For example, the GPIF generally encourages money managers interested in working with it to join the fund’s manager registration system, where they can provide the GPIF with updated information on their investment strategies. Allows managers to maintain and whenever required the lengthy RFP process.
But GPIF’s quest to achieve consistent, positive alpha over the past year has included more proactive efforts to identify promising managers.
Rafael Resendes, a San Juan-based co-founder and partner at Applied Finance, said in an interview that his firm’s path to joining GPIF’s manager lineup began in the spring of 2022 with a “cryptic” email from a consulting firm that It only said that he had been hired “by a large pension fund to identify managers”.
The advisor, whom Mr. Resendes declined to identify, expressed interest in Applied Finance’s flagship Valuation 50 strategy, the model pioneered by Mr. Resendes and co-founder Daniel James Obrycki in 1995 to estimate a company’s intrinsic value. was developed for.
The Tokyo-based money management executive said on condition of anonymity that the consulting firm is Applied Academics. A spokeswoman for the firm declined comment.
In the intervening years, 20 million of those “absolute estimates of value” enabled Applied Finance to identify stocks with relatively high price-to-book or price-earnings multiples, as well as stocks with strong prospects even among those companies. have been allowed, which nevertheless remain overvalued. The apparent allure of low multiples, Mr. Resendes said.
“We provide an absolute estimate of value, which is a very different metric and a very different set of properties than a traditional multi-based value manager,” he said.
After that initial contact last spring, Mr. Resendes said his team’s initial efforts to learn anything about the consulting firm proved fruitless. However, in subsequent meetings, the consultant revealed who the final client was.
From that point forward “this non-stop, intensive due diligence process began … with one or two Zoom calls every week from spring to late summer,” Mr. Resendes said. The level of interest GPIF and its consulting firm have had in understanding Applied Finance’s investment framework has been “amazing,” he said.
If consistent returns are the goal, meanwhile, Applied Finance’s track record could be interesting.
“If you look at the last 12 years, you had a 10-year golden growth window from 2011 to 2020,” followed by a value resurgence from 2021, and the Valuation 50 strategy beat the S&P 500 in both time periods, Mr. .
It’s too early to know whether GPIF’s interest in firms like Applied Finance could set the stage for the giant fund to hire active managers with greater influence than before.
GPIF continued to withdraw from active management of equity at the end of March 2022, the latest financial year. The 2.37% share of the portfolio allocated to actively managed foreign equities and 1.6% to actively managed domestic equities were the lowest levels since late 2014, when GPIF doubled its equity allocation target to half of its portfolio Was.
Meanwhile, at the end of last fiscal year, Mr Ueda – in his review of the latest fiscal year – said he had reduced the fund’s active foreign equity exposure from 2 trillion yen to 4.7 trillion.
If GPIF’s restructuring of its foreign equity manager lineup is to have a meaningful impact on its portfolio, it will require not only a reversal of last year’s 2 trillion yen shortfall, but also further allocations to active managers.
Source: www.bing.com
