When you want a long-term viewpoint on markets, you have to listen to institutional investors. So my last panel at this year’s Milken Global Conference, “The View from Institutional Investors: Where Will Returns Come From” seemed to be the perfect capstone to the event. The panel comprised the top people from public institutions, endowments, and sovereign wealth funds from around the world. The discussion was guided by Christopher Ailman, the chief investment officer from California State Teachers’ Retirement System (CalSTRS), and he immediately steered the panel towards an examination of that long-term focus that institutional investors share. Jane Mendillo, the president and CEO of Harvard Management Company, set the bar with an anecdote about an investment her firm had just completed that had a 50-year time horizon. This longer-time horizon, generally shared across the panel participants, allows them to focus on asset classes like real estate and private equity, which can really bloom over these longer periods. One panelist put it best by positioning that long-term focus as a significant competitive advantage. The opportunity to focus on long-term value allows them to invest in areas where not as many investors have crowded in. This allows them to exploit new and interesting opportunities.
When discussing trends that these large institutional investors face, Michael Sabia, the CEO of La Caisse de depot et placement du Quebec, explained that his fund was pushing their emphasis away from benchmarks and toward conviction. This is direction I’ve heard from clients across Principal Global Investors. Sabia’s feeling was that there was less trepidation over concentration in portfolios as long as it was married to in-depth research that strives to really understand the minutiae of a company’s operations. “Operations are the source of value,” he maintained, “not financial engineering.”
When asked about the goal of the China Investment Corp. (a Chinese sovereign wealth fund), president and chief investment officer Keping Li’s response was actually a very succinct and insightful representation of what all institutional investors strive for. He said the goal was “to protect and increase.” Protect the capital you have, and increase it to provide for the future.
That’s it for me from the 2014 Milken Global Conference! Thanks for reading!! I’ll pass the blogging baton back to some of our other authors for a while. Please check back with the Principal Blog for all of our latest insights.
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