Robert Morier: Welcome to the Dakota Live! Podcast. I'm your host, Robert Morier. The goal of this podcast is to help you better know the people behind investment decisions. We introduce you to chief investment officers, manager research professionals, and other important players in the industry to help you sell in between the lines and better understand the investment sales ecosystem. If you're not familiar with Dakota and our Dakota Live! content, please check out our website at dakota.com. Before we get started, I need to read a brief disclosure. This content is provided for informational purposes and should not be relied upon as recommendations or advice about investing in securities. All investments involve risk and may lose money. Dakota does not guarantee the accuracy of any of the information provided by the speaker, who is not affiliated with Dakota. Not a solicitation, testimonial, or an endorsement by Dakota or its affiliates. Nothing herein is intended to indicate approval, support, or a recommendation of the investment advisor or its supervised persons by Dakota. The statements made by Yasir Mallick represent his personal views and opinions and do not necessarily reflect those of CIBC. Today's episode is brought to you by Dakota Marketplace. Are you tired of constantly jumping between multiple databases and channels to find the right investment opportunities? Introducing Dakota Marketplace, the comprehensive institutional and intermediary database built by fundraisers for fundraisers. With Dakota Marketplace, you'll have access to all channels and asset classes in one place, saving you time and streamlining your fundraising process. Say goodbye to the frustration of searching through multiple databases and say hello to a seamless and efficient fundraising experience. Sign up now and see the difference Dakota Marketplace can make for you. Visit dakotamarketplace.com today. Well, I am thrilled to introduce our audience today to Yasir Mallick, Executive Director and Head of Public Markets at CIBC pension fund in Toronto. In his role, Yasir is responsible for manager selection, portfolio construction, and implementation of CIBC pension plans, public equity, fixed income, and hedge fund investments. Yasir, thank you for joining us today on the Dakota Live! Podcast. It's great to see you.
Yasir Mallick: Thanks, Rob, for the invitation again… once again, nice to see you, and for really all the hard work that you and the [INAUDIBLE] and Dakota team do to make this podcast available. So once again, appreciate it and look forward to a great conversation.
Robert Morier: But before we read your biography for the audience, I want to reintroduce my partner on the desk and friend, Dan DiDomenico. Welcome back.
Dan DiDomenico: Robert, thank you for having me. Yasir, looking forward to our conversation. It should be great.
Robert Morier: Yasir Mallick joined CIBC last year as Executive Director, Head of Public Markets within the Pension Investment Management group. Previously, Yasir was a senior leader with UBC Investment Management and was instrumental to its professionalization and organizational maturity Among other firmwide initiatives and functions, he was responsible for redesigning, implementing, and monitoring public equity, private equity, and hedge fund external manager programs. Yasir brings nearly two decades of investment and risk-related experience, having worked at PwC, KPMG, Ontario Power Generation, and the University of Toronto Asset Management. Yasir holds both a Bachelor of Commerce and a Master's of Finance from the University of Toronto. He is a member of the Chartered Professional Accountants of Ontario and holds the CFA and CAIA designations. Most importantly, Yasir calls Toronto home, where he lives with his wife and two children. Yasir, thank you for being here. Congratulations on all your success, and congratulations on the role at CIBC. We look forward to learning more about it.
Yasir Mallick: Yeah, thanks again. Look forward to the conversation.
Robert Morier: Well, you've had a very impressive journey in the investment world, as I mentioned, nearly 20 years of experience across various organizations now with CIBC. But we always like to set the stage taking you back to those early days in the classroom where it all started. How did you get that itch for investment management?
Yasir Mallick: Yeah, so, look, I appreciate the conversation. And the journey is always not really planned in any clear way. When you start out, you have some professional practice, or, in this particular industry, there are evolutions personally and professionally. But effectively, I was initially drawn by, I would say, the inefficiency of how pension funds were being managed, how investments were being implemented, and how risk was managed. The primary issue for me was that ultimately, EB pensions provide security and the ability to retire gracefully for the low and middle class. And my own parents were really the image I used to personify this purpose. So, they worked very hard, and then that post-retirement period would likely be the period in their life… and it is since they are in that period… when they had the most flexibility and freedom. So, my objective was to optimize an investment portfolio to really make that period as enriching as possible. So that's what drew me and spurred the continued passion for monitoring investments and doing what I do.
