“Wagner has deep expertise and domain knowledge of quantitative macro investing. His dedication to mentoring junior colleagues and partnering productively with teams across the fund showcases his exemplary people skills, earning him respect and admiration across the organization. He thinks beyond siloed portfolios, instead optimizing globally for scalable impact at the total fund level. In a rapidly changing geopolitical landscape, Wagner’s prudent and proactive risk management and thought leadership shine through.”
—Edwin Cass, Senior Managing Director & Chief Investment Officer, Canada Pension Plan Investment Board
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 Wagner Dada.
CIO: How are you dealing with rising interest rates and economic uncertainty?
Dada: It is important to build resilient long-term portfolios and to combine this with agile, prudent portfolio oversight that mitigates short-term risks but is still nimble enough to take advantage of near-term opportunities.
In the context of quant macro investing within the Systematic Strategy Group at CPP Investments, this means that we focus on understanding the historical performance of factors and portfolios over multiple macro regimes, some of which may have been last experienced in the 1970s, e.g. higher inflation. The focus on building long-term and robust portfolios cannot be overstated. Recognizing that the timing of macro regimes is inherently difficult, we combine the mix of factors to ensure that it generates a robust, well-balanced portfolio, regardless of the prevailing macro regime.
We continuously monitor and assess portfolio risks, conduct scenario analysis of different risks and take appropriate actions to mitigate the short-term risks, while staying flexible enough to take advantage of near-term opportunities.
CIO: What is the best way to bring more diversity to the financial industry?
Dada: It is important for organizations to look beyond simply recruiting talent to also focus on how to best retain talent through the development of a diverse talent pipeline across all levels and functions. Organizations in the financial industry should lean into the industry’s affinity for data and measure, track and report on diversity and inclusion metrics within their organization. This will help identify gaps, drive accountability and track progress over time.
Organizations across the industry should also support employee resource groups, providing these groups with resources to ensure their success. Establishing mentorship and sponsorship programs that pair diverse talent with experienced leader, who can provide guidance and support to diverse talent can help signal the commitment of organizations to inclusion and diversity efforts.
Ultimately, addressing the diversity gap starts at the top, since this permeates through to organizational culture. Senior leadership across organizations in the industry must “walk the talk,” promoting diversity at all levels of the organization as well as leaning into industry best practices. This may involve the setting of diversity goals for tracking metrics and regularly communicating the progress and challenges around diversity goals.
CIO: How can allocators address the growing global tailwinds of aging populations, geopolitical tensions and changing global trade?
Dada: In my opinion, the current economic environment creates opportunities for active portfolio management. Investors can address this environment by building diversified, robust, long-term portfolios. The merits of diversifying across asset classes, geographies and sectors cannot be overstated. It is also important for allocators to seek to “future proof” their portfolios. This involves proactively identifying emerging trends, measuring their likely impact on the portfolio, conducting scenario analysis and finding ways to mitigate the downside risks. Investors should also keep an eye on the potential opportunities that emerging trends may bring about. For example, an aging population creates unique opportunities for investments that align with the needs and preferences of seniors. Similarly, changing global trade dynamics could create opportunities in supply chain technology.
CIO: What new skills do you think allocators need to be leaders in the field in the coming decade?
Dada: In a fast-changing world with increased economic uncertainty and disruptive technological innovations, successful leaders will need to be intellectually curious, strategic thinkers and emotional intelligence.
Intellectual curiosity will spur continuous lifelong learning, adaptability and upskilling in a constantly evolving investment landscape. Today that means acquiring coding, quantitative and data science skills, but looking beyond today, I will emphasize curiosity and an interest in continuous lifelong learning. Allocators in the coming decade will have to be big-picture, strategic thinkers, capable of separating the trees from the forest. They will have to be long-term, forward thinkers capable of anticipating future needs, identifying emerging trends—from both a risk and an opportunity perspective—and developing long-term plans to optimize portfolio allocation decisions.
Future leaders need to possess the emotional intelligence to effectively understand and manage their own emotions while empathizing with others and retaining their authenticity. They should have an interest in coaching, motivating and developing talent into high-performing teams.
CIO: What traditional and/or alternative asset classes do you think are most important for institutional investors, and why?
Dada: The relevance and relative importance of specific asset classes ultimately depends on the investment goals, risk appetite, liquidity needs and investment horizon of each institutional investor. Another key consideration for institutional investors is the relative scalability of different asset classes. Equities and bonds are traditionally important for most institutional investors because of their scalability. Given their diversification and return expectation potential, private equity, credit and real assets are also attractive asset classes for most institutional investors. These alternative asset classes are also attractive due to their ability to generate compensated risk premia and stable cash flows. For example, real assets can offer institutional investors a way to harvest illiquidity risk premia. In the post-COVID years, we have seen inflation protection become a key consideration for some institutional investors, spurring an interest in inflation protection alternatives like inflation linkers and commodities.
Ultimately, institutional investors should ensure that the mix of asset classes in their portfolio is appropriate to their specific investment goals and constraints. Moreover, in building the mix of asset classes, institutional investors should strive to build diversified long-term portfolios.
CIO: What roles do AI and large language models have in the future of institutional investing?
Dada: AI is poised to be a transformational technology with potentially far-reaching, but still uncertain, impacts. Some examples of the potential use cases of AI for institutional investors are natural language processing, increased automation and data-driven forecasting.
On natural language processing, I have observed that large language models can already be used to construct sentiment indicators from news articles, analyst reports and other textual data, which can be beneficial in gauging investor confidence. Beyond building sentiment indicators, AI-powered tools may be used to analyze large amounts of historical data (including textual data) and perhaps to identify potential risks and trading opportunities in real time.
AI-powered tools may have applications for automating data collection, processing and drafting market reports.
In my opinion, although AI tools are expected to generate a quantum productivity leap, institutional investors will continue to rely on human experience, domain knowledge, judgment and risk considerations in making prudent investment decisions.
