Anne-Marie Fink - Cutting Edge Pension Investing at SWIB (EP.389)

Risk Management

Managing portfolio risks at SWIB involves a strategic approach to balancing idiosyncratic positions with market beta. Anne-Marie Fink explains that while they don't eliminate all residual risks, they focus on avoiding consistent directional biases in their investments 1. This approach allows them to maintain flexibility and adaptability in their portfolio management. She highlights the importance of transparency and daily monitoring of managed accounts, which provides valuable insights into the managers' real-time actions 2.

It's one thing to see the pretty pages in the flipbook that say, this is our philosophy, this is our process. But then when you watch what they do every day, it gives you a much better feel for who they really are.

--- Anne-Marie Fink

This transparency is crucial for making informed decisions and ensuring alignment with SWIB's investment goals.

   

Hedge Funds

SWIB employs hedge funds as a strategic overlay to achieve portable alpha, focusing on absolute return funds with minimal beta exposure. Anne-Marie Fink describes their distinct use of hedge funds, emphasizing the importance of paying high fees only for alpha, while leveraging passive strategies for beta 3. This approach allows SWIB to efficiently manage costs while maximizing returns. Internally, SWIB manages a diverse range of strategies, including equities and fixed income, while externally, they seek diversification and access to top global talent 4.

We do have long short equity hedge funds, we do have macro funds, we have quant funds, we have multi strats, we have some relative value, and then we also do a little bit of specialty finance.

--- Anne-Marie Fink

This balanced approach ensures a robust and adaptable investment portfolio.

   

Liquidity

Liquidity challenges in private markets are a significant concern for SWIB, as they navigate the complexities of governance and market dynamics. Anne-Marie Fink acknowledges the superior governance model of privately held companies but notes the ongoing liquidity issues that need addressing 5. She emphasizes the importance of building trust incrementally and innovating within the investment program to tackle these challenges. SWIB is actively exploring co-investment opportunities and secondaries to enhance liquidity and adapt to market changes 6.

We're actually growing our privates allocation at the moment, and we're happy to do that. When people are giving us a natural liquidity, we're not very excited about it.

--- Anne-Marie Fink

This proactive approach positions SWIB to effectively manage liquidity while capitalizing on private market opportunities.