Robert Morier: Well, you spent over six years with Ontario Power Generation. You helped transform the pension fund's governance and investment management program into a risk-based framework. So, as you just explained, it sounds like you were able to put those beliefs into practice. You subsequently went on to head up private markets at the University of Toronto Asset Management. Could you take us through what that due diligence process looked like for you in the private market book that you were responsible for at the University of Toronto? And how did that compare with those first six years at OPG?
Yasir Mallick: I joined OPG from really professional practice, say, in providing assurance and then consulting and primarily to corporate treasuries and around financial instruments and hedging. And so, my first stop was corporate treasury at OPG. What OPG had within treasury was really a $20 billion fund. When I transitioned to a role specifically in the investment fund organization, really, I was basically given responsibility for asset allocation, and risk management, and really more total portfolio management. The role at UTAM was polar opposite. So overall, the roles were different. Like the scale of the AUM was different, the size of the team was different, the ultimate objective of the investment program organization was different. So, as I mentioned, OPG was largely asset allocation, risk management, some selected manager, due diligence, primarily in quant and co-investments. But really at UTAM, the role was purely manager selection and diligence, and really projects and initiatives to really, say, make our group more productive. The original role when I joined UTAM was to lead private markets, and the main impetus for that was they wanted someone who knew both public and private. And so, I had done both. And it was really due to how they were set up and their own benchmark. Privates was not a target allocation. They have a simple reference portfolio and everything competes for capital. And so, you end up having to think about, OK, well, how does private equity trade off against this? And how does private credit trade off against what I can do in public space, and the alpha I can get from managers as well, net of fees? The original role for me was to reactivate private equity at UTAM and really all privates… ex-credit. So, some context was UTAM had some challenges during the GFC. Post-GFC, the organization changed the entire team, some governance. A new CEO came in, Bill Moriarty, and he made a systematic process, recruited an experienced team, built a risk-aware culture. And all programs were effectively live, including hedge funds again, with the exception of private equity and private markets… ex-credit. My task was really to reactivate that private program, changing some of the actual private market investment operations and reporting, implementing some tech. But the first stage of approval was really trying to get the stakeholders and investment committee to endorse this new strategy and really buy into how this would be different from maybe past challenges. And then from there, it was actually 100% sourcing, selection, due diligence, monitoring, and only for those functions. It transitioned and evolved a little bit in that we had a CEO change. And then I took over the US public equities again. And then I took over global macro within the hedge fund sleeve. So, there was some cross-overlap as personnel changes happened.
Robert Morier: I hear reactivating. And knowing a little bit about what you're doing at CIBC, it sounds like that might be a thread in your career, reactivating plans that have been in place, having the ability to rebuild in some ways. So, we're very interested to hear how you're doing that at CIBC. But in the context of a university investment program, it's very interesting. So, thank you for sharing that. You also seem like you have a gluttony for punishment. You take on a lot of asset classes. How is that in terms of all of those balls? Just looking back or thinking back to those days at UTAM when you had all of those responsibilities, how could you balance them all?
Yasir Mallick: The challenge of that very, I guess, manager selection team and lead of different asset class verticals is really balancing the target objectives that you obviously have, like alpha, and how much risk you can take, and constraints. But then how many manager relationships can you actively have in the portfolio to generate that? Are markets evolving? What new strategies are percolating up? How much more optimizing and tweaking can you do? And then on top of that, you need to find a way to keep a very large funnel of managers, sourcing, databases, non-database references, and then collecting all that knowledge and information and actually implementing, I would say, more a knowledge-management platform, whether it's a CRM, and designing it in a way that allows you to have a very good librarian system for that information, multi-tagging, but then being able to really access it when you need it. So, there might be research topics you need to do. And so, there's lots of things that come in, a nice report. You don't have time to read everything. And so, can you collect it, tag it in a way that when you do have time, or when you do have to do a deep dive on something, can you retrieve it as part of anything else that is maybe more current? And then on top of that, it's really your manager interactions, tracking maybe secondary managers, peers. So that's kind of how you do it. Now, that obviously, is a little bit more simpler when you, say, have one asset class. And I think public equity, beta 1, there's probably less heterogeneity across like there isn't as many sub-strategies, a little bit simpler to understand than, say, hedge funds. But that's, I think, the fundamental challenge. And you're just balancing that with your time. So, it's really around how much more do you need to do. Well, how many more opportunities are there to really optimize the information ratio of a long-only or a benchmark relative portfolio? And how much can you improve the Sharpe ratio of an absolute return portfolio? And then how much time do you have? Do you have an unlimited amount of budget to hire people and tools and systems? So, you're just balancing all those variables.
