Adding Spices to the Recipe
Canada is increasingly being recognized for its distinctive pension fund model, characterized by a small number of big funds and their heavy emphasis on managing assets inhouse. But Brandon Gill New plays a critical role helping look after a collection of external managers at OPTrust, one of Canada’s largest defined benefit pension plans, and it’s no after-thought. These managers add spice to the recipe at the US$18 billion pension fund as it focuses on remaining fully funded.
At OPTrust, which covers civil servants and members of the not-for-profit sector in the Province of Ontario, Gill New helps oversee about US$4 billion that’s in the hands of some 17 outside managers with a total of 24 portfolios, and “It includes everything in the public markets space -- equity, debt, hedge funds, and quantitative strategies as well.” While some strategies are also managed in-house, she says, “Our external managers portfolio is really set up to complement what they’re doing and access more complex strategies.”
For example, Gill New explains, “We looked at emerging market equities because we believe that this is a great space for active management, but we would need to hire a fairly large team to access EM directly, so we think it’s more efficient to access the market through external managers.” The same reasoning underpins using external managers for gaining exposure to complex credit strategies and a wide range of hedge fund strategies, she says.
When an area looks interesting, she says, “We take a big picture approach, and examine managers from a top down perspective. Then we look at best-in-class managers from a bottom up perspective: Is this a good manager with a sustainable edge, and are they going to fit the performance and risk profile that we need? We’re looking for long-term partners.”
In assembling OPTrust’s armada of managers, Gill New says, she’s not in any particular camp, like growth or value: “We believe in having a well-diversified approach across styles and strategies.” But one thing OPTrust doesn’t want is managers who will serve up a big helping of volatility. OPTrust focuses on its “Member-Driven Investing Strategy,” and Gill New explains, “The idea behind that is we are a fairly mature plan, and our purpose is to maximize the probability of meeting our liabilities. We want to generate our target level of returns while minimizing volatility.”
The OPTrust portfolio has been undergoing a transformation since James Davis became CIO in 2015. “He did a lot of restructuring on the Plan’s portfolio. I joined in early 2018, and we continued to refine and diversify the external public portfolio, so there has been a meaningful change.” At this point, she adds, “now we’re more on the tail end of the journey and closer to a steady state.”
Gill New adds, “One thing that’s worked out for us is we revamped our hedge fund portfolio and implemented a managed account platform. This structure gives us more capital efficiency and the ability to invest more quickly.” Thus, during the COVID-19 crisis, she adds, “We saw significant amounts of dislocation, so we leveraged this platform to allocate to a number of managers who were seeing attractive opportunities and wider spreads in their respective asset classes. We were able to execute very quickly in April and May of last year and be very opportunistic because this partnership was already in place. If we had to do that on our own, I’m not sure it would have been possible.” She adds, “We’re generally pretty happy about going from a much more concentrated to a portfolio that is more diversified across styles and strategies.”
Going forward, she says, “We have a small incubation portfolio that we can use to selectively invest in newer strategies that we feel will drive value in the future. We want to be able to try new ideas but do it safely.” Fintech is one area they’re focusing on, Gill New says, adding, “I’m also really excited about ESG. We sit alongside and work quite closely with OPTrust’s Sustainable Investing and Innovation team, and they’re doing interesting work in the ESG space, particularly on climate change.”
Gill New believes diversity in portfolios should be paralleled by a diversity in investment management teams. After two decades in investment management in New York, London, and Toronto, Gill New says a lot has changed for women. “When I entered the industry in the late 90s, there was no consideration of diversity and women. I was one of the few women on my team at the time,” she says, “but nobody really talked much about it.” More recently, she adds, “We’re at a phase where people are talking about the issues. They see the value of diversity, and now it’s about educating people and figuring out how we can get to a point where diversity is treated as the value-driver that it is.”
