“I have worked with Jude at multiple plans and, without a doubt, he has demonstrated that he is a multi-platinum artist.
Jude couples a high degree of excellence with a disarming ability to build 360-degree consensus and respect. His office is a gathering place for the whole team where people let down their guard and share ideas. Yet, Jude knows how to manage the same people without sacrificing his credibility as a leader. He brings a tremendous work ethic combined with knowledge and creativity to develop a new portfolio analytics group within LACERA’s investment division. In his short time at LACERA, Jude has a long track record of success with major initiatives, including our investment policy statement, risk management systems, functional asset allocation transition, ESG efforts, and our manager scorecard.
LACERA’s 165,000 members are the real winners in having dedicated professionals like Jude working for them every day.”
— Jonathan Grabel, CIO, LACERA
Los Angeles County Employees’ Retirement Association’s Jude Pérez has had a profound impact on the strategy of its investment office by exploring the possibility and influence of significant changes to LACERA’s investment strategy. After joining the pension following eight years at the State of New Mexico, both at the Educational Retirement Board and the Public Employees’ Retirement Association’s investment offices, Pérez introduced new alpha-generating tactics to enhance the California state’s portfolio in a novel way–not just through generating positive returns but rallying his colleagues to do much better at the pension.
Pérez’s career arc took a most interesting turn, where after four years as an owner of a snowboard and skateboard shop, he joined New Mexico as an investment officer and portfolio manager, and worked his way up to subsequently become the deputy chief investment officer at the Public Employees Retirement Association of New Mexico. Prior to his entrepreneurial experience, he was an associate for KB Home, where he underwrote real estate projects for the company.
He earned his MBA from the University of New Mexico and is a CAIA charter holder. Pérez sits with CIO in this NextGen series to discuss how best to capture investment opportunities in today’s volatile environment.
CIO: What makes 2019 an interesting investing climate? How are you handling it?
Pérez: I think what has made 2019 interesting are the waves of populism and economic nationalism around the globe and the many implications. This includes protectionism and politicization of central banks, etc. With regard to protectionism, US-China trade tensions has other implications including US-North Korea relations. In addition, we have other geopolitical issues such as Venezuela and Iran that are driving up oil prices, so they are worth paying attention to. These and other risk factors are playing a larger role is asset pricing and how markets are performing.
Working for a public pension, we monitor geopolitical risks and try to make sense of the resultant market movements. However, at the end of the day, we are long-term investors and have to continue to implement our strategic asset allocation. Public plans can make some very small tactical bets, but how we implement our strategic asset allocation, not market timing, will determine the success of achieving our policy objectives.
CIO: After this year, what are the largest opportunities and the largest threats you see on the horizon?
Pérez: The largest threat could be the intersection of the long economic expansion and geopolitical risk beyond 2019. This unique scenario could exaggerate how the economy would normally respond in a late cycle. As a public fund investor, I believe the largest opportunity is to avoid forecasting. Instead, we should continue to implement our strategic asset allocation and monitor the economic environment. The largest threat is trying to out-think highly efficient investment markets by deviating from long-term allocation targets and implementation plans.
CIO: How did you arrive at your current position? And why did you choose this part of the financial services industry?
Pérez: As for my current position, I joined LACERA for two reasons: First, I had the chance to work with a CIO that I align well with philosophically and had worked for at a previous plan. Second, I was given an opportunity to build a new Portfolio Analytics team that focuses on total portfolio initiatives, asset allocation, corporate governance, and enhancing analytics.
I chose this industry more by chance than a planned career decision. About a decade ago, I was given the opportunity to work for a colleague that I had worked with underwriting real estate for a large home builder. He offered me a position at a public plan working within the private equity asset category. I have chosen to stay in institutional investing because I enjoy how my role lets me tackle challenging problems in a collaborative manner while serving the interests of plan members.
CIO: What was the most important strategic allocation of your career?
Pérez: I feel that the “current” strategic asset allocation you are working on will always be the most important.
CIO: Tips for money managers who want to work with you, especially what not to do.
Pérez: Managers should be forthcoming with a strategy’s limitations and not oversell their product. They should also take the time to understand how the investment or product would fit into the total portfolio. Understand the objectives, learn what the investor wants to accomplish, and be a partner in achieving that goal.
CIO: Biggest goof a money manager has made with you?
Pérez: This is not a goof, but I feel some managers forget that they are investing money that comes from public employees. While some of these managers have amassed a large amount of wealth, I think they forget that a majority of it was built off of capital provided by public pensions.
CIO: Who in the financial world would you like to have lunch with and why?
Pérez: They are not from the financial world, but I would like to have lunch with the US Secretary of Education. I would want to know why financial literacy is not a core subject in today’s teachings.
CIO: What are changes you’d like to see the institutional investing community make in 10 years?
Pérez: Better alignment of interest between investors and managers in regard to fees. For active strategies, I would like to see the industry move more towards fees based on the quality of returns earned, not AUM or simple return hurdles. For passive strategies, a flat fee concept versus AUM.
Better collaboration and organization between institutional investors to help set new pricing/fee models for illiquid assets. When individual money managers start buying sports franchises and $50 million homes, we have to question the fees being charged and the amount of wealth being created on the backs of public workers.
Another change I’d like to see is AI technology designed to help institutional investors with large multi-asset class portfolios optimize allocation decisions and simplify the process of producing actionable analytics.
CIO: What are your hobbies not correlated to work?
Pérez: With three children, I have found that my hobbies have become their activities and just spending time with the family. When I do get a chance, I enjoy reading, watching sports, playing the guitar, and going for a motorcycle ride.