Robert Morier: It makes a lot of sense. Thank you for sharing all of that. Well, after a brief layover at KPMG's Investment Management consulting practice, you joined the University of British Columbia's Investment Management team. Other than Vancouver, what drew you to UBC?
Yasir Mallick: Other than Vancouver and being in COVID lockdown for two years that it felt like a vacation to leave my home and relocate, UBC, IAM, and UTAM were really the only two organizations in Canada that had separate captive investment arms associated with the University, and trying to, I would say, apply a US-style endowment model coupled with the Canadian risk-management philosophy. When I was considering UBC, they had six employees. I was the sixth employee. At the time, they had about $5 billion in AUM. And how this compares with UTAM is when I joined, there was probably in excess of 20 folks. My pure focus was manager selection. They have already had maturity over risk management, on corporate management, on investment operations. Even their manager selection, the alpha that they had generated was very high. They just were trying to tap into private markets. But with UBC, they effectively came out of the GFC, and rather than, say, embrace active management but different controls and governance, they effectively stepped back, became lower volatility, more consultant-driven, and effectively, the results of that coming into 2020 was even their public book probably underperformed by 20%. Really the goal at that point was a catalyst for change. They also hired a brand-new CEO. She had asked me to partner with her to, I would say, get to the UTAM state of maturity as quick as possible. And then obviously, you had opportunities to, I would say, adjust for, I would say, areas that I believe could work better. And so, there was really a mandate to ultimately drive a significant value-added proposition for the organization. And we were flexible, quick, and we had full endorsement by the board. So that was really the mandate and that was exciting. Like I love building. I love, I would say, laying the foundation, but then also being able to have meaningful impact.
Robert Morier: You mentioned earlier in the conversation, and I know we've spoken before, you've talked about enabling affordable and reliable pension funds while expanding financial resources to maximize organizational objectives. It sounds like a very personal mission when you are thinking about these plans that you're working with, whether it's a university endowment, or now, with CIBC, a financial institution. So how do you ensure that that alignment remains consistent across all of these types of organizations? What's that application process look like for you as an investor?
Yasir Mallick: From my own personal philosophy, once again, there's that purpose that is really making sure that we can be more cost-effective for the sponsor as it relates to pensions. At OPG, we're also managing a nuclear investment fund. So, the cost of decommissioning nuclear power stations in the far distant future. So, the cost to taxpayers of that. And then in university endowments, in both pensions, but also their ability to attract and retain top university professors and invest into programs for their students. So, all of that is really those objectives at those organizations. And if we can make that more cost-effective, we have the opportunity to maintain those programs in terms of providing for that. Now, the challenge, honestly, is that the governance of every organization is different. The, I would say, role has been different. And markets evolve as well. So, what, I guess, we're trying to do is balance out organizational dynamics with that ultimate purpose. Overall, it's not a market time-varying approach. It's more like how can I maintain as true to that purpose as possible given organizational construct, alignment of interests in terms of incentive comp? What is the target objective for the fund? Is it more alpha-oriented? Is it more beta-oriented in total return? So, I would say you're always optimizing for the objective of the specific organization which has either different horizons or different specific kind of metric.
Robert Morier: For our audience, this is quickly becoming a masterclass in Canadian institutional investments, so thank you for sharing all that. Your background certainly helps that discussion and that knowledge.
