Eight top pension, endowment and foundation officials
assembled in New York City on the morning of May 15 to share
their thoughts on how complex and challenging their jobs have
become. The previous evening these experts, who hail from Los
Angeles, Washington and a number of points in between, had been
honored for investment excellence at Institutional
Investors annual U.S. Investment Management Awards
dinner. Although they work within institutions of varying sizes
and missions, the winning eight recognize that, no matter how
hard they grapple with difficult investment questions, there
will always be unknown factors thrown in their paths.
The longer youre in this business and the more
you learn, the more you realize what you dont know,
says Donald Lindsey, CIO at George Washington University in the
District of Columbia.
The executives discussed their risk management concerns,
compared their very different fund governance structures and
debated whether there will be a resurgence of economic growth
in the U.S. and other developed countries or if emerging
markets will take over the world. Weighing in on the side of
U.S. strength, Lawrence Schloss, CIO of the New York City
Employees Retirement System, declared, I think the
technological impact on everything is grossly underestimated,
particularly productivity and capital formation and
growth. Joining Lindsey and Schloss were Douglas Brown,
CIO of Chicago-based Exelon Corp.; Conrad Freund, COO of the
LA84 Foundation in Los Angeles; Sean Gissal, CIO of
Milwaukees Marquette University; Joshua Gotbaum, director
of the Washington-based Pension Benefit Guaranty Corp.; Robert
Manilla, CIO of the Kresge Foundation in Troy, Michigan; and
Lee Partridge, CIO of Houstons Salient Partners, which
manages $8.5 billion in assets for the San Diego County
Employees Retirement Association.
Institutional Investor Editor Michael Peltz and
Senior Writer Frances Denmark moderated the discussion,
excerpts from which follow.
Institutional Investor: There are
many forces today challenging the quest for investment
Greece is facing the real possibility of an exit
from the euro; Italy and Spain arent far behind. The U.S.
has its own credit problems, job growth is tepid at best, and a
contentious election season is under way.
Add to that the unrest in the Middle East and
slowing growth in China. With so much negative news, is a 5
percent real return an achievable target?
Donald Lindsey: Im actually very
optimistic. In spite of the overriding macroeconomic problems
that were experiencing, particularly in the developed
world, corporate profitability is at an all-time high.
Productivity is extremely strong. If you look at the very
long-term return on global equity, its around 10 percent.
Now, thats not delivered evenly year after year, as we
all have found out. In fact, you can go for rolling 15-year
periods and longer where the real rate of return has been
negative. But we are undergoing a third industrial revolution,
involving digital technology, that is in the early stages;
these productivity gains are going to be a fantastic tailwind