“Joy knows the details like no one else. To say she thoroughly researches an issue would be an understatement. She is always prepared and can debate an issue with the best portfolio manager out there. She has a lot on her plate, including responsibility for asset allocation and asset classes like LDI, Return-Seeking Credit, Tail Risk Hedge, and our Strategic Partners but manages to balance the priorities nonetheless. In addition, she manages our tactical asset allocation model which has added literally hundreds of millions of dollars in alpha since inception and sets her apart as a value-added leader.”
—Laurence Fulton, CIO, VIMCO
Zhuoying (Joy) Xu is a Vice President at Verizon Investment Management Corp. (VIMCO), where she is responsible for leading strategic and tactical asset allocation and risk management for the two Defined Benefit Trusts, Defined Contribution Trust, various welfare Trusts, and Verizon Foundation with total assets over $51 billion. Joy is also responsible for designing and implementing investment strategies such glide path, tail risk hedging, etc. In addition, she oversees a roster of external mandates including multi-asset managers and global fixed income managers.
She has a stellar track record as the portfolio manager of a $1.8 billion derivative-based global tactical asset allocation overlay portfolio for the pension trust, which generated PL of over $800 million in the past five years while lowering the total fund risk at the same time.
Prior to joining VIMCO, she worked as a Risk Analyst at Merrill Lynch Investment Managers (MLIM), which now becomes BlackRock. She also worked as an Associate at Global Debt Market at Merrill Lynch Company, which now is a part of Bank of America Merrill Lynch.
Xu earned an MS in finance from Carroll School of Management at Boston College. She earns a ranking on this year’s NextGen from a career steadily gaining more responsibility over time, and helping the fund fulfill its fiduciary obligations to a satisfactory and successful degree.
CIO: What did you think you understood before the COVID-19 crisis … and if, during the crisis you were proven wrong, what did you learn from it?
Xu: I underestimated the importance of liquidity. During the early stage of the crisis, the high-quality securities (HQ stocks and treasuries) were sold out more due to the severe liquidity needs. I always leave enough liquidity when I run a leveraged portfolio.
CIO: What took you by surprise? What worked?
Xu: The surprise is how quickly the virus spreads to the whole world and how deeply it impacted our everyday life and work. I thought it would be a regional issue, and it turns out a global issue.
What worked: I offload the risks before the sell off because by doing my research, I believe there must be a supply chain disruption while the capital markets were in complacency.
CIO: How would you build the portfolio differently now that you have gone through this massive accelerated shift in the market? (What changes do you plan to implement? What were the biggest challenges?)
Xu: I would have my plan on a higher hedge ratio to the liability. Leave more cash as dry powder to be able to take advantage of the dislocation in the markets.
CIO: ESG has been a tidal wave force behind recent innovative investment framework in our industry. How do you see the ESG framework and effort be influenced by the recent event?
Xu: We are looking to implement some ESG equity funds for our DC plans. But I didn’t see that is happening in a big way on the DB side of the investments.
CIO: What’s your view on the “perfect storm” that is currently impacting the oil markets, and how will that change how you invest in upstream energy?
Xu: The ‘perfect storm’ is happening when there is an unprecedented demand shock (due to the virus) and supply shock (due to the oversupply) that happened at the same time.
CIO: What’s your view on the fate of the Euro and the EU?
Xu: I believe the Euro and EU will stay. It will be stronger for the European countries to stay together, especially in the economic and geopolitical uncertainty.
CIO: What do you think will be the impact of COVID-19 on developing economies (like Chile or the Philippines)?
Xu: I think the impact of COVID-19 will be more downside risks for developing economies from the US Dollar strengthening, and trade disruptions given that most developing country economics are more reliable on international trades and export-driven.
CIO: What are the new creative/innovative strategies that you are researching right now?
Xu: I have been running and keep enhancing a tactical overlay portfolio which has generated significant alpha over time and also has proven to be a good hedge to the total portfolio.
CIO: With the shakeout of industries currently going on—where do you see the most exciting opportunities over the coming years?
Xu: With the level of disruptions in the capital markets and the unprecedented Fed QE programs, I see a lot of exciting opportunities in many areas. For example, in the equity space, there will be clear winners and losers by sector level and individual names. This will be a great opportunity for active managers and long-short hedge fund managers to generate alpha. On the fixed income side, the potential downgrade of the investment grade, especially the BBBs, will present a great opportunity for fallen angels and high-yield managers.
CIO: And professionally, where do you see the most exciting areas to specialize further over the coming years?
Xu: I am interested in exploring the opportunities in fallen angels and other areas that are backed up by the Fed program, like TALF.
CIO: How is the quarantine affecting the way you view teams and working environments, such as work from home, meetings, etc.?
Xu: Even though it is challenging by not being able to get together physically, my team is fully functional in the working from home environment. I actually saw the productivity increased during the past few weeks as people are putting in more hours.
CIO: What asset class or investment troubles you most right now—and why?
Xu: I don’t have any trouble in my investment. Some managers who were risk-on and suffered losses in March, but their performance already turned around in April.
CIO: Name your four-member investment dream team for your own family office.
Xu: David F. Swensen, Ray Dalio, Jim Simons, and Warren Buffett.
