Former Wilshire President Joins Rhode Island Treasury as CIO

The former president of Wilshire Associates’ consulting practice, Andrew Junkin, will be the newest chief investment officer serving the Rhode Island State Investment Commission (SIC)’s office.

The SIC oversees the assets of the state’s pension system, meaning Junkin will be responsible for the well-being of more than $8.4 billion in assets. He replaces Alec Stais, who announced his exit in May to move to Washington and lead the investment practices at Providence Health and Services, a not-for-profit health care system.

In his departure memo from Wilshire, Junkin said that “the time has simply come to tackle my next professional challenge.” Joining an institutional investor in the midst of a crisis may prove to be that, as the SIC reported a negative 9.6% return in the first quarter of the year. But there’s promise in the fund’s performance in May, which returned 1.69%, or more than $140 million from investments.

“Over the 12-month period ending May 31, 2020, the system returned 6.6%, outperforming the plan’s benchmark return of 5.6% for the same period,” the Rhode Island Treasury said in a statement. “The crisis protection class has been a key contributor to the system’s 12-month investment performance, returning 15.7%.”

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The SIC’s portfolio policy includes a 10% allocation ($877 million) to the crisis protection class, inclusive of Treasury duration and systematic trend assets. The asset class’s year-to-date return is 12.76%, and it returned 6.46% (annualized) since its inception in July 2017.

“The new data indicating that Rhode Island is performing better than most other pension plans during the COVID-19 crisis is welcome news,” Rhode Island Treasurer Seth Magaziner said in a statement in May.

During his time at Wilshire, Junkin spearheaded a team of more than 80 professionals consulting institutional investors including pension funds, sovereign wealth funds, insurance companies, foundations, and endowments.

“I look forward to working with Treasurer Magaziner, his team, and members of the State Investment Commission,” Junkin said in a prepared statement. “I share their commitment to ensuring that Rhode Island’s pension system continues on its path of long-term growth and stability for our members who have spent their careers serving others.”

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Tags: Alec Stais, Andrew Junkin, CIO, Rhode Island, Seth Magaziner, Wilshire Associates

What’s the diagnosis for the US economy? Try the D-word. UCLA economist David Shulman thinks the impact of the pandemic has so scarred the economy that the recovery will be long, unlike with a plain old recession.

“Make no mistake, the public health crisis of the pandemic morphed into a depression-like crisis in the economy,” wrote Shulman, the senior economist at the Anderson School of Management, in the school’s quarterly research report.

The nation’s home lockdowns and business closures since March have dealt the economy a blow like it has never experienced, Shulman said. “To call this crisis a recession is a misnomer,” he declared.

The recession was officially declared June 8 by the National Bureau of Economic Research, a private body that calls economic cycles. The group put the recession’s start date as February. The average length of a recession is 17 months, or a year and a half. The Great Depression actually was two successive downturns, 43 months, then 13 months.

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According to Shulman, the current quarter will see a 42% annual rate of decline in gross domestic product (GDP). After the second quarter, the professor said, the recovery will be very gradual and “won’t return the level of output to prior fourth quarter of 2019 peak until early 2023.”

His second-quarter forecast is steeper than the 33.5% average that the Wall Street Journal’s survey of economists found for the current period. The Journal consensus calls for a turnaround in the third quarter, with GDP up 14.2%, and then a 7.5% increase in the October-December quarter.

Other prognostications are rosier. Speaking at a recent Bloomberg-hosted virtual conference, Blackstone CEO Stephen Schwarzman foresaw a V-shaped recovery, with the economy taking off after the second quarter.

“You’ll see a big V in terms of the economy going up for the next few months because it’s been closed,” the private equity honcho said. “As people are allowed to go back, the economy will really respond a lot.”

Shulman sees too much devastation to be that confident. “Too many small businesses will fail, and millions of jobs in restaurants and personal service firms will disappear,” he said. “For too many workers, the recession will linger on well past the official end date of the depression.”

In the US, more than 39,000 new COVID-19 infections were reported by state health departments on Thursday. That surpasses the previous single-day record of 38,115, reached on Wednesday. The rising level of cases in the South and southwest has led to the postponement of many business re-openings.

“When we did this report, we assumed the path was getting better,” Shulman told MarketWatch. “This big acceleration [in cases] happened in the past week.”

The rising number of cases, he added, could lead many individuals to lock themselves down, regardless of any state or local mandates.

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Tags: David Shulman, depression, forecasts, National Bureau of Economic Research, Pandemic, recession, Stephen Schwarzman, UCLA