The London Pensions Fund Authority (LPFA) has appointed Alex Gracian as chief investment officer.
He has more than 18 years’ experience in managing multi-billion pound institutional portfolios and at top-tier sell side houses, including Gulf International Bank, TRW Pension Fund, Deutsche Bank and Lehman Brothers. At LPFA Gracian will be responsible for managing the Authority’s £4.2bn assets, developing and enhancing the fund’s investment strategy and directing the in-house investment team.
What are your main priorities on joining LPFA?
I want to build on the excellent work of my predecessor [Vanessa James] and build up the team internally using my several years of managing large institutional portfolios. I am a strong believer of the devil is in the detail so I will use my own specific skills, particularly on the quant side, to take a more ‘quantamental’ – i.e. a combination of a quantitative and fundamental approach – to add more value to the performance on a risk-adjusted return basis.
What are the main issues for institutional investors in the next 12 months?
There is a quote I like: ‘There are plenty more cockroaches to come out from under the fridge.’ From a broad institutional perspective there is still a lot of uncertainty in Europe, slowing growth in China and in the short term the US elections, so you will see a lot of volatility in the market. From a pension fund-specific point of view we are still in the situation of the perfect storm where you have issues around funding ratios in an environment where employers have weak balance sheets, increased longevity and low returns from conventional assets classes.
How can pension funds best navigate the challenges of a low return and high risk environment?
Focus on quality best-of-breed managers and assets and have a tilt bias towards income-based funds. Also, focus on capital preservation and reducing downside risk and understanding correlations between the assets you have in a changing bull and bear and fast-moving market. A perfect example of that is the popularity of risk parity and minimum variance portfolios. A lot of institutions and managers have focused on that as an expression of a low beta-quality proxy portfolio where you might give up some expected return, but at the benefit of smoothing out the return.
What do you do in your spare time that might translate into your career?
I am in the process of training to be a psychotherapist and working for a charity placement at a drop-in centre in Deptford. This helps me to understand and work better with my relationships within my team and with both internal and external stakeholders.
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