In order to get there, Gill New says, “There’s a lot a company can do. More generally, in terms of gender diversity, I think it’s important to educate everybody on the critical issues, so people gain empathy and understanding of the challenges many women experience.” She adds, “It’s important for managers to make sure women are given flexibility because often working women are mothers as well – certainly, I am – and it’s helpful to have the flexibility that works well with a family.” But she adds, “it’s also very necessary to include men in the dialogue: Gender diversity is not just a women’s issue. It’s important to educate everybody and equalize some of the balance between men and women. Men should be able to spend time with their families as well, and companies should make sure there’s no stigma if men take paternity leave or needed time for their families, so that working women don’t get burnt out in the process of balancing work and parenting.”
Gill New sees an interesting way diversity is being expressed at OPTrust that goes beyond gender or race. On the one hand, she says, “I work with a handful of younger people, and they’re quite forward-thinking about the future of investing and what’s developing in the investment and fintech space. I’m learning a lot from them, and they’re pushing me forward.” But meanwhile, “I often come in suggesting all of the ways an investment may go wrong. I’m a big history book every time we look across strategies.”
She adds, “I’m a trust-and-verify person. I push my coworkers to dig very deeply into the work we’re doing, so no stone is left unturned. I’m imparting that wisdom based on my experiences, and they’re pushing me to think about where the world is going and what we need to be thinking about as the investment world evolves.” And she says that push-me-pull-you tension improves the quality of decision-making.
Something else Gill New has seen over her career is the need to choose her bosses carefully: “I’ve learned that you need to work in supportive organizations. My current bosses are extremely supportive. That’s one of the reasons I joined OPTrust.” This support is so important, she insists, that women should focus on “choosing your boss and the people you work with versus the specific job. You’re going to have much more success if you work in a supportive team versus a challenged team, even if you’re at your dream job.”
Her other advice is to calm down: “I used to get worried about work, but once I had kids and I had so much to manage, I developed a different perspective and would approach work in a more balanced manner, and it actually helped my career.”
Gill New was born in Tokyo to American parents and grew up in Houston. She went to Middlebury College because “my family’s very international and Middlebury had a great language program.” She then “stumbled into” the financial world, she says: “After college, I moved to New York, and I ended up getting hired into an investing role at Chase Manhattan Bank. I got the job because I spoke Spanish. I didn’t know anything about finance at the time, but I ended up working for a group that invests for Latin American clients, so my boss started teaching me about investing, and I loved what I was learning. I liked the satisfaction of making a good call on an investment, and I’ve been in investing ever since.” After several years working in New York, she went off to London to get an MBA and worked for a year at a hedge fund there. “I then married my husband who is Canadian, and we decided to move to Toronto, and from there I got a job at OTPP (Ontario Teachers’ Pension Plan).” After 10 years at OTPP and a stint at BMO, she went to OPTrust.
At OPTrust, she says, “It’s somewhat smaller than some peer plans, and there is a great sense of community where teams are very interlinked -- I’m looking across a lot of different assets that at are integral to the portfolio. I also often find myself working closely with other teams like our Finance, Portfolio Construction, or Risk teams, and everyone feels like we’re in it together. We have a very supportive community.” She adds, “The Plan’s size is also interesting at OPTrust because since we’re smaller that allows us to get a look at a lot of ‘nichi-er’ investments that aren’t scalable for the very large plans, and I quite enjoy that.”
Brandon and her husband have an eight-year-old daughter and a seven-year-old son, and the pandemic has changed all of their lives. “In the ‘olden days,’ I would travel a lot – I love exploring new places and new cultures. I also do photography; I’m a supporter of music and the arts; and I’m involved in charities as well.” But in the era of lockdowns and WFH, she says, “I do things I never would have expected I would enjoy, like gardening and baking. I’m not a very outdoors person, but I bought a bike recently – I haven’t had a bike since I was a teenager. And my son plays in a soccer league, but they canceled the league, so I am now his soccer partner. I am playing a surprising amount of soccer and other sports these days. One of the positive outcomes of the crisis is that I am very much enjoying spending more time with my kids.”