Investing for the Long-Term

Panel Composition & Mandates

• Tom Tull (ERS Texas): Manages $30B+ for 400k state workers; invests 60% internally to reduce costs from 40bps to 10bps.
• Michael Rowland (OMERS): $100B plan with $200B future liability; represents 500k Ontario municipal employees; prioritizes long-term stability over 100-year lifespans.
• Dinko Azmil (Kazana National Fund): Malaysian sovereign fund with a 25-year history; mandates generating returns for the government while ensuring strategic impact on Malaysia.
• Sophia Chen (Cathay Financial): Largest financial holder in Taiwan ($300B assets); 60% in life insurance facing a negative spread due to low rates; invests 65% overseas to seek yield.

Strategic Investment Philosophy & Liquidity

• ERS Texas: 2/3 of benefit payments funded by investment earnings (8% 30-year return); relies on tactical allocation and internal management to manage liquidity gaps where monthly outflows ($200M) exceed inflows ($100M).
• OMERS: Facing a maturing 2:1 ratio of workers to retirees; targeting 55% alternative assets (up from 45%) to reduce volatility and capture absolute returns, shifting away from public debt/equity.
• Kazana: Operates without new government cash injections for 15 years; funds investments via reinvested income, divested proceeds, or leverage; maintains an 8-10 year investment horizon.
• Cathay: Balances a 55-year-old insurance book with a 6% guaranteed rate legacy; actively reduced long-term guarantee rates to 2-something percent and outsources risk via unilink policies (40% market share) and FX policies (20-25% of book).

Alternative Assets Allocation

• ERS Texas: Increasing alternative exposure from 26% to 37% to combat public market illiquidity and capitalize on emerging market growth (2x US rate).
• OMERS: 45% currently in alternatives (real estate, PE, infrastructure); utilizes "boots on the ground" teams globally to control assets and drive operational returns rather than just financial engineering.
• Kazana: Primary focus is Private Equity/VC; currently facing crowded markets and higher valuations, leading to increased reliance on partnerships for deal validation and co-investment.
• Cathay: Limited to 8% in real estate (owning 200+ offices); cautious on PE fund valuations due to "passive" crowding; focuses on co-investment and direct exposure to renewable energy and solar in Taiwan.

Factor Investing & Market Approach

• ERS Texas: Uses factors (momentum, value, growth) as tools for cycle positioning but rejects pure risk parity or smart beta strategies.
• OMERS: Prioritizes quality assets and absolute returns; avoids public market volatility by moving to direct private investments and venture capital.
• Kazana: Discards quantitative factors in favor of "old fashioned" country, currency, and sector allocations suited for situational PE deals.
• Cathay: Relies on global macro teams to forecast 1-2 year trends; adjusts asset allocation based on volatility risks (e.g., exiting high-yield/callable bonds during stress).

ESG Integration & Governance

• Cathay: First Taiwan bank to sign Equator Principles; self-complies with PRI/PSI despite political constraints; uses dedicated ESG analysts and global databases; advocates for active engagement to help good companies improve disclosures rather than avoiding them.
• Kazana: No formal ESG policy until recently but avoids tobacco, gambling, alcohol, and mining due to reputational risk; views ESG as "good business" rather than a marketing metric.
• OMERS: Hard-wiring ESG into policy statements; focusing on social aspects (gender diversity, pay gaps) and governance (independent directors); warns that legislative mandates may replace organic board decisions if funds fail to act.
• Cathay: Warns against the simplistic "Good ESG = Good Share Price" narrative; notes that high ESG standards often correlate with large cap size and affordability.

Forward-Looking Trends & Risks

• Demographics: Sophia Chen identifies the shift from a dividend of labor to an aging population in Asia as a critical 10-year investment theme.
• Market Evolution: Michael Rowland predicts a trend of public funds expanding third-party asset management businesses, increasing competition for deal flow.
• Valuation Risks: Tom Tull advises against "falling in love" with assets or chasing "sexy" sectors; emphasizes avoiding assets in early stages of decline.
• Climate & Macro: Panelists highlight climate change (TCFD/Science Based Targets) and underestimating known risks as primary long-term threats.
• Competition: Increasing crowding in PE and private credit markets, particularly in Asia, is driving valuations higher and necessitating bilateral deal relationships over competitive auctions.