Mika Malone

Name: Mika Malone
Title: Managing principal
Firm: Meketa Investment Group
Assets under advisement: $1.4 trillion
Number of consultants: 62
Type of clients: Multi-employer plans, public funds, corporations, endowments and foundations, health care organizations, financial intermediaries. 

Mika Malone is a managing principal at Meketa Investment Group, a 16-year veteran at the firm after having joined as an investment analyst in June 2003. She keeps an eye out for a plethora of different challenges and risks facing her clients’ portfolios. The two that stand out in today’s environment include environmental, social, and governance (ESG) opportunities and investment themes trending more towards sustainability and “green” efforts, as well as the interest rate environment and the consequences of low rates on client investment portfolios.

“We’ve been in such a low-inflation environment for such a long time, and now the Fed moved from a tightening posture back to easing and lowering rates, so I think that the overarching theme is asking what the fixed income marketplace looks like, since that is in a way the anchor of your portfolio,” she says.

“The expectation for fixed income returns is what you build on for asset allocation to determine your equity risk and whether you should take on alternatives and come up with other ways to approach the market. I think the conversation about rates is one of the larger ones,” Malone tells CIO.

She also explored the impact of ESG and constituent demand to better understand and influence what is in their portfolios.

“You need to be aware of how your portfolios are structured, and whether the governance within those portfolios is strong, and how investment firms are looking to position portfolios for the future, rather than the past,” she says.

Digging Deeper on ESG
When it comes to ESG, Malone finds that a strong challenge is just to determine a consensus within the asset management industry as to what ESG really means.

“Every asset management company has a slew of really good marketers who can develop language around their ESG philosophy but trying to get to the heart of whether that’s really a foundational piece of how they invest or just a good spin on their work [is an obstacle],” she says. Malone assumes responsibility in her position as a consultant to try to figure out what it means to different people.

“I think what that leads to is more customization to client advice and portfolios. I spend a lot of time with clients trying to figure out what their beliefs are and how to go forward to find the best opportunities for their portfolio.”

Malone tells CIO that there’s no one-size-fits-all strategy to consulting with regards to ESG. Each investor has a different taste, and sometimes individual investors struggle to articulate their philosophies and look at all options to improve company performance, resulting in a sort of “push-and-pull” between divestment and engagement, she says. “We spend a lot of time on how clients can maintain a balance.”

“From an impact standpoint, we have clients who say ‘it’s so hard to just divest from a particular industry, where are places we can focus on just doing good rather than just removing the bad?’”

Outside of ESG, China is another market topic that is garnering a lot of interest and attention from Malone and her team at Meketa. “Five years ago, China played a different role in the global economy, and now you’re looking at client demand for potentially investing in China A shares strategies or breaking China into its own investment market. China is becoming a huge part of the emerging market index and we want to separate out some of the risks,” she says.

“There’s no short-term solution to the tensions between the US and China, and both countries have a lot on the line in terms of trade and economic strength.”

Artificial intelligence is another key to the future that Malone is paying attention to. “From an investment standpoint, there are lots of dollars in the private equity space seeking the technology of the future, and artificial intelligence is a big part of that and will influence the way we look at client portfolios for years to come.”

It goes past just the ability to run thousands of Monte Carlo simulations or traditional mean-variance optimization, she explains. “All of us have access to information, but the question is how can we better synthesize that information for clients?”

By Steffan Navedo-Perez