U. California CIO Installs New Investment Team

After a quiet first few months the job, University of California (UC) Regents CIO Jagdeep Bachher has announced major personnel changes almost daily over the past several weeks.

The raft of new hires includes a public pension CIO (Sam Kunz, plucked from Chicago’s police fund), the founder of a real estate firm (Thomas Fischer, now an investment officer), noted academic Ashby Monk, and two of Bachher’s former colleagues.

Alumni of the Alberta Investment Management Corporation (AIMCo) now hold three of the top UC investment jobs, including Bachher himself. Prior to joining the Oakland, California-based office in April, he spent several years as deputy CIO at the $70 billion sovereign wealth and pension fund.

"In hiring, I target people with experience who’ve had leadership roles. Hence, CIOs at other institutions who want to go back to investing have been very attractive." —Bachher on building UC's team

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He has brought with him Arthur Guimaraes, now UC’s COO, and Brian Gibson, who serves as senior investment advisor.

Other asset owner recruits include Niclas Winterstorm, who spent years with Norges Bank Investment Management, investor of the world’s largest sovereign wealth fund. Faced with the opportunity to hire Winterstorm, Bachher created the role of operational risk management director for him.

“I’ve known him for a while and thought, ‘He can really add value,’” Bachher told CIO. “So let’s create a job for him.”

In taking over UC’s CIO role and creating the team, he describes his strategy as three-fold. “First, you must make sure you absolutely understand the organization and the people you have, and be sure that talent has the opportunity to grow and blossom.” In addition to the new hires, Bachher has promoted several existing employees.

“Second,” he says, “you need to bring in external people. Target those with experience who’ve had leadership roles. Hence, CIOs at other institutions who want to go back to investing have been very attractive. Finally, I was intent on absolutely making sure that we don’t hire based on having a job to fill. Instead, we searched for excellent talent, and in some cases created a role for them.”

Bachher is still recruiting for a number of senior positions at the $91 billion fund, including senior managing directors of fixed income and public equity, head of risk management, head of real assets, chief of staff, and at least two people for the sustainability team. (Interested?)

New Hires:

-Arthur Guimaraes, COO & Associate CIO (ex-AIMCo)

-Brian Gibson, Senior Investments Advisor to the CIO (ex-AIMCo and Ontario Teachers’)

-Ashby Monk, Senior Advisor to the CIO

-Sam Kunz, Managing Director, Asset Allocation & Investment Strategy (ex-CIO of the Policemen’s Annuity and Benefit Fund of Chicago)

-Niclas Winterstorm, Director, Operational Risk Management (ex-Norges Bank Investment Management)

-Lindsey Adams, Director, Real Estate (ex-San Francisco Public Employees’ Retirement System)

-Jessica Hans, Senior Investment Analyst, Private Equity & Real Assets (ex-Monsanto and Blackstone)

-Matt Webster, Senior Investment Analyst, Private Equity & Real Assets (ex-Chertoff Group)

-Sheng-Sheng Foo, Senior Investment Analyst, Public Equity (ex-California Endowment, a $3 billion foundation)

-Thomas Fischer, Investment Officer, Real Estate (ex-Otto Finlay Investment, a real estate operating company)

Promotions:

-Paul Teng, Director, Deputy Head, & Acting Head, Public Equity (formerly Investment Officer)

-Edmond Fong, Managing Director, Cross Asset Class Investments (formerly in absolute return unit)

-Susie Ardeshir, Investment Officer

Exits:

-Mel Stanton, Deputy CIO (now retired)

-Peter Taylor, CFO (now president of a private foundation)

-Brian Johnson, Director, Real Assets (now managing director of the University of Southern California’s endowment)

Expect further divergence between developed economies and major (but risky) upside potential from emerging markets, the investment banking titan says.

Investors should be prepared for a year of low returns, according to investment bank Goldman Sachs.

In its outlook for the next twelve months, the Wall Street giant outlined 10 themes investors should consider, including increasingly divergent performances from developed economies and stronger performance by emerging markets.

“Our market outlook overall is quite benign,” the bank’s note said. “But, under the surface, it is striking that many assets are priced to offer low absolute rates of return over the coming years.”

Investors might be cheered that the bank also predicted low volatility would remain a market feature over the next year, but while this scaled back the likelihood of large downside hits, movements to the upside were likely to be rare too, the bank said.

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Where upside could be captured, however, is in some emerging market economies, the bank said.

After a turbulent 2013, during which many of these countries were hit by the so-called “taper tantrum,” many economies were put into better order, Goldman Sachs’ note said.

“Two years on, emerging markets are likely to enter 2015 in better health—external imbalances have improved in several countries, with India, Thailand, and Chile among the stand-outs,” it said.

“Of the major asset classes, it is striking that emerging market equities now trade with earnings yields that are above their long-run averages. That on its own is no reason to own them. But for the first time in a while, we find ourselves thinking that they offer at least the possibility of significantly higher returns than developed markets over the medium term, even if they still offer significantly more risk,” the note said.

And if investors were advised to select their emerging market exposure carefully, the bank said they should also take care when choosing developed markets in which to place their faith.

“Divergence between the US and other developed market economies—particularly the Euro area—has already emerged as a key theme in 2014,” the note said, “and the gap between US growth and euro area growth (even adjusting for trend) is likely to remain wide. On an annual average basis, we expect that gap to widen.”

The note added that smaller economies within developed markets may become a focus for investors as local central banks—especially in Norway and the UK—may tweak economic policy before, or out of step with, their larger neighbors.