Dan DiDomenico: It's been incredible, Yasir, listening to you. You have a unique ability of making the complex sound simple. I know there's a lot of moving parts in terms of your responsibilities across asset classes. And I'm sure it's your experience, but also the process that makes it manageable for you as you're walking through so much that you've had responsibility for over the years. All of that experience, I'm sure, is informing and influencing your manager research process. And that's where I want to drill in just a bit more here with you. So, once you've settled on an asset allocation decision, whether it be focusing on emerging market equities or private credit, how do you narrow down that search, so the scope of your search from sourcing, to then do you have a buy list or manager ratings? How are you working that down to a manageable few that you're engaging with to fill that role within asset allocation?
Yasir Mallick: Once the program objectives have been set, really it starts with the sourcing channel. For every universe, whether it's a global equity or emerging market equity or hedge fund… so I manage the hedge fund portfolio as well… how do you maintain the best awareness of who's out there? And so, the sourcing is multifaceted. The first one is really there's specialized databases that have some of this. What's our technology budget? Can we effectively tap into those? So that's one. It also gives us just benchmarking, right? Like are we actually a top-quartile program or not? Net of costs, et cetera. Outside that, it's relationships at different, I would say, third parties, whether it's cap intro groups, or other intermediaries, placement agents, consultants. You're trying to, once again, see what they're working on, what they're hearing, which funds they're marketing, et cetera. And that gives you other things that are actually not on those databases. And then finally, I guess the last two, at least for me, would be on the sourcing-specific side is really your own professional network or your peers at a bunch of different institutions and they're running publics or private equity or hedge funds. Like are there overlap? What do you think about this manager? And it's not to say that people's diligence standards are really different. We're not trying to make judgments because ultimately, everybody's programs actually have different objectives, different scale, different internal pressures. So, and I'm not trying to be like, oh, I don't know why they picked that manager versus another one because they're trying to optimize for a different set of constraints and factors. But that provides, I would say, some credibility-weighted intel on what they think about managers. And I can cross-compare my views versus them following some initial meetings I've had or process understanding, and then finally, at least for publics on sourcing is just I might look into various single-name equities if I'm talking about fundamental managers or activists and stuff, and might be tracking different small-cap stocks or micro-cap. And we're the owners of those stocks. And sometimes when you look at that table, you notice firms that you're like never heard of. And then from sourcing, it's more about you take as many meetings as you can subject to you do some culling in terms of have you only been around one year? Is this like $5 million or $10 million so it's not scalable? Is this like five stocks? What are we talking about here? So, you do some culling, and then you take as many intro meetings as possible that time affords. And some of this is helpful based on experience where you can at least recognize patterns, or you can leverage prior experience with that manager or strategy. So that helps cull down the list further. And then it's really driven by those meetings. So, you have those meetings. You ask for a lot of information and data. You try to process all that, analyze it through software analytics, custom analytics we're doing, and ask better questions during those maybe secondary meetings. That really helps narrow the list. You start building confidence with certain groups over another, and that list narrows. That's, at least, how I learned how to do it at UTAM, how I learned how to do what I put in place at UBC IAM. And we're working through the early stages here. Once again, it's only been three months. But it's different than at OPG we had kind of a procurement process, RFPs and RFIs, and then it's more questionnaire driven. But here, it's more you are somewhat this detective and you're trying to work through the scenes of making sure you have a complete list, and then from there, move through the steps.
Dan DiDomenico: So, as you're playing that role of detective within meetings… and especially as it relates to active managers, I think the volume around the active-passive debate right now is about as loud as it's ever been… within those meetings, what are you listening for? What are you weighting within the conversation? What do you want to hear in terms of governance, team stability, alignment of economic interests… I'm sure fees are a big factor in that as well… giving you a sense or some probability that this active manager can either continue to outperform or within different market environments, I'm sure, perform differently set against your expectations? But to evaluate that skill for an active manager, what are some of those criteria that you're listening for?
