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Stephen Gilmore

lines on the record: 78
first: 2026-02-09
most recent: 2026-02-09
sittings or episodes: 1
sources: podcast

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“In both of those countries, in New Zealand and Australia, a lot of the investing was offshore because they've got relatively small domestic capital markets. One of the biggest considerations related to foreign currency and the hedging of those foreign currencies. And of course for comparing assets, you would want to look at things on a hedged basis so you can compare across countries. That has implications for liquidity because in both Australia and New Zealand, Canada, for that matter, when there's a negative shock, equities are going to fall. But those currencies will also weaken so there's a liquidity consideration. That's different if you happen to be a US space investor, or it has historically been different. That's one consideration. You've got to look at the big factor, which is equities, and you normally looking at regression analysis, but then again,”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“You should think about funding all the investments out of the reference portfolio, funding them out of some combination of equities and fixed income. In our case, it's US treasuries. You want to risk match the investment you're making with some combination of equities and bonds. In reality, it's going to be the equity risk that dominates. You're obviously looking at things like equity beta as one of the considerations. You've also got to be thinking about how you charge for illiquidity. Because if you are investing in a liquid asset, you've given up some optionality. And that's of some value. How much, of course, will depend a bit on the institution, depending on how much liquidity you have, it also can be a function of base currency and currency hedging and so on. Those are some of the considerations.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Reference portfolio have We've recommended 75% equity, 25% bond, portfolio. We've recommended an active risk range around 400 basis points. That's a growth-orientated portfolio, and it's a function of our time horizon. It's also a function of our funder status. We're just a 80% funded. Is reasonably similar to the current portfolio, a little bit riskier than the current portfolio, but not a lot.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“You'll think about IRRs, you'll think about multiples. If you're looking at infrastructure, you might think about discount rates. If you're looking at real estate, you might think cap rates. Some people will focus on money weighter returns, some people will focus on time weighted returns. You've got to come up with something that everyone can work with. That takes time. Likewise, when you're looking at the cost of capital, you have to be thinking about, well, is this a reasonable proxy, especially for the private markets, because you've got infrequent valuations. So that takes time as well.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things with a strategic S allocation is that you do have policy ranges. You can deviate. In practice, teams tend not to deviate too far from benchmarks. There's a psychological element. Conceptually, if you were to speed up the SAA process, the review, to do it more continuously, it would look more like a total portfolio approach. If you have that thought process, we're just going through the exercise more frequently and we're becoming less anchored to what the SA is. That's getting you part way towards that mindset of a TPA. Thinking about how the competition for capital takes place, you have to go out and have some sort of common language for looking at different investments. That can be difficult because different asset classes think about returns differently. If you're looking at private assets.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Take people on this total portfolio journey. I sought a few other things which made the process easier. You want to get the right alignment and you want everyone to be investing the portfolio as a whole. Some years earlier, Marcy had changed the compensation structure so that everyone got rewarded on the basis of the whole portfolio, not the asset class. That was quite important. The team had done a lot of work on liquidity, had invested a lot of time, a lot of efforts and really good work was done on that. That was a particular advantage for looking at the whole portfolio. I saw some elements there which were really helpful when one wants to go down this route.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“I first came in, my focus wasn't on rapidly moving to a total portfolio approach. My intention was to spend three to six months listening, learning, or about to start an asset liability management review, which occurs every four years. The question for me was, do I want to push to go down this route of a total portfolio approach now or do I wait four years? And I didn't really want to wait. We really did this in a stepwise fashion. One of the first things we did was to show the board how a risk equivalent portfolio had done compared with Telpus portfolio. It was revealing for people because 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. Once I saw that reaction, I thought we should go further.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“I would also like to think that management now becomes more accountable because under a strategic asset allocation, yes, the management can make a recommendation to the board on the SAA, the board adopts it, in the question as who owns it, because it's combined, it's a joint thing with 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 management becomes more accountable. It also becomes clearer how has the management team done relative to a simple off-the-shelf portfolio. It should improve accountability, and those are all governance improvements.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things that has attracted value from the culprit's experience has been a tendency to be too procyclical. 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 concerns about liquidity, concerns that didn't need to be acted upon, but there was an information challenge at the time, information on liquidity has improved greatly since then. But risk was taken down. If you're a long-term investor, that's exactly the time to be putting on risk. The same thing has happened when markets are more exuberant. Risk has been taken up. 