Peng Wang is managing director of investments at Group Health Foundation, which he joined in 2019 following four years as head of portfolio research at TIAA Endowments. In this interview, he discussed how the Foundation has refined its flexible asset allocation framework; the team's efforts in making the portfolio 100 percent active; and their focus on innovation and inefficiencies in China and India.
Wang was named to Trusted Insight's 2020 Top Institutional Investing Rising Stars.
Trusted Insight: Can you tell us yourself and your role at the Group Health Foundation?
Peng Wang: I was born and raised in China. I came to the U.S. for graduate school. I got a master's degree in physics from Georgetown University. After that, I had a very focused career path in endowment. I started at Georgetown endowment in 2005 which was roughly $1.2 billion in assets. In 2010, I joined the University of Virginia endowment, and helped manage $7.5 billion in assets back then. After that, I joined the TIAA endowment in 2015, and that was roughly $10 billion.
I joined the Group Health Foundation as a managing director. My responsibilities ranged from a quant analyst, to investment analyst, to associate aid, and then risk manager. Now I manage all the public or marketable portfolio here at Group Health Foundation. On top of that, I also cover asset location, portfolio construction, risk management, and also private equity investment related to China.
Trusted Insight: Did you ever think you would end up in an asset allocator role? Given that your background initially was in physics.
Peng Wang: Honestly, I was really lucky. Back then, the CIO at Georgetown was Larry Kochard. Larry was looking for someone with the quant skills, who can program, who can code. I started that as an internship, purely just by chance. After I finished several projects for Larry, I think he really enjoyed working with me and he gave me a formal job offer.
Compared to physics research, I feel like I was more usefully busy. I contributed more meaningfully while I was working for the endowment. I was contributing to the university and to higher education. Also, it's a more exciting and resourceful job, because you can learn from the best in the field. You can talk to all the best even when you are relatively junior. I enjoyed the learning part so much. That's why I decided to leave my physics path to focus on endowment management.
Trusted Insight: It's interesting that you bring up Larry Kochard. We have done two interviews with him that were focused on the nuanced evolution of his asset allocation approach.
When speaking with your colleague Muthu, he mentioned the organization was like a startup since it was a 2-person team and very nimble. Would you agree on that experience?
Peng Wang: A quick comment on Larry. Larry's really like my mentor. The first two projects I did for him was really around asset allocation. He was really cutting edge even back then and is still very cutting edge today. We would use portability-based thinking about managing the uncertainties around all the cash flows and the liquidity from private equity.
Over the years, I really refined the flexible asset allocation framework originally applied here at Group Health Foundation. To answer your question, it's actually very exciting to have fresh capital. You know, if it's low-legacy companies with no legacy in investment. We can build something that is truly our own. We can work on what we believe is the best approach and framework. There's no internal politics, which allows us to be nimble and practical. We can actually set up to achieve the best performance through the best approach, that we believe.
Trusted Insight: Another goal of your organization was to make the portfolio more actively managed? How’s the gone and what’s the timeline for such change?
Peng Wang: Well, it's really a brand new portfolio. At the end of 2019, the portfolio was 100% passive, with 75% in equity and 25% in investment-grade bonds. After both Muthu and I started working full time, the process had been really efficient. As of 2020, roughly 40% of the portfolio is now active.
Muthu and I have a lot of experience, so we know most of the managers we want to invest with. So far it's been very effective. It's really a lot of those well-known, big names, hard-to-access managers, because we had a previous relationship with these guys. So we were very lucky. We were able to invest with a lot of them during the drawdowns.
We deployed pretty efficiently. I believe by the end Q3 2021, 70% of the portfolio will be active. We have another five managers in the pipeline. And we're just doing more reconnecting or catching up before we invest in the next four quarters.
The goal here is really to fuel the fully active endowment portfolio. Very typical endowment portfolio. A big part of that portfolio will be in private equity, which will take time to build. I think that's the only part that will take longer. But everything else, we are building pretty efficiently and effectively. And that's another advantage of a small team. We are able to communicate and discuss more efficiently. Instead of a big team where we'll spend more time managing the person rather than investment.
Trusted Insight: What is your outlook on international markets outside the U.S? Perhaps there are places you are excited about moving forward?
Peng Wang: I will take one step back. Our investment themes are innovation and inefficiency. We have very flexible wheels to implement our top-down themes. For example, those two things led us to China, India, and the U.S., regional-wise. We are also focused on technology and healthcare from a sector perspective.
What those two themes mean, over time, could change. For example, China is the perfect example of both innovation and inefficiency. And from the U.S., it's really more about innovation, not many inefficiencies here. The same for healthcare and technology. Those are really about innovation, and less about inefficiency.
We have an unconstrained, flexible framework. We do not have a target, for example, for certain countries or regions. We just want to invest where we believe the best opportunities are. And we invest in very concentrated ways, which is very different from most endowments. To answer your question, right now, the focus is China in general and U.S. technology and healthcare.
Trusted Insight: Group Health Foundation also aims to improve health and racial equity, what does that mission mean to you?
Peng Wang: The foundation's mission is certainly very meaningful to me and to everyone who works here. I'm an immigrant myself originally from China, so I do believe in our mission. I feel I'm lucky to be able to contribute to the cause. It means a lot to us which in turn will help us deliver the best returns.
Having a more diversified team is a fruitful and positive change in our industry. Our team here at Group Health Foundation is very diversified as we are from India and China. The other three members are all ladies. We have tried to reach a more diverse team from both a gender and racial perspective.
View our full catalog of interviews here.
Wang was named to Trusted Insight's 2020 Top Institutional Investing Rising Stars.
