Andrew Mayer is a Senior Investment Officer at the Wyoming Retirement System, where he has served since 2012. He holds the CFA and CAIA designations and is responsible for coverage of the Marketable Alternatives asset class (multi-asset mandates and hedge funds) for the system. In this interview, he discussed how the investment team shifted from a generalist model to a more specialized one, how the board adopted policies that allows them to remain opportunistic and nimble, and why he believes it's important to also have active views and exposure in China and Europe.
Andrew Mayer was named to Trusted Insight's 2021 Top Public Pension Investment Directors.
Trusted Insight: Could you start by telling us about the Wyoming Retirement System? How are your assets distributed, and how is your team organized to manage them?
Andrew Mayer: WRS manages about $10B on behalf of all public employees in Wyoming. The structure of the investment team is for one senior person and one junior person to have coverage responsibility over each of the major asset classes, with the CIO vetting and assisting with everything. Each asset class enjoys a great deal of autonomy and the process for approving an investment is very collaborative. The asset class categories as we define them are Equity, Fixed Income, Marketable Alternatives, and Private Markets. Our strategy has evolved from a generalist model to a more specialized one, but since most of the staff have had some experience covering several of the asset classes, it allows for more collaboration, vetting, and robust discussions across asset classes. The Marketable Alternatives portfolio for WRS not only holds some of the typical diversifying absolute return-oriented strategies but also tends to operate like a completion portfolio. Today the pension’s strategic allocation to Marketable Alternatives is 19%.
Trusted Insight: Many pension systems are underfunded and depend on large distributions to private equity to make the returns they need. What is the funding situation like at the Wyoming Retirement System and how does your board strategize to meet their fiduciary duties to your members?
Andrew Mayer: For the last several years WRS’ funding ratio has been in the mid 70’s percent. Most importantly though, WRS is on a trajectory to being 100% funded. Our legislature and board have put aside political considerations and have always made the tough decisions to make sure that the plan remains on a path to being fully funded, even as we reduced the actuarial rate, which required further contributions by both the state and employees. One of the most impactful things our board has done to address the low return environment is to adopt policies that allow staff to act opportunistically and to remain nimble. For example, staff has all investment discretion, asset class bands are fairly wide, and they have given the ability to staff to execute tactical trades.
Trusted Insight: What's your strategy for creating a unique and strategic posture that helps you find the right managers for your funds?
Andrew Mayer: WRS invests 100% externally, and we do so in a fairly concentrated manor. In my view, the best thing we can do as allocators is to resist “filling boxes” based on narrowly defined asset classes. Our staff is committed to getting the best risk-adjusted return opportunities in the portfolio, no matter where they reside. “Alpha” is rare, almost always fleeting, and in nearly every occasion, capacity constrained. As such, where we can identify managers with a high probability of repeatable ex-ante alpha that are disciplined in managing capacity, we will build out relationships with them, relay our preferences to the select cap intro teams we know well, and stay in front of them so that in the event capacity becomes available in the future and we are made aware, (as it did briefly during Q1 of 2020 with several well-regarded managers) we are the first call for new external capital. We aren’t fooled into thinking that we are the only LP with this agenda, but we have accessed some of our best investments that way and we hope this tactic will continue to serve us well in the future.
Additionally, as long-term investors, we are happy to trade liquidity for fee concessions, invest in hybrid asset class structures, or make investments in assets that don’t fit neatly in a traditional portfolio structure, knowing that many of our peers are hamstrung by bureaucratic processes, and may leave those areas with more “meat on the bone.” I also really value talking with other investors. I do realize that this may not always be an option in other institutional investor categories, but I have found public pension investors I have spoken with to be incredibly helpful. By doing so, we have been able to build more conviction and uncover opportunities that we would otherwise have missed.
Lastly, we also look to structure as much alignment as possible with the managers we hire. This may mean we utilize their expertise to help construct tactical trades, it may mean that we get co-investment opportunities at a low or zero management cost, or it may mean that while we don’t mind paying for strong returns, in the circumstance where returns are not consistent with both the manager’s and our underwriting, the expenses are as close to a passive fee alternative as possible (hurdles, 1 or 30, equity participation, and delayed crystallization of performance fees are the most common). All of them are options but we are flexible enough to negotiate any combination of terms to improve alignment.
Trusted Insight: Your institutional peers, especially in the foundation and endowment world, are still bullish on the opportunities in China. Do you have these kinds of conversations on your team or with your board when it comes to investing outside the U.S.?
Andrew Mayer: Yes, absolutely. As the investing world becomes more tri-modal (US, Europe, China), it’s going to be more important from a diversification standpoint that we have active views and exposure, particularly as correlations weaken if deglobalization continues as we expect it to. We have been having these conversations for several years and have just recently begun to shift our allocations. Two years ago we hired our first active liquid China mandate and we added another one last year. Additionally, we have allocated to our first private market China mandate last year and another one this year.
Trusted Insight: What kind of exciting programs are in the works down at the Wyoming Retirement System? Some LPs talk about tech and innovation focused programs; anything similar at Wyoming?
Andrew Mayer: No official dedicated programs, but the prevalence of interesting innovation and disruption plays does inform our macro view and our prospective allocations. In that way, and based on a bottoms-up analysis, we certainly have more thematic exposure in some of those areas.
Trusted Insight: Are there any final thoughts you’d like to add?
Andrew Mayer: I feel like this is probably the time to dispel the popular belief that I ride a horse into the office and live on the prairie.
Disclaimer: These views are my own and are not intended to be 100% reflective of WRS’ views
View our full catalog of interviews here.
The full list of 2021 Top Public Pension Investment Directors can be found here.
Andrew Mayer was named to Trusted Insight's 2021 Top Public Pension Investment Directors.