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. I'd like to think there's a governance improvement there.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“In past conversations with Matt at New Zealand and RAF at the Future Fund, they both emphasized the importance of sound governance in being able to make the model work. What's your perception of the lived experience of Cowper's knowing, have you seen lots of different CIOs over the years?”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've been at New Zealand Super for five years. It's a great place, and it's nice being home. I got a call from a recruiter. They mentioned the Calpa's role. Frankly, I wasn't that interested. It's a tough gig. But the call prompted me to think about it some more and to do some due diligence. I thought there's so much potential there. When the recruiter called back, I was more open, and the recruiter immediately got Marcy on the phone. She's very persuasive and very engaging. Not long after that call at the same day, the recruiter called me and said, we want you to interview with the board subcommittee. Shortly thereafter I interviewed with the board subcommittee. And great questions and I really enjoyed the interaction. That's what I wanted the roll.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Grew up in New Zealand. My first few jobs were in New Zealand when I was at the Reserve Bank I did what a lot of New Zealanders do, and that is take a year off to travel. That one year ended up being 30 years. I went from New Zealand, I ended up working in the UK, then working in the UVAS, then back in the UK, then in Hong Kong, then back in the UK, then off to Melbourne, then Auckland. I also spent some time in Tajikistan when I was at the IMF, lived there for two years. For me, living in different places is normal. I've lived in six different countries, ten different cities. It's not unusual.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Talk about Kalpas, for instance, under the Strategic Asset Allocation which is currently in place. The management team has the discretion to vary the asset allocation within certain ranges. 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 a round of about 450 basis points of active risk, using all the policy ranges. 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. The guardrails are still there in terms of the act of risk. What has changed is that there's more discretion to deploy that act of risk in different areas. With that additional discretion comes the responsibility to be more transparent.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“To the extent that a strategic asset allocation approach has defined buckets, defined targets, that there are guardrails put in place. Sometimes you hear about total portfolio approach other than there's a reference portfolio that's got some simple stock bond risk appetite. It feels less guardrailed around what the expectation should be. How do you go from we want to achieve this objective to a portfolio construct underneath that someone on the board, a governance structure can get their arms around and say, okay, this is our version of the total portfolio approach.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“More about a mindset. The most important thing is that the portfolio is built to try and achieve the ultimate objective. The ultimate objective for future funds now is CPI plus four to five. That's what the portfolio is constructed to do. In New Zealand it's less clear in terms of having a specific return objective. The focus on the risk appetite and generating wealth for future generations of New Zealanders and to help the budget manage the cost of an aging population. But in both cases, the focus is not only referred to as a strategic ass allocation. It's saying what's the best portfolio. And there's a competition for capital across the portfolio, across asset classes. In both cases.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“The concept of this one has a reference portfolio. This one doesn't, but both under the umbrella of total portfolio approach, which lots of people are talking about now. What does total portfolio approach mean to you?”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Tried to take advantage of that mean reversion. It worked well. Both organizations have been very successful, but successful in different ways. In the case of New Zealand super, Toodle portfolio approach, they have a reference portfolio. Future fund, total portfolio approach doesn't have a reference portfolio. They both have an understanding of how much Rista are taking, so they will focus on that risk appetite. Future Fund will move around quite a lot in terms of active risk, and it used to be quite discretionary. New Zealand super, much more systematic.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“You've got to think of what the objectives of the two organizations are and how they react to those objectives and also lift experience. Future funds lived experience was that discretionary investment worked reads me well. It had also been reasonably cautious because when they started, the reward for risk was quite high. New Zealand super had risk on during the financial crisis, had a large drawdown, had stuck with the strategy effectively, and then became more structured in terms of the philosophy adopted a total portfolio approach both organizations did that around twenty ten. New Zealand super was far less reliant on external skill, tended to think more about having a stable risk after right through time. A lot of the active risk was more systematic, trying to rely on the advantages that the organization had, advantages like a long horizon, if any stable risk appetite,”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Started with a lot of money to begin with $60 billion. The last thing you want to do when you've got a big money to start off with is to lose a chunk of it. You're going to be conservative. They also started at a time when assets were cheap. They had a lot of liquidity and were able to benefit from those high prospective returns because of those cheap assets. They worked pretty well for a while. Future Fund was discretionary, active. a short horizon because the expectation was that they would have to make distributions to the budget come 2020. It turned out not to be the case and those distributions have been put off further and further. The team at the beginning didn't know that. If they had known that, I imagine the future fund would have had a higher risk appetite through time. But that wasn't the case. Going back to your question on the approaches to the total portfolio.