“When I think of a model builder and innovator, I think of Brandon Gill New. Over the last couple of years, she has been an integral part of building OPTrust’s external platform, new strategies, and incubation-style approaches. These attributes are paralleled by her ability to see the “whole picture” through her direct experience and deep understanding of a number of asset classes that span across public and private assets. I am proud to have someone like Brandon on my team who is a positive influence and mentor to the people she works with and a proud supporter of women in the industry.”
—James Davis, CIO, OPTrust
Brandon Gill New, MBA, CFA, is a senior portfolio manager in the Capital Markets Group of OPTrust, where she is part of the leadership team and investment committee that managers the C$5.6 billion External Manager Portfolio, and where she leads the fundamental strategies team.
Gill New has helped to provide considerable enhancements to OPTrust’s External Manager Portfolio since joining in early 2017 by focusing on improving the portfolio’s infrastructure and analytics, and developing new high-quality investment and operational processes. This wasn’t the first time she had done something of the sort; as a senior member of Ontario Teachers’ Pension Plan’s Alternative Investments Group, she contributed to the refinement of the investment strategies, particularly through the 2008 Crisis. As an MBA Candidate at London Business School, she previously took the initiative to help establish the school’s student-run investment fund. The fund’s structure and investment research process gained the acceptance of the school’s Investment Management department and was implemented into the curriculum, helping to give students valuable hands-on experience in investing to help them launch their investment management careers.
Beyond the design and implementation of investment processes, Gill New has significant experience investing in securities and funds across several different asset classes, first in public equities, followed by alternative investments, and then eventually moving into private markets strategies. Gill New enjoys the flexibility in her position to work on several different aspects of OPTrust’s asset allocation, some days working on the plan’s credit strategy, other days working on its hedge fund portfolio, and often working on other burgeoning asset classes and strategies.
This experience investing across asset classes and developing strategic and operational components of the fund earned Gill New a ranking in this year’s NextGen series, through an illustration of leadership across the major aspects of running a fund.
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?
Gill New: As a long-term investor, we at OPTrust focus on our funded status as it is the measure which directly determines our ability to pay pensions and deliver on our mission. One of the ways we do this is through our Member Driven Investing (MDI) strategy, which seeks to achieve sufficient investment returns to support plan sustainability without taking on excess investment risk. This crisis has underscored how important portfolio construction and hedging is to that process, particularly in the times when we feel the most confident.
There have been periods in my career when I have questioned the need to pay for a portfolio tail hedge. I generally subscribe to the notion that a well-diversified portfolio will allow managers to “make hay when the sun shines,” making up for losses that occur in difficult times. During this crisis, I have really come to appreciate the value of our risk mitigation portfolio which provides portfolio tail hedge protection to our total portfolio. In March of this year, it proved instrumental in helping to preserve our plan’s funded status. We are now in a better position to take advantage of opportunities resulting from dislocations from the crisis.
CIO: What took you by surprise? What worked?
Gill New: I have been most surprised by the remarkable market rebound we have witnessed since March. Despite the unprecedented amount of stimulus being pumped into the financial system and global economies, I find it interesting that financial markets are already back to 2019 levels. There is still quite a bit of uncertainty around expected economic outcomes as we have yet to see full ramifications of the virus, and there are risks of resurgences. I think the rebound in the markets that we are witnessing right now is also a reflection of how much liquidity is in the system, waiting to be deployed.
Amidst all of the market volatility, we have been pleased with how resilient our Total Fund portfolio has been. As we are a mature plan, we had a significant allocation to fixed income and also a lower relative allocation to public equities in our portfolio. We were also running a risk mitigation portfolio, which provided protection during the worst of the crisis. Consequently, we are now well-positioned to take advantage of opportunities that are continuing to present themselves.
CIO: How would you build the portfolio differently now that you have gone through this massive accelerated shift in the market?
Gill New: Given the way our Total Plan portfolio was constructed going into the crisis, we have been happy with the resilience it has shown, proof that our Member-Driven Investing strategy is working. The plan consists of a well-diversified portfolio across public and private markets with the mandate of maintaining our fully funded status with the lowest risk possible.
The External Capital Markets portfolio holds a sub-portfolio which contains market-neutral strategies like hedge funds, multi-asset funds, and alternative risk premia funds. This particular portfolio is in a process of transition. In the past, it contained a handful of large concentrations in particular managers, which were intended to be completion allocations for the Total Fund. We have been working to resize these positions in the context of a revamped Capital Markets portfolio that includes both internal and external strategies. This rebalancing was not complete going into this crisis.