Yasir Mallick: To be honest, it's kind of an interesting debate because it's not binary. There's elements that you need to do for indexing. There's also challenges of scale. At a certain size, you can't really deploy at scale into all these different things. So that constrains how much your book can be active and passive, and maybe you have to play the game a little differently. I generally always start with their pitch book. But if this leads past the pitch book… and sometimes I, like for public managers, may even ask for their returns, both gross and net of fees… but I try to do some homework, and I generally always read through the materials beforehand. Maybe a manager also sends like their most recent quarterly letter so I can get a sense of their philosophy a little bit. But during that meeting itself, it's really trying to let them, tell me why they're different or what's their specific edge or proposition. I'm not looking for a stock idea. I'm really looking specifically for the investment implementation and why they think their strategy is so compelling. I'd probably care less about the firm in that meeting because most of that is on the deck and I can probably google some of that stuff. But it's more about, were they able to pique my curiosity about what might set this particular strategy apart, or their willingness to consider different fee arrangements or different structures. Those are the things that I'm looking for in that kind of first meeting.
Dan DiDomenico: Yasir, this is so helpful. It's understanding that continuum from sourcing to the meetings. You're getting at your underwriting process. You're giving us a lot of great color on that. So, then you hire the manager. You also mentioned in your comments it's not only the sourcing, the selection, it's also the monitoring. So, within the monitoring, what are some of those key criteria? Or just talk to us a little bit about your process for potentially even removing a strategy.
Yasir Mallick: The process generally has been more how has your thesis or how did you underwrite that manager to begin with in terms of what markets will this not work? What are their key decision-makers that really make this happen? What is their systematic process that allows them to identify the investments or optimize that portfolio better than someone else? And you are trying to monitor all the kind of key indicators that you think might help inform that view. And as you get that information, and you see real-time performance as well, you're trying to synchronize those two and see if you got it wrong in your original thesis. Or they have had a challenging period, but this was the risk that I noted, and this was the regime that they were not expected to perform, so things are fine. It's not about just they had poor relative performance because no strategy will really work all the time. I guess there's some that have in terms of some multi-strats and things of that nature. But overall, I think that's the philosophy I take. You're somewhat at the behest of how much information you're getting from a manager. But that all goes into initial onboarding. So typically, the level of transparency I'm getting, I need to be comfortable with that before I even make that first investment. And I try to get that contractually locked down so that there aren’t handshake agreements on these things.
Dan DiDomenico: Yeah, that's important, and that transparency on both sides of the table, right? You setting those proper expectations of here's why I'm hiring you, here's your role, here's what the expectations are. And as soon as there's a deviation from that as you're continuing to monitor that strategy, are you playing your role? And if you start moving away from that, I'm sure that leads to more challenging conversations. Yasir, before we take a little bit of a step back because I do want to talk portfolio construction with you and the mix of assets within your portfolio or platform of investments, just one last question around the investment criteria. Are there any minimum requirements of what you would expect or need to see either from size of the team, AUM, track record, decision-making structure? So, are there must-haves that you must have within the conversation to even take that next step or that step forward in evaluating a manager?
Yasir Mallick: Some of this is asset class and strategy-dependent, and to some extent, where you are in your organizational maturity or investment maturity. If you have squeezed everything you can out of your implementation and it's very well, and then you have to start continuing to pursue things like, say, spinouts and emerging managers and a bunch of different things. So, I would say nothing is ever really off the table. But in terms of, I would say, some criteria, I do think it's just asset-class specific. So, I think for public equities, some general rule is like I do need position-level transparency. I can't debate this point. And so, I do need that. We can talk about the frequency about that. We can talk about maybe does it need to be lagged. It does pose an interesting challenge. Or maybe I haven't seen so much pressure yet, but advent of AI and these things, like how comfortable, especially quant managers, are they going to do for this. That's something kind of TBD for me. But overall, at this point, like public equities, I do need 100% position-level transparency. There's other additional reporting on top of that. There's obviously, I would say, if there's a regulatory requirement on our end and we just can't get that, that's a binary risk for me. Just can't not apply legal rules. So, from a Canadian jurisdiction or a banking regulation in my current spot, or in my prior organizations like 501(3)(c) entities, these types of things. So that's on public equities. For hedge funds, it comes down to a little bit of net of fee. They do need to also be reasonably transparent. If I had a principle in mind, it would really be transparency. Do I have enough transparency for the strategy sufficient that if there's going to be hard times, I am going to be able to stand up in front of my committee or other stakeholders and be confident about my assessment about them and why I chose them? So that's ultimately what I'm looking for.
