“Brandon’s primary focus is real assets, giving him a view of income-oriented investments, inflation protection and opportunistic and distressed strategies. Brandon assists with drafting and revising investment and operational procedures and provides input into the investment strategy for real assets. He seeks other areas to develop and grow his investment skills, such as leading roundtable discussions on investment topics, completing leadership and investment-related courses and building his network with other institutional investors.”
—Hershel Harper, CIO, UAW Retiree Medical Benefits Trust
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 Brandon Tasco.
CIO: How are you dealing with rising interest rates and economic uncertainty?
Tasco: This might be the most boring answer you’ll receive, but diversification in asset classes and managers is how we deal with uncertainty and changing rate environments. Simple can be sophisticated when it comes to investing. We structure the portfolio to perform in a variety of economic and interest rate environments and adhere closely to our long-term strategic asset allocation targets. Portions of the portfolio that we would expect to perform better in a rising rate and inflationary environment have done their job. That being said, we can and do tilt the portfolio as the economic environment and opportunity set changes. In today’s environment, as an example, it might make sense to hold more cash distributed from current investments versus reallocating due to current cash returns. We are always assessing opportunities and implementing marginal tactical shifts to enhance portfolio returns.
CIO: What is the best way to bring more diversity to the financial industry?
Tasco: A very important question, and it’s something that we have been actively working to improve here at the Trust. Personally, I think there are multiples ways to help accomplish this. First, I believe it is a process that needs to begin early, by providing a broader range of high school and college students with exposure to our industry. I have witnessed firsthand the difference that early access and exposure can make. I started a student-managed investment fund at a downtown Detroit university and actively participate in a high school financial literacy program. I have observed students matriculate through these programs, acquire the knowledge needed, become excited about our industry and ultimately secure an opportunity that most likely would not have happened without these programs. In addition, we as an industry and employers can do a better job of expanding our recruitment efforts by moving beyond traditional hiring methods to ensure that candidates from non-traditional channels, who possess equal talent, are given the chance to demonstrate it.
CIO: What roles do AI and large language models have in the future of institutional investing?
Tasco: AI’s current use case and its impact on institutional investing going forward will be improving and expediting the investment process. When the right questions are asked and algorithms are correctly configured, AI holds the potential to reduce the time required to develop expertise in a specific subject and shorten the learning cycle. Our business, like many others, relies on obtaining direct experience and knowledge, which used to only come from an apprentice approach and getting passed-down expertise. Now, baseline knowledge is readily available with a few keystrokes. By harnessing AI and large language models, we can accelerate the learning cycle resulting in better investment decisionmaking. AI will only get more engrained and become a standard part of the investment processes in the future.
CIO: What asset class or investment troubles you most right now, and why?
Tasco: Office is too easy and won’t get many clicks as a controversial answer at this point! So I am going to say private credit, which is largely made up of direct lending. I think troubling might be a stretch, but with the rapid growth of the asset class and when I see that seemingly every entity is starting or buying a private credit platform, my caution flag starts to go up. The floating-rate nature of direct lending has led to good returns recently, but at some point (maybe not!), companies could have issues servicing that debt, especially in a recessionary environment. Not all bad news. I do think there is opportunity still in private credit, as traditional lenders continue to pull back, and potential for good returns, but manager selection becomes increasingly important, and we are likely to see a wider dispersion of returns going forward between managers.
CIO: What should be an investment trend, but isn’t (yet)?
Tasco: There should be an increased allocation of resources and funding toward technology that will improve the investment decisionmaking process, not just data collection by the back office. If the tech stack is implemented correctly, it would enable a comprehensive understanding of the portfolio, including inherent risks, how the portfolio would react in different scenarios and opportunities for portfolio enhancement based on those scenarios. I believe we are currently in the early stages of integrating technology with investment professionals to enhance returns, transitioning it from a back-office function to an integral part of the investment decisionmaking process.
Consider the regional banking crisis as an example. How many spreadsheets were emailed around to get a sense of portfolio exposure to SVB? This process created hours of work and a focus on portfolio risk versus opportunity from the crisis. If the technology existed and data readily available, with a few clicks the investment team could immediately understand total portfolio exposure to SVB and other pressured regional banks, assess the exposure and shift quickly from playing defense to offense and take advantage of the crisis.
CIO: What new skills do you think allocators need to be leaders in the field in the coming decade?
Tasco: At the CIO level, similar skills that have made successful CIOs in the past stand the test of time and will be important in the future. The ability to clearly set the vision, shape the organizational culture, empower staff, drive innovation and hire and retain talent will all continue to be essential skills important to develop for any up-and-coming future CIO. As the complexity of investment options and organizations continues to grow, it is increasing unrealistic the CIO will be the expert in all areas of the organization and asset classes. But the CIO’s ability to lead a team, make decisions and foster a culture of high performance has never been more important.
