ALO22: Finding an Absolute Return Solution for a C$11BN Pension Plan ft. Christophe L'Ahelec
Top Traders Unplugged
Balancing Asset Classes for Pension Plan Stability
Exploring the strategic asset allocation of a pension plan to ensure funding stability through exposure to various asset classes including equities, bonds, real estate, and commodities while emphasizing the importance of inflation protection.
Christophe L’Ahelec, Managing Director of Public Markets at University Pension Plan Ontario, joins Alan Dunne in this episode to discuss their approach to managing the C$11bn defined benefit pension plan. We discuss the high level Strategic Asset Allocation of the plan and also how the changed macro environment in recent years has motivated a shift in the asset allocation towards more absolute return strategies. Such strategies play a dual role of diversification and return enhancement for UPP and we discuss how Christophe thinks about an appropriate strategy allocation within absolute return. We also delve into the challenges of manager selection and evaluation, why it is important to remember that you are buying an “investment process” not historical returns when allocating to managers and discuss when is it appropriate to remove a manager and when not.
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Episode TimeStamps:
02:50 - Introduction to Christophe L'Ahelec
07:06 - A new initiative
10:01 - What kind of strategy drives their asset allocation?
12:40 - What goes into which bucket?
14:45 - What makes absolute return exposure more attractive at the moment?
16:31 - Constructing an absolute return portfolio
18:38 - How they approach trend following
21:58 - Why do they use leverage?
23:32 - What do they expect from their portfolio?
25:12 - Managing liabilities
27:58 - Public equities - where do they stand?
30:59 - Investing in niche strategies
34:11 - How they evaluate managers
36:21 - Open to early stage manager risk?
41:42 - What makes a manager stand out?
44:56 - When should you remove a manager?
46:47 - What is their governance process?
50:36 - How they make decisions as a team
52:20 - Advice for new investors
55:34 - Thanks for listening
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