If I could build this particular portfolio from scratch now, diversification would remain the most important area of focus across geography, style, and trading speed. Ultimately, a resilient portfolio has a higher probability in weathering crises, whichever form they take.
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?
Gill New: In the early days of the crisis, some people worried that companies’ focus on coronavirus would displace attention on ESG initiatives, since management teams and boards would need to place their efforts on the immediate challenges at hand.
However, I believe that the focus on ESG themes will actually strengthen as a result of the crisis. In fact, the virus has showcased some of the consequences we may experience if ESG issues are not addressed. Whether they like it or not, companies are now being forced to think about ESG as they manage through the crisis. Management teams must now consider factors such as the physical and mental health of their employees, the changing nature of the work environment, supply chain management, and product accessibility as well as childcare.
Investors will become increasingly aware and vocal. This event will only heighten their scrutiny over companies’ ESG-related practices to be assured that companies they invest in are well equipped to manage all types of risks.
CIO: What’s your view on the fate of the Euro and the EU?
Gill New: There is no doubt that the European Union is currently facing its greatest test yet. A number of European countries have been disproportionately affected given the asymmetric impact of the virus. The disparity in COVID’s impact is increasing the political divide between the North and the South.
Leadership should be able to manage through the situation as they have in past crises, but the longer the duration of the crisis, the more likely the threat to the Union. Policymakers will also need to prove commitment to the Eurozone. They will need to take aggressive fiscal action to mitigate economic disparities, and agree on a palpable mechanism to finance or write off the debt that will be incurred. Coordination between European countries is challenging in the best of times, but leaders have historically been able to work through challenges. The risks of a divorce include lack of country competitiveness and severe long-term recession, creating the strong motivation to stay intact. If leaders are not able to act assertively, nationalist influences will feed on tensions, making the Eurozone vulnerable over the long term.
Data shows that support for the Euro has been rising since 2013, and buy-in for the concept of Europe is at relatively high historical levels. Therefore, EU leaders do have some political capital to spend before the region experiences tangible break-up risk, as long as policymakers act aggressively. However, it will not be a smooth road, and political costs will increase with indecision and the longer the crisis lasts.
CIO: What do you think will be the impact of COVID-19 on developing economies?
Gill New: There will be a significant divergence in how developing countries are affected by COVID-19, and some will be much more vulnerable than others throughout this crisis. The resilience of a given country will depend on a number of factors, including government leadership, health care systems, infrastructure, sensitivity to certain sectors like tourism and retail, and the ability to prop up economies financially. It will also depend on countries’ dependence on commodity prices.
Pullback from globalization and international trade will also have negative implications for certain developing countries.
It will be best to access markets taking into account these themes on a country-by-country basis. We have seen a wide range of effectiveness of policy response ranging from that of Chile and South Africa, whose governments seem to have been quite proactive in dealing with the virus and who are implementing aggressive testing, vs. Brazil and Russia who are perceived to have been slow in their response. Country asset prices are also reflecting these divergences, making this a stock and country-picker’s market.
Developing countries need global growth to stabilize. It is also important to understand that the impact on these countries will also greatly depend on the duration and characteristics of the crisis.
CIO: What are the new creative/innovative strategies that you are researching right now?
Gill New: Innovation is a big focus at OPTrust. We undertake a lot of research on emerging investment strategies, and very selectively incubate those that we think will drive value in the future. This allows us to safely develop a true understanding of the characteristics of a new strategy, and allows us the ability to invest with high levels of conviction as the strategies become scalable.
Alternative financing has become another area of interest for our team. We have been focusing on fintech as a source of disintermediation in financial services. Fintech enables the flow of transactions at the point of origination, which creates proprietary data that could be used to underwrite more effective financing products. We believe this is a scalable opportunity that is in the early stages of development.
Additionally, we are spending time understanding digital assets, such as cryptocurrencies, in anticipation of the potential emergence of an alternative financial system.
We have also been doing a lot in the area of machine learning, investing in leading external managers in this space, and separately and slowly developing internal capabilities with a focus on enhanced risk management.
CIO: With the shakeout of industries currently going on—where do you see the most exciting opportunities over the coming years?
Gill New: Over the next few years, I see great opportunity to explore certain technology-related and fintech-driven investments. These sectors are poised for growth as people continue to transition towards using the internet for their day-to-day services. Adoption of internet-driven services has been hastened as COVID has pushed us to live our lives more virtually than before. There will be opportunities to invest and lend to these businesses at appealing return levels given traditional investors and lenders are still challenged in servicing these businesses.
CIO: And professionally, where do you see the most exciting areas to specialize further over the coming years?
