New Mexico ERB Beats Peers, Logging a 7.29% Return

In a world where pension funds are often posting lower returns and underperforming targets, the New Mexico Educational Retirement Board (ERB) has surpassed its peers and exceeded its hurdle.

The fund posted a 7.29% return in fiscal 2019, narrowly beating its 7.25% benchmark. Its values also climbed to $13.3 billion, which the board touted as a new “high water mark.” These results also resulted in another milestone: the plan has had positive returns for 10 years in a row.

The organization has returned 6.73%, 9.63%, and 8.43% over the five-, 10-, and 30-year periods.

“Without those gains, we would have to look elsewhere for benefit funding,” said ERB Chair Mary Lou Cameron. “We feel that our investment results validate our long-term strategy of building a lower volatility portfolio.”

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Real assets, which includes natural resources and infrastructure but not real estate, was a driver, gaining 13.6%, according to Chief Investment Officer Bob Jacksha. Private real estate also did well, returning 12.7%.

“In that database, our private real estate program ranks in the first percentile, in other words No. 1, and it consistently ranks high in all periods,” Jacksha told CIO. Another area of note was the ERB’s “other diversifying assets” portfolio, which he said is “relatively new” for the plan.

“For some time we have invested in GTAA and Risk Parity. We re-categorized those two allocations under the general heading or “Diversifying Assets” and added another subcategory simply called ‘Other.’ For the fiscal year the ‘Other’ category did quite well, returning 12.1%,” Jacksha said. “Perhaps equally as important, since the first investments in “Other” in February of 2018, the category has exhibited a correlation to the total portfolio of -0.14 and to equities of -0.03, thus far fulfilling the ‘diversifying’ aspect we are seeking.”

The “other” assets June 30 market value was $337 million, and the fund will keep building on the category. “While we are quite pleased with the return so far, this category may prove even more valuable as we seem to be in a more volatile market environment than the relative stability we have experienced that past few years,” said Jacksha.

Private equity also returned double digits at 11.5%, followed by a good showing from US equities, which returned 9%. The CIO said even core bonds did “surprisingly well” at 7.9%.

Non-US stocks were the big lag; both developed and emerging equities posted around 1%, according to Jacksha.

The New Mexico ERB’s asset allocation as of June 30 was 41.8% alternatives, 31.3% equities, 25.9% fixed income, and 1% cash.

Tags: Bob Jacksha, New Mexico, New Mexico Educational Retirement Board, Pension, Returns

Terrence Thompson, art by Iris Lei

Trailing Ryan Bailey, Terence Thompson is the second CIO NextGen to move on.

The investment manager’s last day with Arizona Blue Cross Blue Shield was Friday, he told CIO in an email. Thompson will be headed to a family office, but he was unable to disclose where and what his role will be within the new organization.

Although he is the second NextGen CIO reported to change jobs this year, he is the first to officially make the move, as Bailey wraps up with the Dallas-based pediatric care system Children’s Health next week.

Thompson has been with the Phoenix-based organization since 2013. Prior to that, he held various financial roles in the US Air Force.

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“Terry’s experience as an Air Force officer equipped him with a keen sense of order and the ability to tackle multiple projects simultaneously and with efficiency,” Cameron Black, Arizona Blue Cross Blue Shield’s vice president and chief investment officer, said of Thompson in his NextGen profile. Black also praised Thompson’s analytical and people skills.

The departing health care official said in his profile he “knew investments would be my eventual career path very early on” as he participated in student-led investment clubs in school. He went into the Air Force due to his “passion about preserving” his family’s military lineage, so he enrolled in the service before making his way into the health sector.

“I’ve found the allocator track on the buy-side to be a fantastic path to stay connected to markets, work with and meet incredibly smart, dedicated individuals, and at the same time support the priorities of a mission-centric entity like BCBSAZ,” he said.

Tags: Arizona Blue Cross Blue Shield, Family Offices, Health Care, NextGen, Terence Thompson