Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
NZ Super CIO quits for coveted CalPERS job
Stephen Gilmore will leave the $70 billion plus NZS to assume the CIO gig at the almost US$500 billion Californian government employee pension fund, CalPERS in June.
Gilmore, former chief investment strategist for the Australian Future Fund, took over from Matt Whineray as NZS CIO in 2019 and was reportedly a candidate for the top job that was ultimately awarded to Jo Townsend, who was named as permanent replace for Whineray last week.
“Stephen has made a significant contribution to the sophistication of the NZ Super Fund since he joined us in early 2019, a period during which the fund has grown by more than $30 billion, nearly doubling in size,” said acting NZS chief Paula Steed.
“(Gilmore) has championed the role of new technology in enabling better investment decision-making, brought innovative and disciplined thinking to our investment processes and, as Chair of our responsible investment strategy refresh, has been key to our shift towards a sustainable investment approach.”
During Gilmore’s tenure NZS continued down the path to internalisation, with more than half of its “exposure and active risk” now managed in-house. It also went live with an AI-powered portfolio manager dubbed “Keoragi” that would be free of the human biases and narratives that can “colour the judgement of a traditional quantitative analyst”.
In 2022 it also reframed its core $25 billion passive global equities holdings around a new Paris climate agreement-aligned MSCI index in a move that drastically reduced both the theoretical and real NZS stock universe.
“A smaller, more concentrated portfolio will be cheaper to run, and more manageable for us when looking to identify and engage on responsible investment issues,” Gilmore said at the time.
CalPERS CIO Nicole Musicco quit last September to “attend to the immediate needs of (her) family” after just two years in the role, with her deputy Dan Bienvenue assuming the duties in the interim.
“Stephen brings an unmatched knowledge of global investing and managing diverse and high-performing investment professionals,” said CalPERS President Theresa Taylor. “We conducted an exhaustive, worldwide search for a deeply skilled leader to continue our mission of providing retirement benefits to California’s public sector workers, and we are confident Stephen is the right person for the job.”
This article originally appeared on Investment News NZ. Additional reporting by Lachlan Maddock.
