“Clay is a very strong member of our team—bright, intellectually curious, and a responsibility-taker. Clay dives in deep on the research and due diligence side; I frequently get comments from the senior management of our manager stable regarding the thorough due diligence by New Mexico when Clay has been in their shop. This young investor has a long, successful career ahead of himself at much higher levels of responsibility.”
—Robert “Vince” Smith, CIO, New Mexico State Investment Council
Clayton Camper, CFA, CAIA, who now is the real estate and real return analyst at the New Mexico State Investment Council (NMSIC), has made some interesting shifts in his career. He originally set out to get a computer science degree from Montana Tech, but decided that rather be in the world of technology, as he “found business more interesting.” So he switched to a business major and started out as a financial adviser with Thrivent Financial, using its proprietary software to construct portfolios for individual clients.
After realizing the investment side of financial planning “is far more interesting,” he moved to Thornburg Investment Management. As a regional associate at Thornburg, he, among other things, prepared and presented equity and fixed-income investment strategies to institutional research analysts and consultants.
Camper arrived at New Mexico’s sovereign wealth fund in 2018. “Switching asset classes was a bit of a learning curve,” he said, of transferring his focus to real estate and real assets such as infrastructure, timber, and energy. “I have no problem asking fifth-grade questions.” He credits his boss, Paul Chapman, for bringing him along.
CIO: What are your favorite alts, and why?
Camper: As my position is helping manage the real estate and real assets portfolios at NMSIC, I’m going to be completely biased here and say real estate and real assets. I enjoy the tangible nature of the asset class. For me, investing in something you can touch, see, and even taste, in the case of our agriculture investments, is more fun than an investment built of ones and zeros. Ideally, the real estate and infrastructure assets we’re exposed to today will continue to be critical to their communities for a long time into the future.
CIO: How will the pandemic have changed the economic/financial world?
Camper: A lot of our discussions revolve around the secular tailwinds already in place that COVID-19 accelerated, and how we should view our portfolio allocation in light of the risks and opportunities these present. Within my coverage area of real estate and real assets, the implications of our newfound comfort with video conferencing and the ability to work from home impacts multiple sub-sectors. Outside of the obvious immediate impacts COVID had on areas such as hotels and airports, there are still a lot of long-term unknowns as we try to look into the future.
Will office usage decrease as a good portion of tenants downsize, or will the impact be mitigated as higher-credit tenants increase their square feet per employee to accommodate better spacing and add communal space in an effort to increase FOMO (fear of missing office)? Will urban apartments lose share to single-family rentals that offer more space in the suburbs, or will enough people be excited to return to the hustle and bustle of downtown? Will airports and hotels see business travel return to prior levels, or be notably impacted as Zoom meetings replace a significant portion of trips that would have previously been done in person? Questions like these exist across numerous sectors, impacting our view of opportunities and risks within our portfolio in ways that weren’t top of mind in 2019.
CIO: What place does blockchain have in tomorrow’s financial scene?
Camper: I think one of the obvious places we’ll see an impact is in regard to the settlement process. Blockchain should enable T+2/T+3 to be a thing of the past while simultaneously reducing counterparty risk.Another exciting avenue enabled by smart contacts is the ability for illiquid assets such as an individual real estate deal to be tokenized and traded on your smartphone. This should allow individual investors from disparate locations to pool resources together and invest in previously inaccessible assets with enhanced liquidity.
CIO: How will ESG change investing going forward?
Camper: ESG [environmental, social, and governance investing] has been and continues to be a constantly evolving definition. Governance has long been important, but what has been notable in the last decade is the shift of the environmental and social components of ESG moving from “nice to haves” to “need to haves.” As recently as the great financial crisis, ESG tended to be more associated with specialist firms such as Calvert and Parnassus or as an alternative investment flavor you could elect as a way to avoid sin stocks contained within a firm’s flagship product. Today, ESG is no longer relegated to an available option on the shelf, but viewed as something essential to be engrained in all investments. Core buyers increasingly demand the companies and assets they invest in to have not only strong governance, but be positive contributors to our world at large.
As such, it’s critical for the funds we invest with to emphasize ESG within their portfolio companies and assets. Whether it’s data center tenants demanding renewable powered buildings, global pension and sovereign wealth funds demanding better board diversity, or office tenants requesting LEED certified buildings, the costs of ignoring ESG now equals a risk of fewer customers, worse multiples, and lower returns.
CIO: Where do you see the most exciting areas to specialize further over the coming years?
Camper: As opposed to specialization, one of my favorite aspects of my job comes from the large variety of great investors we get to converse with and the diversity of potential investment areas we have a chance to educate ourselves on, and ultimately invest in. Whether it be single-family rentals, life science campuses, seaports, railroads, power plants, farmland, or timber, we never have an excuse to be bored. However, in an effort to not dodge the question entirely, two of the larger themes that permeate across many of our investments are demographics and the energy transition. Each one of these areas is definitely worth any time spent in enhancing my knowledge.
CIO: What asset class or investment troubles you most right now—and why?
Camper: There are two that we talk a lot about internally. The first is energy investments involving oil and gas such as E&P [exploration and production], midstream, and gas power plants. The volatility in the space, rise in ESG, and an increased pressure on some institutional investors to divest from these sectors entirely has produced a notable reduction in equity issuance and private capital raising. With natural gas being the most likely bridge fuel to a 100% renewables future and many energy outlooks not projecting a peak in global oil demand until 2030 or later, the dearth of capital investment in the sector should provide opportunity to the few brave investors who remain in the space. However, there is an ever-present political risk (geopolitical and stroke of the pen) to consider alongside a decreasing buyer pool who will pay you fair value at the end of your investment period.
The second asset class we discuss a lot is traditional office. We certainly aren’t in the camp that the office is dead or no longer valuable. This being said, office space traditionally has higher operating costs relative to other real estate sectors, and future demand expectations are now uncertain as companies evaluate how an ability to work from home impacts the size of their office need. As such, it is currently difficult to make a bullish case on the sector.
CIO: What should be an investment trend, but isn’t (yet)?
Camper: I’m going to cheat on this question and name a trend that is already in motion, but one that I think will continue to move full steam ahead for many years to come. I believe the move toward greater allocations to the alternative/niche/non-traditional private real estate sectors will continue to grow. Of the traditional property types, the majority of institutional investors are all trying to move in the same direction at once (more industrial and multifamily, less retail and office). With only two desirable traditional real estate sectors, many will likely diversify further into alternative sectors with strong defensive characteristics and/or strong demographic and secular trends, such as affordable housing, single-family rental, life science, self-storage, active adult, senior living, data centers, etc. REITS [real estate investment trusts] made this move years ago and the private market will continue to head in this direction.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Camper: Sam Zell [of Equity Group Investments]. He has an exciting history of successes and failures, most notably within real estate, in addition to a variety of other industries. Combine this with his colorful character and I think you’d be hard-pressed to be bored during an hour luncheon.
