I work as a state government auditor. Recently, my office has been working on an operational audit of the state's pension fund. Our audit was primarily focused on operations at the fund (i.e., examination of the organization's internal control structure, review of various non-investing operating procedures, etc.).
Today, I had the pleasure of interviewing the CIO of the fund. He had worked for some local hedge funds for over 25 years before coming to the state pension fund as a CIO. He has a CFA, and worked as an electrical engineer before turning to finance.
After I asked all of the audit-related questions I had, I decided to spin the conversation over to investing. He was more than happy to oblige. He stressed that he was an investor, not a trader. Here are a few takeaways from our conversation:
- One cannot predict what's going to happen a year from now in general.
- The equity markets are overly complacent right now and while expensive, are not as expensive as they were in 2000. There are still bargains out there, but plenty of value traps too.
- He has not seen volatility this low ever in his entire career. He feels that the market is dramatically underpricing the possibility of a geopolitical shock or natural disasters that might cascade upon one another. To him, the VIX is unnaturally low right now, and he believes that it will eventually revert to the its past mean if a geopolitical shock comes to fruition.
- For anyone with a sizable portfolio, it's important to buy assets uncorrelated with the equity market. The state pension fund cut its equity allocation from 49% to 40% over the past few years for this reason and instead has focused more efforts on identifying good investments in real estate and private equity.
- He's bullish on land and agriculture. The state pension fund recently bought an interest in an agricultural cooperative that produces blueberries for harvest.
- He readily admits that he has underperformed the market in his personal portfolio. But given that the guy is over 60 years old, he may be more concerned with capital preservation than most people.
- He is a big fan of Andy Grove, one of the founders of Intel. He considers Intel the precursor to what Silicon Valley is today. He recommended that I read his two books, "Only the Paranoid Survive" and "High Output Management".
Submitted January 03, 2018 at 09:49PM by rimlogger http://ift.tt/2E4s51o
