Alcoa CIO Joins Iconoclastic 300 Club | Chief Investment Officer

Ron Barin Rob Barin, CIO, AlcoaRon Barin, who has run money for some of the US’ largest corporate pension funds, has been invited to join the 300 Club of global institutional investors.

He joins a group including Chris Ailman (CIO of the California State Teachers Retirment System), Bob Maynard ( CIO of the Public Employee Retirement System of Idaho), and Stefan Dunatov (CIO of the Coal Pension Trustees Investment).

The organisation debates and publishes papers on testing received investment theory—and suggests ways to improve it.

“I’ve long admired the 300 Club and believe that the need to question the conventional investment paradigm has become more urgent,” said Barin.

For more stories like this, sign up for the CIO Alert newsletter. 

“We’re on an exciting journey to attempt to move beyond the best practices of the endowment model.” —Ron Barin, AlcoaBarin, now CIO at metals firm Alcoa, has invested institutional assets for pharmaceutical firm Pfizer and held roles in treasury financial risk management roles at Estee Lauder and Unilever.

“I’ve put some of my investment beliefs into practice by evolving Alcoa’s pension and foundation investment strategies to a risk factor portfolio construction approach,” he said. “This allows for enhanced portfolio diversification relative to the equity risk premium by allowing us to harvest a wide array of long term risk premia coupled with downside risk management—we’re on an exciting journey to attempt to move beyond the best practices of the endowment model.”

Last year, Barin told CIO that risk management was “in his DNA.”

“I joined Alcoa as chief investment officer in 2008,” he said. “As the financial crisis hit later that year, I used that situation as a springboard to start looking beyond the traditional investment paradigm and beyond the limits of portfolio theory.”

Upon joining the 300 Club, Barin outlined Alcoa’s approach as “challenges the prevailing assumptions of existing portfolio and economic theory—rational expectations and stable equilibrium don’t exist in the real world—which has some interesting implications for how we quantify and manage investment risk.”

Last year, CIO also met and lunched with the 300 Club to listen in to their thoughts on institutional investors’—and their suppliers—bad, and potentially changeable habits.

The US regulator has charged an advisory firm and two of its executives with fraud, claiming they sold unsuitable investments to public pension funds.

The Securities and Exchange Commission (SEC) filed the charges yesterday, alleging that Gray Financial Group, its founder Laurence Gray, and its co-CEO Robert Hubbard “breached their fiduciary duty” by persuading public pension funds for the city of Atlanta, Georgia to invest in an “alternative investment fund” in breach of state law.

Gray Financial Group—which operates as Gray & Company and manages more than $10 billion—collected “more than $1.7 million” in fees from pension funds for firefighters, police, and other public sector workers, the SEC’s statement said.

“We allege that Gray Financial Group and its senior officials put their own interests ahead of their clients, and Gray deliberately misrepresented that the recommended investments were permissible under Georgia law,” said Walter Jospin, director of the SEC’s Atlanta Regional Office. “Public pension funds and their beneficiaries deserve better from their advisors.”

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

“The claims and arguments in the SEC’s filing are without merit,” said Terry Weiss, a lawyer at Greenberg Traurig representing Gray Financial Group, Gray, and Hubbard.

Georgia state law was changed in 2012 to allow pension funds to allocate to “alternative investments”, subject to strict limits.

When Gray Financial Group advised the pension funds to invest in its own GrayCo Alternative Partners II fund, there were fewer than four other investors and less than $100 million in total assets in the fund, the SEC alleged—both breaches of Georgia law. In total four pensions invested $77 million in the fund, the SEC said.

Public pensions in the state must limit their investments to a maximum of 20% of a fund’s capital, but the SEC said two pension funds exceeded this limit.

The SEC’s filing alleged that the company, Gray, and Hubbard had “recommended, offered, and sold” investments in the GrayCo Alternative Partners II fund “despite the fact that they knew, were reckless in not knowing, or should have known that these investments did not comply with the restrictions on alternative investments imposed by Georgia law”.

“Additionally, in October 2012, when recommending GrayCo Alt. II to one of these clients, Gray Financial and Gray made specific material misrepresentations concerning the investment’s compliance with the Georgia law and the number and identity of prior investors in the fund,” the SEC said.

“The SEC is once again bringing its charges in an unconstitutional and home-cooked administrative proceeding rather than trying a case before an impartial US district court and a jury of one’s peers,” Weiss said, according to Reuters. He added that the company would “vigorously defend itself”.

Source: Securities & Exchange Commission Breakdown of investments in the GrayCo Alternative Investment Partners II fund. Source: SEC

Related Content: Is Your Consultant Breaking the Law?