What’s Buzzy: Cathie Wood Likes T-Bonds Over Large Caps

The doyenne of disruption thinks deflation will change the game board. Except for her beloved Tesla.

Which would Cathie Wood rather invest in over the next 10 years: large-cap companies as a whole, or US Treasurys? Her answer: the guvvies.

Right now, the benchmark US 10-year Treasury yields only 1.4%, and its total return—interest plus price changes—is negative 2.3%. At the same time, large caps have done well. The S&P 500, the signal large-cap index, is up 18.6% this year, after a bounce back this week.

Someone at the Morningstar Investment Conference asked Wood, the champion of disruptive technology companies, which she’d prefer.

“I do really think the Treasury bond will do well,” said Wood, also the founder of Ark Innovation. The reason is that, unlike most on Wall Street, she said she thinks deflation—not inflation—lies ahead for the US economy, and tanking consumer prices would buoy bonds. The Bloomberg US Aggregated Bond Index, which covers investment-grade paper such as Treasury corporate bonds, has hardly been a winner this year, losing 0.43%.

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What’s more, not all of the growth stocks that have performed so swimmingly of late will continue to do so, she added. Too many carry too much debt, for one thing, in her view. But she remains committed to her faves, as they are bent on disrupting the economic status quo: electric vehicle maker Tesla, digital payment outfit Square, and video health-care prover Teladoc.

Virginia Retirement System Pays Out $7.85 Million in Incentives to Investment Staff

The state pension fund credits an actively managed portfolio for this fiscal year’s 27.5% investment return.


The Virginia Retirement System (VRS) board of trustees approved incentive pay of more than $7.85 million for 52 members of its internal investment staff. The award was in thanks for producing a 27.5% investment return during fiscal year 2021 that added more than $20 billion to the portfolio’s total asset value, raising it to $101.8 billion.

The board of trustees attributed the pension fund’s strong performance to its actively managed investment portfolio.

“These excess returns would not have been possible under passively managed investment strategies,” VRS Chairman O’Kelly McWilliams said before the unanimous board vote to approve the incentive pay package, according to the Virginia Times-Dispatch.

The performance, which was led by the pension fund’s public equity program and private equity partnerships, was a sharp turnaround from last year when the retirement system reported an only 1.4% return, net of fees, though that still outperformed its benchmark, which returned 1% for the year. VRS awarded $3.35 million in incentive pay to its investment professionals last year, according to the Times-Dispatch.

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“I applaud the commitment of our professional investment team, who have contributed to the robust growth of the fund,” McWilliams said when the 2021 results were announced in August.

The VRS board also paid out a 2.5% bonus to administrative employees, including those who support the investment division, for meeting performance benchmarks. Further, it gave merit pay increases of 2% to 4%, for a combined payout of about $1.2 million.

Additionally, the board approved a 5% bonus, equaling approximately $10,000, plus a $75,000 payment in December for VRS Director Trish Bishop, and approved a 7% bonus worth $12,382 for Internal Audit Director Jennifer Schreck.

Related Stories:

Virginia Legislature Passes Bill to Create State-Run Retirement Plan

Virginia Pension Fund Returns 1.4% in 2020

Virginia Will Lower Assume Rate of Return for Its Retirement Fund

 

 

 

 

 

 

 

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