Dan DiDomenico: That's a great point.
Yasir Mallick: For track record of a firm, if you don't have a lot of track record, there won't be really a way for us to institutionally allocate.
Dan DiDomenico: Fantastic points and important ones for us to consider when approaching you for a meeting or for a conversation. Digging a little bit deeper now into the portfolio, maybe if you just talk to us a little bit about those mix of assets and how it typically would look as it relates to your public market opportunities.
Yasir Mallick: Some context about CIBC, a very large Canadian bank. But I really manage their EB pension plan. So, we sit within treasury, and I lead the public markets function, so a new role that was created as they think about internalizing. So really my mandate is to internalize manager selection for the public markets investments at CIBC pension plan. And so, what that includes is effectively public equity, public fixed income, and hedge funds. So really what I'm looking for there is it's really setting the table. Like what are the tools and resources I need to really have the same level of investment due diligence, monitoring, and rigor as my other shops? So that was initial groundwork in those first few months. And now it's really more top-down strategy. So, what do we have right now? What level of optimization can I do around that? Or is it fully optimized right now? So that's the discussion. There's different roles in public equities like the degree that you use long only, the difference between fundamental versus quant. Will you use extension strategies? Is hedge funds an asset class separately? Do you put it portable alpha within publics? Once you set this top-down program structure or how you think of the percentages to all those things, in addition to how much liquidity you really need to have in publics equity, then it's about trying to find that manager that fits that and whether they have capacity or not, and how you scale into these things.
Dan DiDomenico: Yasir, so this is one of my favorite questions to ask. What are some of those areas of opportunity that you're assessing now within the public market space?
Yasir Mallick: Specifically, for my current role, and the initiatives, and going back to I think Rob made a point about gluttony for pain and joining groups that you have to start from ground zero again and build back up. So right now, I would say my main focus is really top-down strategy and getting that program construction right. What is the ELF objective? What is the tracking error? Public equities? Is public equities hedge funds separate? Is it contained into one wrapper? And how much of these strategies, quant, fundamental, et cetera? But concerns overall is just look like US equities had a tremendous run. If I could go back in time in 2010 and just invest in that, I would. Or if I really could, it's like Tesla and all these make sense. They are roughly 70% of ACWI today, MSCI ACWI. If I had a time machine 10 years into the future, I feel like that cannot be sustainable, 70% of global equity markets. And so how do we think about our geographical allocations here? And how does that line up to manage our universe today? So, people are thinking ACWI ex-US for, I think, most US institutional investors. There's EMX China now. And there's a bunch of ways to implement. And so, my main focus is what should be that policy or implementation home base. Do I have DM and EM separately because the world has fractured now into two camps? Or and there might be even further fracturing. So, in terms of even within the DM camp, there's potential hostilities now. Yeah, so I would say that's my biggest, I would say, the most impactful material decision. There's obviously, different strategies like people like metals and mining for the thematic long-run nature of EV and the move toward more sustainable economy. There's also biotech and specialists and a few other areas. But I would say that's the major thing I'm focused on at this point that's driving me to pursue this project and initiative as quick as possible.
Robert Morier: That makes sense. I'm getting concerned about your pain threshold. And that you might be doing this all alone. I know you're not. So, would you mind telling us a little bit about the team? Who else is with you on this journey?
Yasir Mallick: The organization, so $8 billion in AUM, $10 billion gross exposure. When I joined, there was three individuals so led by our CIO, James Ash. There is a head of private markets who deals with everything… PE, real estate, infrastructure, private credit. And as I mentioned, they were primarily using an external consultant for all public markets. So, my goal is to internalize that. So, I'm leading that function. We also recently added a head of a total portfolio management, so asset allocation, risk, these broader plans of reporting, and technology analytics. So, the build-out has effectively been two more senior hires, and then let's see what else we need. Because once again, I think you can do a lot with technology these days. The question becomes how many managers is going to be in your program? What does the complexity of this program look like? I'll have a better answer, honestly, for some of that in the next 12 to 18 months as I think about where the top-down parameters land.
