot of confidence in our building to execute that, which has sort of developed over time. So we look at what we expect to make on that. So our confident, our risk adjusted return expectations, we adjust that by a confidence versus every other thing that we'd allocate active risk to, and that gets the biggest chunk of active risk.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so the team builds DCF models for all of these markets. We have long run views on the big drivers, so growth, inflation, real interest rates, and then that's which come from our internal economics teams as well as gathering data externally. And then with those, we form views on what the long run equilibrium values are. We use, particularly in the rates and the impacts on the currency as well, we use sort of the near-term market pricing because what we're not trying to do is forecast where things are going over the next couple of years. What we're trying to say is, is there some sort of reasonable difference from the long run equilibrium value? And then if we think it's a little bit lower, then we'll buy it. If it goes down at that point, we'll buy some more and we'll do that incrementally. And then if it starts to go up, then we'll start to sell it. So long run economic drivers try to have economic identities so that you don't have”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“In there. So you can increase breadth, but I think you reduce confidence, and so we probably don't improve the performance of that by doing that. I think that's the key is to have breadth of non-hopefully uncorrelated positions. Without destroying the confidence by just getting to a point where we just can't have a view.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Genesis of it was it started with basically two levers, it was either a view on global equities versus global bonds and it was a view on the Kiwi versus the basket of currencies. So those are two things. And then over time we've significantly increased the breadth of it. So now we've got global equity markets like Japan, Canada, US, Europe, UK, emerging markets. We've got the same bond markets. We've got about four different credit markets, Australia, Japan, US, Europe. We've got all the major currencies. So we haven't gone down below to sector or individual securities because we're more confident at the whole of market level of being able to say, what do we think the long run equilibrium prices of valuers and then compare that to the current price when you get to individual sectors and individual securities, we're just much, much less confident.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“Are you going down to the security level so you could do mean reversion across markets? You could do it tilt to value and growth. You could get into sectors. You could get into securities within sectors. How far down are you going?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's got global equities, global bonds, currency. It's got some credit, so it's sovereign and credit. We've just recently introduced a small bit of risk in commodities. So we're starting to tilt those as well. So the big global equity markets, big global bond markets, large currency markets. So these are all liquid things that we can use, either futures or TRSs on and can trade and that team will trade pretty much every day.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“We might be in those, we might not be in those. It's very hard if you've built the team internally to say actually, we just don't want to invest anything in this opportunity. Because then you've got a team who's sitting there going, twiddling their thumbs and going, well, what am I doing? It's really around alignment, ability to manage risk in a way that is critical to us, a bit of cost, and also just being clear-eyed about who's got the expertise. Can we actually get the expertise here in New Zealand versus what we need?”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“And because you're waiting for these markets to mean revert, and they might be slow or they might move further away from whatever you think the mean is. And so that one we thought is really hard to get alignment with external managers. And also what we've seen is where managers are running those types of programs. Sometimes they have a pooled program and other clients in that program start to lose their nerve and want them to take the risk off and that's exactly the wrong time to do it. And so this allows us to control that and we're responsible for it. We manage it. And that feels like a happier place to be. When it comes to other things like, for example, Moja Arbitrage or Cat bonds or life settlements or that stuff, there's expertise externally that we don't want to build internally. It gives you more flexibility if you're using those externals. Ensure you're going to pay for that. But in a construct like ours where through time”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source
“We start with a few questions like can we get satisfactory alignment? And that probably is one of the biggest drivers. Not so much a cost one, because while you can get some costs improvements, I think the bigger driver of our decisions, especially where we are down in the bottom of the Pacific, it's going to be very hard for us to build teams in the US or in Europe or whatever and replicate what we might get from managers. So the cost one is less of a thing. A lot of it is alignment or we can't get some sort of critical risk control that we might want or the ability to move it. So strategic tilting is a good example. Strategic tilting is entirely managed through derivatives. It benefits from the liquidity management that our portfolio completion team runs and the counterparty risk that we represent as a fund as a whole. But also the thing about strategic tilting is that you can be for a long time underwater.”
2019-09-09 · Capital Allocators · Matt Whineray – Leading New Zealand Super Fund (Capital Allocators, EP.108) · IDENTIFIED FROM THE TRANSCRIPT · source