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Class of 2020 NextGens

Frank Molina Deputy Director of Investments, International Brotherhood of Electrical Workers (IBEW) Art by John Jay Cabuay

“Frank is an innovator who brings a lot of great ideas to the plan. He’s a terrific guy to have on your team.”

—Jim Smizer, Director, Investments, IBEW

Frank Molina is deputy director of investments at the International Brotherhood of Electrical Workers (IBEW) Pension Benefit Fund, where he is responsible for overseeing the administration and investment management of $3 billion in pension fund assets for more than 100,000 beneficiaries.

In this capacity, Molina helps source, research, and conduct diligence on investment managers. He’s also worked to help implement ESG guidelines into the fund’s investment policy statement. Molina’s specialization is in alternative assets, particularly in private equity, venture capital, and infrastructure.

Previously, Frank was manager of investment relations in the corporate affairs department of another Taft-Hartley fund, where he had oversight of investment relations for $35 billion in pension fund assets, and helped lead shareholder activism campaigns. Molina was formerly a corporate campaign strategist and research and health care policy analyst in New York. Frank holds a B.A. from the University of Massachusetts Amherst and an MBA from Columbia Business School, where he was a Private Equity fellow.

Molina earns a ranking in this year’s NextGen series through a successful career in the still-niche Taft-Hartley arena, helping the fund achieve return targets and more comfortably fulfill obligations to retirees.

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?

Molina: Before the crisis, I believed that both consumer and corporate debt were so high (at historic levels) that any blip in the economy would lead to significant bankruptcies throughout every major sector. However, two and half months in, and things are holding steady (for the most part). Moreover, capital markets, while volatile, appear to reflect either infinite optimism or if cash-flow and fundamentals matter, irrational exuberance.

CIO: What took you by surprise? What worked?

Molina: I did expect things to be much worse this far into the pandemic and quarantine, but the Federal Reserve’s recent $2.3 trillion cash infusion appears to have worked. While a V-shaped recovery appears to be out of reach, perhaps we might be in line for a U-shaped recovery.

CIO: How would you build the portfolio differently now that you have gone through this massive accelerated shift in the market?

Molina: I am not sure how much we would do differently with our portfolios. We tend to take a conservative approach and it has helped us navigate well during turbulent times. Before the pandemic, we were set on scaling down our equity exposure as valuations had risen high enough that it was in order. I would have waited before recommending an allocation to a growth equity and venture capital strategy. We will not be changing much near-term, but we will look at valuations in our real estate and private equity portfolios a lot closer over the coming months. Lack of fixed income yield will remain a hurdle but given the Federal Reserve’s recent involvement, there is room for optimism.

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?

Molina: We will come out of this pandemic with different ways of looking at the existing ESG framework, for the better. That is, work in ESG has up until recently focused primarily on the environmental and governance components of the framework. However, the COVID-19 pandemic and its direct and indirect effect on labor (essential or not) has highlighted the need to give the “S” or the social benefit component equal weight. You cannot speak of the social benefits or the “S” in ESG without considering labor standards (wages, benefits, etc.). I do think the “S” was trending positive pre-COVID-19, as illustrated by the Business Roundtable letter published in August 2019, but COVID-19 has given everything new meaning. Given broad corporate involvement in helping mitigate the effects and impact of COVID-19, it will be difficult to return to the past and interpret a firm’s value creation solely on the price of its share. In turn, ESG metrics will likely be taken into account and given more importance.

CIO: What do you think will be the impact of COVID-19 on developing economies (like Chile or the Philippines)?

Molina: These are vastly different developing economies. Bill Gates once said that “any categorization that lumps together China and the Democratic Republic of Congo is too broad to be useful.” While not as egregious, Chile and the Philippines are vastly different economies. Chile has a solid business reputation and while nascent, the country’s start-up and technology scene has been coming on strong and this should help soften the impact of COVID-19. However, there is still significant social unrest in Chile given inadequate pension and safety net reforms. Investors are likely be underweight on developing economies for the foreseeable future. Thus, both countries are bound to suffer significantly because of COVID-19, but they will not be unique in that regard. It is difficult to estimate what the impact could be as things are changing rapidly.

CIO: With the shakeout of industries currently going on—where do you see the most exciting opportunities over the coming years?

Molina: I think technology will continue to produce the most exciting opportunities in the coming years. I am also very interested in all things energy. Energy permeates every aspect of our society and I am interested in seeing how it evolves over the next coming years and how it rebounds from recent events.

CIO: And professionally, where do you see the most exciting areas to specialize further over the coming years?

Molina: Private equity and venture capital will be the most exciting areas to specialize in over the coming years. Both of those asset classes are still maturing and, as they continue to mature with technology as the main impetus, I think it will lead to plenty of creativity and opportunity for talented investors.

CIO: How is the quarantine affecting the way you view teams and working environments, such as work from home, meetings, etc.?

Molina: I view teams the same way. When you build a team where individuals complement each other in skill set and in the goals they set, you are in good shape. A change in venue does not necessarily mean a change in team dynamic. However, the work environment can take a toll and it can be difficult to un-plug when your office is your laptop. Like most things, it was tough in the beginning, but things are falling in place.

CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?

Molina: Warren Buffett. What he has been able to do over the years is remarkable.

CIO: And in a fantasy scenario, if money was no obstacle, where in the world would that meeting take place?

Molina: Omaha, Nebraska—in his office or at a local deli or restaurant just to have him in his element.

CIO: What asset class or investment troubles you most right now—and why?

Molina: Equities. Valuations these days can mystify, as there are plenty of companies with little to no cash-flow and clear challenges ahead that are trading at hefty prices.