“Simply put, Bryan makes everyone around him better. He offers thoughtful and creative ideas to his colleagues and genuinely considers others’ perspectives. He’s selfless in the sense that he just wants the team to get to the best solution, rather than simply pushing his own ideas. He is of the highest moral fiber, never forgetting that we owe our best to the teachers, firefighters, police officers and state employees of South Carolina. He’s a true fiduciary of the highest order.”
—Geoffrey Berg, Chief Investment Officer, South Carolina Retirement System Investment Commission
The CIO Editorial Team shared a dozen questions with all our NextGen nominees and asked them each to pick six to answer. Their answers informed our decision to include them as a NextGen. Below are the answers from Bryan Moore.
CIO: How are you dealing with rising interest rates and economic uncertainty?
Moore: While interest rates have moved higher, longer duration Treasurys are still pricing in a reversion back to lower-interest-rate levels. If the long end of the curve moves higher, it will allow us to shift into lower volatility assets to create a smoother path of achieving our assumed rate of return of 7%. The caveat is that we always want to be mindful of the steepness of the efficient frontier in relation to risk-free assets and the incremental compensation available for moving out the risk curve.
Currently, we are using the economic uncertainty and investors’ overallocation to private markets as an opportunity to build allocations with harder-to-access private market managers. We deployed a similar playbook in our hedge fund portfolio during the uncertainty of 2020, as we allocated to a handful of previously inaccessible managers. Countering outflows from other investors helped create the backdrop for significant outperformance relative to our HF strategy benchmark post-2020.
CIO: What asset classes offer the best options for avoiding or mitigating drawdown risk in an institutional portfolio?
Moore: It’s important to not pretend that a portfolio can avoid drawdowns. Instead, we have focused on designing a portfolio framework that prioritizes liquidity, which not only will allow us to survive market stresses, but also allow us to counterattack when opportunities are the most attractive.
Given this backdrop, cash and short-duration Treasurys are a compelling asset class today, with yields providing a return commensurate with what most institutional investors were happy to earn from high-yield bonds three to five years ago. Cash has a lot of utility today, especially as institutional investor portfolios are overweight illiquid asset classes, such as private equity and real estate. The goal of building our cash and short duration exposure is to first address any liabilities, while then tactically deploying it at more attractive levels into equities or credit.
CIO: What should be an investment trend, but isn’t (yet)?
Moore: The increase in the cash rate has heightened the importance of cash-based hurdles in performance fee calculations, especially in asset classes where the cash rate is an expected component of the total return (direct lending and hedge funds). This puts LPs in the position to consider whether investing in an illiquid structure with no hurdle or a modest soft hurdle (i.e. full catch-up) adequately aligns with the value proposition from the GP when carry is effectively guaranteed. Given this backdrop, we continue to explore ways to build better LP/GP alignment in our portfolio across strategies where there is a natural cash return pass-through.
CIO: What investing decision have you made for your organization that you’re most proud of?
Moore: I am most proud of our Portable Alpha Hedge Fund program. Since it was launched in July 2016 with a 10% target allocation, the program has generated more than $1.4 billion of additional value to the plan.
With a portable alpha program, liquidity management is paramount to creating a lasting program. To help reduce liquidity needs, our portable alpha program relies on fixed-income derivatives as the beta component. On the hedge fund side, we have very strict beta/correlation criteria and risk contribution limits, which has resulted in a portfolio that has generated positive performance each annual period since its inception while exhibiting a near-zero beta to equity markets.
CIO: Which asset manager (exclusive of their firm) has most influenced your growth as an institutional asset manager?
Moore: I had the great benefit of working alongside my colleague, Geoff Berg, for the past 11 years. Geoff was elevated to our CIO in 2016 and has completely executed a turnaround within the organization. Together we instituted many big-picture ideas and concepts that help make our organization better, and the results of those big-picture ideas are now showing up in our performance. He puts his team first and himself second when it comes to creating the right ecosystem for us to operate, and I believe that is truly one of the main reasons for our organization’s success over the past seven years.
CIO: What new skills do you think allocators need to be leaders in the field in the coming decade?
Moore: Creating a thoughtful, top-down portfolio philosophy deemphasizes the importance of individual investment outcomes and emphasizes the desired outcomes of a broader package of decisions.
To help illustrate this, we developed a framework five years ago in which we outlined a baseline for each asset class. The goal of this baseline framework is to guide what we want to achieve and the role each asset class serves in our portfolio. There is a spectrum of risk that any asset class can take, and there are many instances where our implementation looks different than other investors in those same asset classes (which doesn’t make us right or them wrong). The real benefit is that we have a consistent playbook which allows the team to share a common understanding as to what we are building toward. We can’t control markets, so shifting the focus to decisions we can control is the most reliable skill in helping a team succeed.