Trusted Insight: Can you tell us yourself and your role at the Group Health Foundation?
Peng Wang: I was born and raised in China. I came to the U.S. for graduate school. I got a master's degree in physics from Georgetown University. After that, I had a very focused career path in endowment. I started at Georgetown endowment in 2005 which was roughly $1.2 billion in assets. In 2010, I joined the University of Virginia endowment, and helped manage $7.5 billion in assets back then. After that, I joined the TIAA endowment in 2015, and that was roughly $10 billion.
I joined the Group Health Foundation as a managing director. My responsibilities ranged from a quant analyst, to investment analyst, to associate aid, and then risk manager. Now I manage all the public or marketable portfolio here at Group Health Foundation. On top of that, I also cover asset location, portfolio construction, risk management, and also private equity investment related to China.
Trusted Insight: Did you ever think you would end up in an asset allocator role? Given that your background initially was in physics.
Peng Wang: Honestly, I was really lucky. Back then, the CIO at Georgetown was Larry Kochard. Larry was looking for someone with the quant skills, who can program, who can code. I started that as an internship, purely just by chance. After I finished several projects for Larry, I think he really enjoyed working with me and he gave me a formal job offer.
"Over the years, I really refined the flexible asset allocation framework originally applied here at Group Health Foundation. It's actually very exciting to have fresh capital."
Compared to physics research, I feel like I was more usefully busy. I contributed more meaningfully while I was working for the endowment. I was contributing to the university and to higher education. Also, it's a more exciting and resourceful job, because you can learn from the best in the field. You can talk to all the best even when you are relatively junior. I enjoyed the learning part so much. That's why I decided to leave my physics path to focus on endowment management.
Trusted Insight: It's interesting that you bring up Larry Kochard. We have done two interviews with him that were focused on the nuanced evolution of his asset allocation approach.
When speaking with your colleague Muthu, he mentioned the organization was like a startup since it was a 2-person team and very nimble. Would you agree on that experience?
Peng Wang: A quick comment on Larry. Larry's really like my mentor. The first two projects I did for him was really around asset allocation. He was really cutting edge even back then and is still very cutting edge today. We would use portability-based thinking about managing the uncertainties around all the cash flows and the liquidity from private equity.
"The goal here is really to fuel the fully active endowment portfolio. A big part of that portfolio will be in private equity, which will take time to build."
Over the years, I really refined the flexible asset allocation framework originally applied here at Group Health Foundation. To answer your question, it's actually very exciting to have fresh capital. You know, if it's low-legacy companies with no legacy in investment. We can build something that is truly our own. We can work on what we believe is the best approach and framework. There's no internal politics, which allows us to be nimble and practical. We can actually set up to achieve the best performance through the best approach, that we believe.
Trusted Insight: Another goal of your organization was to make the portfolio more actively managed? How’s the gone and what’s the timeline for such change?
Peng Wang: Well, it's really a brand new portfolio. At the end of 2019, the portfolio was 100% passive, with 75% in equity and 25% in investment-grade bonds. After both Muthu and I started working full time, the process had been really efficient. As of 2020, roughly 40% of the portfolio is now active.
Muthu and I have a lot of experience, so we know most of the managers we want to invest with. So far it's been very effective. It's really a lot of those well-known, big names, hard-to-access managers, because we had a previous relationship with these guys. So we were very lucky. We were able to invest with a lot of them during the drawdowns.
We deployed pretty efficiently. I believe by the end Q3 2021, 70% of the portfolio will be active. We have another five managers in the pipeline. And we're just doing more reconnecting or catching up before we invest in the next four quarters.
"Our investment themes are innovation and inefficiency. We have very flexible wheels to implement our top-down themes. For example, those two things led us to China, India, and the U.S., regional-wise."
The goal here is really to fuel the fully active endowment portfolio. Very typical endowment portfolio. A big part of that portfolio will be in private equity, which will take time to build. I think that's the only part that will take longer. But everything else, we are building pretty efficiently and effectively. And that's another advantage of a small team. We are able to communicate and discuss more efficiently. Instead of a big team where we'll spend more time managing the person rather than investment.
Trusted Insight: What is your outlook on international markets outside the U.S? Perhaps there are places you are excited about moving forward?
Peng Wang: I will take one step back. Our investment themes are innovation and inefficiency. We have very flexible wheels to implement our top-down themes. For example, those two things led us to China, India, and the U.S., regional-wise. We are also focused on technology and healthcare from a sector perspective.
What those two themes mean, over time, could change. For example, China is the perfect example of both innovation and inefficiency. And from the U.S., it's really more about innovation, not many inefficiencies here. The same for healthcare and technology. Those are really about innovation, and less about inefficiency.
We have an unconstrained, flexible framework. We do not have a target, for example, for certain countries or regions. We just want to invest where we believe the best opportunities are. And we invest in very concentrated ways, which is very different from most endowments. To answer your question, right now, the focus is China in general and U.S. technology and healthcare.
Trusted Insight: Group Health Foundation also aims to improve health and racial equity, what does that mission mean to you?
Peng Wang: The foundation's mission is certainly very meaningful to me and to everyone who works here. I'm an immigrant myself originally from China, so I do believe in our mission. I feel I'm lucky to be able to contribute to the cause. It means a lot to us which in turn will help us deliver the best returns.
Having a more diversified team is a fruitful and positive change in our industry. Our team here at Group Health Foundation is very diversified as we are from India and China. The other three members are all ladies. We have tried to reach a more diverse team from both a gender and racial perspective.
View our full catalog of interviews here.