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Chief Investment Officer: 2018 Knowledge Broker: Allan Martin

December 12, 2018

Allan Martin

Allan Martin has been a consultant with NEPC for 18 years, but when he started in 2000, it was actually his third career in finance. After an MBA from Stanford, he landed a job at Bankers Trust Co. in New York, where he spent 26 years working at one of the pioneering firms in quantitative investments in a variety of capacities, including managing investments and finally becoming the chief of global retirement services.

“There was a small fraternity of people who had a passion for investments and who had a passion for [that] sort of analytical thinking and investing supported by data and so that’s what got me hooked,” he said.

Martin’s specialty was in enhanced passive indexing strategies, but his next move was at active management firm RCM. The firm specialized in large-cap growth stocks. Martin was the firm’s marketing director/principal, global marketing and client services. He stayed at RCM for four years, leaving the firm around 18 months after it was acquired by Germany’s Dresden Bank.

Martin said he was thinking about retirement when he got a call from NEPC founder Richard Charlton, who asked him if he wanted to become a consultant.

“He called me and said, ‘you know, you’ve seen a lot in your life, you’d be a good consultant.’ And I said, ‘why not?’ So, I ended up going to work for NEPC thinking it was three days a week. It’s a very full-time job and I have been working with large public funds almost exclusively ever since.”

Martin said the challenge for pension plans today is an expected low-return environment, making it difficult for plans to achieve their 7%-7.5% expected annual return. He said a standard 60% equity 40% fixed income portfolio isn’t workable and alternatives are needed. “So that in itself is challenging,” he said, “You have to find new strategies that blend with existing strategies.”

One strategy Martin favors is private debt investments as an alternative to the low returns in core fixed income. He said returns in core bonds generally pay a low 2.5%-2.75% rate compared to 6.5% that can be obtained by investing in private debt direct-lending strategies in Europe.

Martin said institutional investors in those strategies are investing in loans to private companies made by the direct lenders because of a void created by financial institutions. “Banks stopped lending to businesses in Europe because they were required by regulators to restore their balance sheets,” he said.

Martin said many of his pension plan clients in the US have gone into direct-lending strategies because of the opportunities. “We’re looking for things that have a higher return and that don’t have outsized volatility,” he said.

Martin said his first two careers in the finance industry have helped him develop investment expertise that he has been able to use as a consultant and come up with innovative solutions like direct lending to help clients. “Before you can think outside the box, you really do have to understand the box and that takes experience,” he said.

Martin stressed, however, it is a team effort, and he credits the investment staff he works with at pension plans like the $25.5  billion San Francisco Employees’ Retirement System, the $9.9 billion San Bernardino County Employees’ Retirement System in California, and the $12.8 billion New Mexico Educational Retirement Board, among others he works with to help develop the investment ideas.

Allan Martin has been a consultant with NEPC for 18 years, but when he started in 2000, it was actually his third career in finance. After an MBA from Stanford, he landed a job at Bankers Trust Co. in New York, where he spent 26 years working at one of the pioneering firms in quantitative investments in a variety of capacities, including managing investments and finally becoming the chief of global retirement services.

“There was a small fraternity of people who had a passion for investments and who had a passion for [that] sort of analytical thinking and investing supported by data and so that’s what got me hooked,” he said.

Martin’s specialty was in enhanced passive indexing strategies, but his next move was at active management firm RCM. The firm specialized in large-cap growth stocks. Martin was the firm’s marketing director/principal, global marketing and client services. He stayed at RCM for four years, leaving the firm around 18 months after it was acquired by Germany’s Dresden Bank.

Martin said he was thinking about retirement when he got a call from NEPC founder Richard Charlton, who asked him if he wanted to become a consultant.

“He called me and said, ‘you know, you’ve seen a lot in your life, you’d be a good consultant.’ And I said, ‘why not?’ So, I ended up going to work for NEPC thinking it was three days a week. It’s a very full-time job and I have been working with large public funds almost exclusively ever since.”

Martin said the challenge for pension plans today is an expected low-return environment, making it difficult for plans to achieve their 7%-7.5% expected annual return. He said a standard 60% equity 40% fixed income portfolio isn’t workable and alternatives are needed. “So that in itself is challenging,” he said, “You have to find new strategies that blend with existing strategies.”

One strategy Martin favors is private debt investments as an alternative to the low returns in core fixed income. He said returns in core bonds generally pay a low 2.5%-2.75% rate compared to 6.5% that can be obtained by investing in private debt direct-lending strategies in Europe.

Martin said institutional investors in those strategies are investing in loans to private companies made by the direct lenders because of a void created by financial institutions. “Banks stopped lending to businesses in Europe because they were required by regulators to restore their balance sheets,” he said.

Martin said many of his pension plan clients in the US have gone into direct-lending strategies because of the opportunities. “We’re looking for things that have a higher return and that don’t have outsized volatility,” he said.

Martin said his first two careers in the finance industry have helped him develop investment expertise that he has been able to use as a consultant and come up with innovative solutions like direct lending to help clients. “Before you can think outside the box, you really do have to understand the box and that takes experience,” he said.

Martin stressed, however, it is a team effort, and he credits the investment staff he works with at pension plans like the $25.5  billion San Francisco Employees’ Retirement System, the $9.9 billion San Bernardino County Employees’ Retirement System in California, and the $12.8 billion New Mexico Educational Retirement Board, among others he works with to help develop the investment ideas.

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