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Deep Dive with CIO Farouki Majeed of Ohio School Employees Retirement System



This is an interview conducted by Michael Maduell of SWFI and Farouki Majeed, Chief Investment Officer of the Ohio School Employees’ Retirement System.

MADUELL: Thank you for this interview. I’m talking with Farouki Majeed, the CIO of Ohio School Employees’ Retirement System. How long have you been at this organization?

MAJEED: I’ve been CIO for 5 years.

MADUELL: At SWFI, we have seen the rapid adoption of private credit mandates by U.S. pension funds. How does this strategy fit in with the pension’s other allocations.

MAJEED: Yes, we have been allocating to private credit over three years.

The allocation to private credit was from traditional fixed income where we are underweight. Private credit has performed well with much higher returns than traditional fixed income. However, this space is getting crowded and that is something we are aware of.

MADUELL: A sign for us when an asset class gets a bit overcrowded is when the number of conferences focusing on the strategy goes up. In terms of money management, what is the split of internal versus external? What is your take on U.S. equities?

MAJEED: We are a mid-sized pension at $13.5 billion. All of it is externally-managed. We are tasked to allocate money across a wide set of asset classes.

In terms of U.S. public equities, we have been reducing exposure in the past six months moving them to non-U.S. equities. Non-U.S. equities have finally turned and are over performing U.S. equities. The international equity allocation is split into EAFE and emerging markets. We had been underweight in emerging market equities and have brought that to neutral weight. When we allocate money to emerging equity managers we don’t invest in single-country strategies, but rather give our external managers broad discretion to select stocks and countries.

MADUELL: We have seen more institutional investors use exchange-traded funds (ETFs) for a variety of reasons such as hedging or getting certain exposures. What is your take of ETFs and passive investing with regards to the world of institutional money management?

MAJEED: ETFs are increasingly becoming an option for public equities. I would say for active managers in U.S. large cap beating their benchmarks has been a challenge. We have 50% passive allocation in U.S. equities and 30% passive non-U.S. equities.

MADUELL: What about smart beta? Do you consider low-volatility to be a smart beta strategy?

MAJEED: We have ventured into some factor based strategies including low-volatility in combination with valuation.

MADUELL: Through our conversations, many asset owners including U.S. state pensions are keen on investing in U.S. infrastructure. Is this something Ohio School Employees’ Retirement System is engaged in?

MAJEED: We do invest in infrastructure. We expanded our real estate program to real assets. Real assets include infrastructure and other types of tangible assets with good income returns. We are invested in two infrastructure funds representing 3% of our assets..

MADUELL: How about infrastructure co-investments?

MAJEED: In infrastructure, no, but in private equity we have participated in co-investments and are looking to doing more..

MADUELL: Last, but not least, what about hedge funds? A growing chorus of U.S. pensions like CalPERS has dropped them. Can you provide some context here? Do you use fund-of-fund managers?

MAJEED: We do invest in hedge funds. This is under multi-asset strategies which has a 10% target in our portfolio. We have been realigning allocation within the portfolio to focus on risk diversification and trying to engage in fee reductions.

We use hedge funds for risk diversification. We do not use fund-of-funds for hedge funds, as we directly invest into hedge funds.

MADUELL: One more, besides global macro, any take on insurance-linked securities?

MAJEED: We are invested in catastrophic re-insurance as they are uncorrelated with other managers in our multi asset portfolio.

MADUELL: Thank you for your time.

About Farouki Majeed

Farouki Majeed joined School Employees Retirement System of Ohio (SERS) as Chief Investment Officer in July, 2012. Majeed came to SERS from CalPERS, where he served as Senior Investment Officer – Asset Allocation and Risk Management from 2007 to 2012. Previously, Majeed was the inaugural CIO of the Abu Dhabi Retirement Pensions and Benefits Fund of the United Arab Emirates. He was Deputy Director, Investments, for the Ohio Public Employees Retirement System from 2002 – 2004. Majeed was Chief Investment Officer for the Orange County Employees Retirement System from 1997 – 2002 and Investment Officer of the Minneapolis Employees Retirement Fund from 1991 – 1997. Majeed began his finance career in 1980 with the National Development Bank of Sri Lanka, his homeland, and worked in the Asia Division of Bank of America prior to arriving in the U.S. in 1987 to pursue graduate studies. Majeed has 30 years of experience in various investment and finance education positions in the U.S. and abroad.

Majeed holds a master’s degree in business administration – finance from Rutgers University, and a bachelor’s degree in engineering from the University of Sri Lanka. He is a Chartered Financial Analyst. Majeed also serves on a voluntary basis as a member of the Investment Advisory Committee of the United Nations Relief and Works Agency (UNRWA) Provident fund based in Amman, Jordan.

Funds and Ownership, KKR Partners with Shinhan Financial



South Korean financial giant Shinhan Financial Group Co., Ltd. reached a preliminary agreement with KKR & Co. to form a series of global buyout funds that could raise up to 5 trillion KRW. KKR and Shinhan signed a Memorandum of Understanding (MoU) in Seoul in early October. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Norwegian Government Recommends SWF Remains at Central Bank



There was speculation that Norway Government Pension Fund Global (GPFG) could be managed outside of Norges Bank. The Norwegian government shot down this idea and recommended Norway’s GPFG remain in Norges Bank. This recommendation came in the form of a white paper submitted to the Norwegian Parliament, Stortinget.

Norway’s Minister of Finance Siv Jensen, commented in a press release, “The Government proposes a new and modernised governance structure for Norges Bank. Moving forward, this new structure lays the foundations for the sound management of the central bank and of the GPFG.”

Some Central Bank Recommendations

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Invesco Buys OppenheimerFunds for $5.7 Billion



Invesco Ltd. signed a deal to acquire OppenheimerFunds, Inc. from Massachusetts Mutual Life Insurance Company (MassMutual). In turn, MassMutual and the OppenheimerFunds employee shareholders will receive a combination of common and preferred equity consideration, and MassMutual will become a significant shareholder in Invesco, with an approximate 15.5% stake. This strategic transaction will bring Invesco’s total assets under management (AUM) to more than US$ 1.2 trillion. The transaction is expected to close in the second quarter of 2019, pending necessary regulatory and other third-party approvals. The transaction gives Invesco access to more third-party distribution platforms.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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