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Newsmakers

SWIB Names Edwin Denson as CIO, Replacing the Late David Villa

The economist has been overseeing risk management and investing strategies at the Wisconsin organization.

By Larry Light

Edwin Denson

Economist Edwin Denson has been named as the next executive director and chief investment officer for the State of Wisconsin Investment Board (SWIB). Denson, who has overseen risk management and investment strategies at the fund, succeeds David Villa, who died in February.

“SWIB is fortunate to have someone with Edwin’s talent and experience, who is ready to take on this leadership role,” said David Stein, chair of the independent SWIB Board of Trustees, in a statement. “He combines a deep understanding of SWIB’s innovative investment strategy with a wealth of expertise in both public and private sector asset management.”

SWIB manages more than $143 billion, including the fully funded Wisconsin Retirement System (WRS).

Villa joined SWIB in 2006 as CIO, and was named executive director in 2018, when he was also named to CIO Magazine’s Power 100. Under Villa’s stewardship, SWIB said its internal management grew from 21% of assets to more than 50% of assets.

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He added $1.9 billion to the state’s retirement system above its performance benchmarks over the past five years. WRS reported preliminary 2020 net returns of 15.21%, with five- and 10-year annualized returns of 10.74% and 8.51%, respectively. It outperformed its benchmarks for all periods.

Denson, who joined SWIB in 2018, said in a statement, “I felt lucky to have known David for almost 20 years and to have worked closely with him again over the last few.”

A veteran investment officer who previously worked at the $475 billion Canada Pension Plan Investment Board (CPPIB), he added, “Now, I am eager to build on his vision, strategy, and direction for the agency as we continue to create a world-class investment management organization.”

At SWIB, Denson has served as the managing director of asset and risk allocation (ARA), responsible for risk analysis, allocation and oversight, asset allocation, passive portfolio and leverage implementation, macroeconomic analysis, and fund-level investment strategies. He also serves on SWIB’s Management Council. During his time at SWIB, he has more than doubled the ARA staff to build out innovative investment strategies for the pension program.

Before joining SWIB, he was a managing director and head of strategic tilting at the CPPIB, which he joined in 2013. There, he and his team drove one of the three primary sources of investment return. Before that, Denson spent 13 years in asset allocation, currency, and risk management as a portfolio manager at William Blair, was a managing member at Singer Partners LLC, and was a managing director and head of asset allocation at UBS Global Asset Management.

Earlier in his career, Denson was an economist at Lehman Brothers, Primark Decision Economics, and Putnam Investments, and he also briefly managed a commodity trading adviser and a quantitative equity strategy.

Denson holds a bachelor’s degree in economics from Cornell University and a Ph.D. in economics from Northwestern University, specializing in macroeconomics and econometrics.

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Home > News > Risk > Michigan Pension Fund Sues Credit Suisse Over Risk Exposure
Risk

Michigan Pension Fund Sues Credit Suisse Over Risk Exposure

The Swiss bank is accused of misleading investors after it lost billions when Greensill and Archegos collapsed.
By Michael Katz


The City of St. Clair Shores Police and Fire Retirement System is suing Credit Suisse Group for allegedly misleading investors and mismanaging risk exposure to “high-risk clients” such as Greensill Capital and Archegos Capital Management, both of which collapsed last month.

The Swiss bank lost billions of dollars when UK-based financial services firm Greensill and US-based family office investment fund Archegos went under in March.

The lawsuit alleges that Credit Suisse “concealed material defects in the company’s risk policies and procedures and compliance oversight functions and efforts to allow high-risk clients to take on excessive leverage, including Greensill Capital and Archegos Capital Management, exposing the company to billions of dollars in losses.”  

Lawyers for the Michigan-based pension fund said that not only did the bank “conceal these operational landmines” from investors, which they say caused the price of Credit Suisse securities to be artificially inflated, “but it also undertook actions indicating that Credit Suisse securities were substantially undervalued, such as a massive stock buy-back program.”

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The lawsuit claims that following a series of corporate scandals which revealed deficiencies in Credit Suisse’s risk and compliance activities, the price of the bank’s American depositary receipts (ADR) fell nearly 30% to $10.60 per ADR by the end of March from $14.95 in February.

Greensill, which filed for insolvency protection in March, focused on the provision of supply-chain financing and related services. The company relied on loans provided by specialized supply-chain investment funds managed by Credit Suisse to finance its activities, and it would issue notes bought by investment funds to provide it with cash. The repayment of the loans was secured by Greensill’s entitlement to the cash paid to its clients’ suppliers.

However, the lawsuit alleges Credit Suisse investment funds bought notes tied to Greensill’s future accounts receivables finance activity, “meaning these loans were only secured by future and uncertain sales, and were therefore riskier.”

Archegos held assets of approximately $10 billion, but, according to the complaint, it used the leverage provided by its swaps strategy to gain exposure to more than $50 billion worth of securities.

“Unbeknownst to investors and regulators, several large brokerage banks, including Credit Suisse, had each simultaneously allowed Archegos to take on billions of dollars of exposure to volatile equities through swaps contracts, dramatically elevating the risk posed by these concentrated positions,” said the lawsuit.

According to the lawsuit, during the week of March 22, a group of banks that facilitated Archegos’ “high-risk strategy” became concerned because the market value of some of the stock shares underlying its swaps positions had declined. And by March 26, several of the banks, including Morgan Stanley, Goldman Sachs and UBS, began liquidating billions of dollars’ worth of securities at “fire-sale prices” after Archegos failed to meet a margin call.

“By the time Credit Suisse tried to liquidate its own positions underlying Archegos swap contracts over the ensuing weekend, prices had already collapsed and Credit Suisse quickly racked up billions of dollars in losses,” the lawsuit said.

“The loss we report this quarter, because of this [Archegos] matter, is unacceptable,” the bank’s chief executive, Thomas Gottstein, said in statement, according to BBC News.

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