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American Public Plan All-Stars
Julian Baca, 35
Deputy CIO, Public Employees' Retirement Association (PERA) of New Mexico
New Mexico's mantra, Land of Enchantment, is second only to Montana, The Last Best Place, in the category of simply phenomenal state slogans. Baca takes this to heart. "I fly fish as much as possible to unplug," he says. "It can consume you, really—the simplicity of standing in a wild stream and fly fishing." This slow slide toward simplicity is mirrored in the way the New Mexican Deputy CIO approaches his day job. With the fund increasingly allocating to the alternatives sector since 2006, Baca is seeking less complexity "as PERA ventures deeper into the complex world of alternative investing," he says. "Reducing fees is something we're basically obsessed with. We also are working to build a more high-conviction portfolio, and we want to lower the number of relationships we have in order to simplify."
Another focus in the Enchanted Land: seeking alternative managers who actually add alpha, which may mean going beyond the usual private equity/hedge fund suspects. "Contrary to the view of the conventional wisdom, alternatives do have embedded beta," he says, "You can target top-tier managers, but past performance is no predictor of future performance. In our search, we have been focusing on performance less and looking at managers that are highly differentiated and well positioned to take advantage of opportunities that make sense to us." In effect, with both job and hobby, Baca is pursuing every fly fisherman's dream: the perfect and simple cast into the contours of the stream, where the most robust trout awaits.
American Public Plan All-Stars: These five are riding—or perhaps leading is a more accurate word?—the secular wave of public plan investing: a massive alternative investments ramp-up. With more capital to put to work than God, the American public pension system's shift toward more sophisticated asset allocation will alter the asset management business in a way unseen before. Out is long-only active equity. In are hedge funds, private equity, and more. These five, if nothing else, should expect their phones to be ringing non-stop for, oh, the next 15 years.