Gill New: In addition to fintech, I am really looking forward to deepening our team’s understanding in a number of interesting investment areas.
ESG is becoming increasingly integrated into our investment process. I look forward to working with internal and external partners to continue to integrate this into both our own processes and to help partner with our managers to increase their understanding and capabilities in this area. It is important to make sure ESG-related risks are taken into account appropriately in valuations, and alpha opportunities may be sought resulting from positive business transformations. We also think a lot about the challenge of managing a long-term pension portfolio through likely climate change risks and demographic shifts, a task that is both daunting and intellectually exciting.
Another area of great interest is China. China will continue its influence over the global economy in the coming decades. We would like to gain a more immersive understanding of the dynamics in China so that we can comfortably access the investment opportunities the country offers. The country is creating its own axis of technology, and a number of sectors, including health care, are poised for considerable growth. We see great potential to access differentiated alpha opportunities and enhance total portfolio diversification.
CIO: How is the quarantine affecting the way you view teams and working environments, such as work from home, meetings, etc.?
Gill New: Despite the challenges, I believe many positives will come out of our experience during this global pandemic. COVID-19 has challenged some of the fundamental assumptions we have about how we should work. In our part of the business, we have learned that we can work from anywhere and get the job done effectively. In the future, we may not have to travel as much knowing that we can conduct meetings effectively over virtual platforms. This excites me greatly because I think these changes pave the way for increased diversity in the workplace. Employers will also be more likely to accommodate people with different work preferences and offer flexible arrangements. It also trains us to be innovative about how we work.
The situation has also reminded us that we need to be empathetic to our teammates. Everyone is dealing with their own personal issues: some who live alone are feeling isolated, while others have kids and are trying to manage homeschooling during work hours. This highlights the need to be aware of what our coworkers are dealing with outside of work. Our team checks in with each other and we try to keep things humorous and light while still maintaining high performance standards in our work. I very much hope to carry this dynamic over into our future work environment.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Gill New: I would be keen to meet with Michael Moritz, partner at Sequoia Capital and long-time VC investor who is known for his very early investments in tech companies like Google and PayPal. I would love to understand how he determines if an early-stage company will be successful or not. I would also like to hear his thoughts regarding how the Chinese technology environment is developing, and where he sees opportunities in that market.
CIO: And in a fantasy scenario, if money was no obstacle, where in the world would that meeting take place?
Gill New: In Beijing, so we can be immersed in some of the culture and technology that we would be discussing.
CIO: What asset class or investment troubles you most right now—and why?
Gill New: Currently I am feeling quite concerned about risks in certain pockets of the private debt market, particularly in loans of lower-quality mid-market and small companies. These companies are particularly sensitive to slower growth and tighter lending conditions.
The private debt market has become extremely frothy over the past few years. While I think there will be some interesting opportunities to be had in that space coming out of this downturn, loans made over the past few years have been riskier and some may need to be written off. Loans have been originated at higher leverage ratios and with sub-optimal terms. Deals were structured with significant EBITDA add-backs, and some loans have few, if any, covenants. Term degradation has been a consequence of liquidity flooding into the private debt space in search of yield.
Certain companies, especially those who are vulnerable to economic cycles, will not survive or will require serious restructuring in the upcoming recession. BDC’s that contained a higher proportion of vulnerable companies will also feel this pain and will be forced to cut dividends.
CIO: Name your four-member investment dream team for your own family office.
Gill New: I think that my family office investments would perform very well if my dream team consisted of Jane Buchan, Stan Druckenmiller, Michael Moritz, and Erika Karp. They are all extremely seasoned, and among the most intelligent investors and innovators in their respective areas.
CIO: Describe the weirdest interaction you’ve had with an asset manager.
Gill New: I have experienced a surprising number of weird interactions with managers over the course of my career. Sometimes I think I should write a book about them.
In 2007, when I was at a prior firm, my colleagues and I had an introductory meeting with a direct lending manager who made small-sized loans. We asked the manager about his history and track record in direct lending. In a quite threatening tone, he told us that lending had been “a family business for a couple of generations.” He also told us that he “ALWAYS gets his money back and has tactics for getting it back.” I was actually pretty terrified!
Of course, we did not pursue due diligence on the manager. Later, we learned from a peer organization that, in their background check process, they discovered that he was the suspect of a murder investigation. Many years later, I ran a search to see what happened to him. While he was never arrested for the murder, he was arrested for defrauding his fund investors to the tune of hundreds of millions of dollars. This experience serves as my reminder that it is always important to do those manager background checks!