Trusted Insight: Could you start by telling us about the Wyoming Retirement System? How are your assets distributed, and how is your team organized to manage them?
"Since most of the staff have had some experience covering several of the asset classes, it allows for more collaboration, vetting, and robust discussions across asset classes."
Andrew Mayer: WRS manages about $10B on behalf of all public employees in Wyoming. The structure of the investment team is for one senior person and one junior person to have coverage responsibility over each of the major asset classes, with the CIO vetting and assisting with everything. Each asset class enjoys a great deal of autonomy and the process for approving an investment is very collaborative. The asset class categories as we define them are Equity, Fixed Income, Marketable Alternatives, and Private Markets. Our strategy has evolved from a generalist model to a more specialized one, but since most of the staff have had some experience covering several of the asset classes, it allows for more collaboration, vetting, and robust discussions across asset classes. The Marketable Alternatives portfolio for WRS not only holds some of the typical diversifying absolute return-oriented strategies but also tends to operate like a completion portfolio. Today the pension’s strategic allocation to Marketable Alternatives is 19%.
Trusted Insight: Many pension systems are underfunded and depend on large distributions to private equity to make the returns they need. What is the funding situation like at the Wyoming Retirement System and how does your board strategize to meet their fiduciary duties to your members?
"One of the most impactful things our board has done to address the low return environment is to adopt policies that allow staff to act opportunistically and to remain nimble."
Andrew Mayer: For the last several years WRS’ funding ratio has been in the mid 70’s percent. Most importantly though, WRS is on a trajectory to being 100% funded. Our legislature and board have put aside political considerations and have always made the tough decisions to make sure that the plan remains on a path to being fully funded, even as we reduced the actuarial rate, which required further contributions by both the state and employees. One of the most impactful things our board has done to address the low return environment is to adopt policies that allow staff to act opportunistically and to remain nimble. For example, staff has all investment discretion, asset class bands are fairly wide, and they have given the ability to staff to execute tactical trades.
Trusted Insight: What's your strategy for creating a unique and strategic posture that helps you find the right managers for your funds?
Andrew Mayer: WRS invests 100% externally, and we do so in a fairly concentrated manor. In my view, the best thing we can do as allocators is to resist “filling boxes” based on narrowly defined asset classes. Our staff is committed to getting the best risk-adjusted return opportunities in the portfolio, no matter where they reside. “Alpha” is rare, almost always fleeting, and in nearly every occasion, capacity constrained. As such, where we can identify managers with a high probability of repeatable ex-ante alpha that are disciplined in managing capacity, we will build out relationships with them, relay our preferences to the select cap intro teams we know well, and stay in front of them so that in the event capacity becomes available in the future and we are made aware, (as it did briefly during Q1 of 2020 with several well-regarded managers) we are the first call for new external capital. We aren’t fooled into thinking that we are the only LP with this agenda, but we have accessed some of our best investments that way and we hope this tactic will continue to serve us well in the future.
"[We] make investments in assets that don’t fit neatly in a traditional portfolio structure, knowing that many of our peers are hamstrung by bureaucratic processes, and may leave those areas with more “meat on the bone.”
Additionally, as long-term investors, we are happy to trade liquidity for fee concessions, invest in hybrid asset class structures, or make investments in assets that don’t fit neatly in a traditional portfolio structure, knowing that many of our peers are hamstrung by bureaucratic processes, and may leave those areas with more “meat on the bone.” I also really value talking with other investors. I do realize that this may not always be an option in other institutional investor categories, but I have found public pension investors I have spoken with to be incredibly helpful. By doing so, we have been able to build more conviction and uncover opportunities that we would otherwise have missed.
Lastly, we also look to structure as much alignment as possible with the managers we hire. This may mean we utilize their expertise to help construct tactical trades, it may mean that we get co-investment opportunities at a low or zero management cost, or it may mean that while we don’t mind paying for strong returns, in the circumstance where returns are not consistent with both the manager’s and our underwriting, the expenses are as close to a passive fee alternative as possible (hurdles, 1 or 30, equity participation, and delayed crystallization of performance fees are the most common). All of them are options but we are flexible enough to negotiate any combination of terms to improve alignment.
Trusted Insight: Your institutional peers, especially in the foundation and endowment world, are still bullish on the opportunities in China. Do you have these kinds of conversations on your team or with your board when it comes to investing outside the U.S.?
"As the investing world becomes more tri-modal (US, Europe, China), it’s going to be more important from a diversification standpoint that we have active views and exposure..."
Andrew Mayer: Yes, absolutely. As the investing world becomes more tri-modal (US, Europe, China), it’s going to be more important from a diversification standpoint that we have active views and exposure, particularly as correlations weaken if deglobalization continues as we expect it to. We have been having these conversations for several years and have just recently begun to shift our allocations. Two years ago we hired our first active liquid China mandate and we added another one last year. Additionally, we have allocated to our first private market China mandate last year and another one this year.
Trusted Insight: What kind of exciting programs are in the works down at the Wyoming Retirement System? Some LPs talk about tech and innovation focused programs; anything similar at Wyoming?
Andrew Mayer: No official dedicated programs, but the prevalence of interesting innovation and disruption plays does inform our macro view and our prospective allocations. In that way, and based on a bottoms-up analysis, we certainly have more thematic exposure in some of those areas.
Trusted Insight: Are there any final thoughts you’d like to add?
Andrew Mayer: I feel like this is probably the time to dispel the popular belief that I ride a horse into the office and live on the prairie.
Disclaimer: These views are my own and are not intended to be 100% reflective of WRS’ views
View our full catalog of interviews here.
The full list of 2021 Top Public Pension Investment Directors can be found here.