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Got to understand the objectives of each of the organizations. One thing that I spend quite a lot of time thinking about when I arrived at New Zealand Super was why Future Fund and New Zealand Super did things quite differently. Future Fund was set up in 2006, started operating in 2007, so it was later than New Zealand Super, which got going around 2003. They had a lot of similarities, sovereign wealth funds, both in Australasia, New Zealand super had larger risk appetite than Future Fund. The reason being it had a longer horizon. It was getting small contributions over a long period of time. The distributions from New Zealand super were going to be some way off in the distance. FutureFund had”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Was largely shaped by the CIO at the time Dave Neil, one of the core things was to have a joined up process, to build a portfolio that was designed to achieve the ultimate objective rather than to have lots of segmented asset classes. Yes, they had asset class teams. The idea was to think of the portfolio as a whole. So you didn't have all these intermediate targets that became known as total portfolio approach.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“I've been in the public sector and the private sector, and I like both. After the financial crisis, I wanted something else to do. One of the opportunities that came up was to work with Future Fund in Melbourne, being in New Zealander, it's closer to home. So I went off to Melbourne after a short period of time, I ended up running the strategy team there and thoroughly enjoyed it because the future fund started in 2007, had quite a large pot of money. It was a startup with a lot of capital. So we had to think about how to invest. The future fund had actually been one of the beneficiaries of the financial crisis because it had low risk portfolio going into the crisis, so it had a lot of cash to invest when assets were very cheap. It was a pretty exciting time.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Very knowledgeable across many things. One of the lessons that came out, of course, was that no matter how good a person is, things can always go wrong. It was important to challenge, to stress test. One of the things that made it problematic for FP was it came down to liquidity challenges. Sometimes you can't anticipate that the repo market is going to freeze up. You can't necessarily anticipate how the rest of the market is going to perform. You always want to think about what can go wrong, even though you've got brilliant people. In the case of FP, they stopped entering into new super senior transactions of that elk from late 2005 well ahead of the final denuant in 2007-2008. It wasn't soon enough.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“I was there during the financial crisis. I started at AIGFP in London, which traded under the name Bonk AIG, which was the European arm, from 2004 until 2009. I was working primarily on emerging markets, had created an investable emerging market index business, which was going pretty well. That was a fairly small part of what was happening at AIGFP. The problematic part of the business related to super senior protection on multi-sector CDOs, that became problematic with subprime. There were issues with liquidity, the repo market froze up, and we'll know the story of what happened with AIG. I learnt a lot from that time. 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 Jokusana who ran the place. He was super smart.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“It's an interesting question because you learn something in each role. When I was at Chase before the merger with JP Morgan, I got to discern the dealing room and to combine different products. I got to sit with the swap straders, the floating floating traders, the option traders, and I would structure transactions, seeing things from different perspectives was very helpful. I still think about going through the pricing on a floating floating swap. That was insightful. Then moving to the FX Options desk, it was quite a revelation because when you come from an academic background, you think it's all about the formula, and you don't really understand how people derive or how they trade implied vol. That was another lesson. And there are lots of incidents like that. Those are two early ones that stand out.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“Goes back to university, studied economics, then went and lectured in finance for a year before going off to the Reserve Bank in New Zealand. Then went traveling, picked up a job at Chase Manhattan in London, derivative structuring, FX options, then a detour to the IMF for six years, then back to the markets with Morgan Stanley. I was emerging market strategist, then went across to AIGFP, was there for a while, then off to Future Fund in Australia, New Zealand Super, and now Kelpers.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“On the SAA, the board adopts it in the question as who owns it because it's combined. It's a joint thing with a 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 management becomes more accountable. It also becomes clearer how has the management team done relative to a simple off-the-shelf portfolio.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things that has attracted value from the Culpa's experience has been a tendency to be too procyclical. If you think back to the time of the financial crisis, various assets were liquidated, this was taken off, that was done in part because of concerns about liquidity, concerns that didn't need to be acted upon, but there was an information challenge at the time, information on liquidity has improved greatly since then. But risk was taken down. If you're a long-term investor, that's exactly the time to be putting on risk. The same thing has happened when markets are more exuberant. Risk has been taken up. 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. Management now becomes more accountable, because under a strategic asset allocation, yes, the management can make a recommendation to the board.”
2026-02-09 · Capital Allocators · Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486) · IDENTIFIED FROM THE TRANSCRIPT · source