Robert Morier: That sounds interesting and a lot to think about over the next year or so. I'm curious, maybe thinking about your past experience, and now developing house views, have you developed a house view yet on fund of funds, specifically thinking about the hedge fund book?
Yasir Mallick: I have used it in the past, in specifically UBC. And look, I would say it really depends how big your hedge fund allocation is. And I think it goes back to that point. Is hedge funds a separate asset class in your policy mix? All the experience I've had with a dedicated policy allocation is that there's just buyer's regret or remorse for this asset class because it's market-neutral generally and no real beta. But long term, beta pays… or it has been. The total return of every other asset class that has a market beta, whether it's real estate, infrastructure, PE, credit, whatever, they all look better. And so, the question is why would you do this? And the typical answer for investors is drawdown protection, or lower volatility, risk reducing, lower correlation. But with how much privates everybody is doing, that role is effectively being done by privates. We can talk about the look-through real risk of privates versus what you see day to day. But what every institutional investor takes to their board is accounting returns, period. And those accounting returns show your actual risk experience that you're accountable for to stakeholders and members. It's hard for me to see how hedge funds fit that bucket. Now, if you're a completely independent organization that doesn't have any sort of less stakeholder involvement… there's a lot of big Canadian [INAUDIBLE] plans… that is not as much of a consideration. They might be able to take out the beta from all their underlying managers at the top of the house, rebalance the portfolio, so maybe more pure alpha. But that's the, I guess, context to your question. I haven't really answered it. But in terms of fund-to-fund, I would say my program at UBC was really small because half of the portfolio, which was the pension plan, didn't have hedge funds as a proven asset allocation. And then the endowment did. And at a minimum 5% allocation for a $2 billion portfolio, that's not really a lot of capital. So how much operational effort and systems and different tools do I need that are different than long-only equities? And how diversified would my book really be? That simply lended itself well to, look, like I'm just going to get a partner for that. Now, the challenge with that is that there's not a lot of fund-to-fund standalone organizations left post-GFC, so it is a challenge. Not saying that there isn't. But then you're kind of in the world where you have this existing fund, and maybe it's not completely optimal to your target goal that you're trying to achieve. You kind of have to take everything, or you have to effectively have the scale to do an SMA and have some parameters around it. So that's, I guess, my fundamental issue with the hedge fund fund-to-fund route. And it makes probably a lot of sense if you have a standalone asset allocation, not a lot of assets or budgetary constraints on internal team or technology. For how I'm thinking about it, it's more like, OK, this is likely should be part of the more broader public book. And how can I neutralize the beta-regret problem?
Robert Morier: I keep thinking about the word reactivating because you're in this reactivation mode with the plan. And rather than asking you about emerging managers, maybe thinking about it this way. Over your career, you have a number of incumbent managers that you've worked with consistently, you know them, you know their marketers, you know their portfolio managers. But you also have this really interesting opportunity in this reactivation to take new calls to managers you've never heard of, or you may not have met before, so maybe not quite emerging managers, but they're emerging managers to you because they haven't been in your plan. So how do you think about those two calls, if you will? Kind of going back to what Dan was talking about when you are thinking about how you're going to build this portfolio, is the conversation different? What do you specifically look for in those managers? I also can't help myself. I'm a comic book fan, so I think about Batman. The Batmobile is always going to be there. You know it's going to get you to the crime. But it's the new year that it may not work every time, or at least in the beginning.
Yasir Mallick: There’s an appeal to that.
Robert Morier: There's an appeal to that, exactly. So, tell us about the new toys. The new gear.
Yasir Mallick: My youngest son just got into Batman, and so this week, he [INAUDIBLE] Batman toothbrush. So, it's interesting timing on that comment. Look, I guess it depends on how you started your journey and how you answer that question. I started OPE which was total fund. And my economic motivation was not to earn value add on only the portfolio that I put in place. So that was never an objective function. And joined UTAM, and the same thing. Like there wasn't like my ability to carve off everything or carve off a sleeve or put it into some sort of legacy bucket and say, OK, you know what? From this point onward is my performance column. So, the reason why I say that is that just changing managers is a disruptive activity. And there's two reasons. One is the cost, there will be cost of transition, cost of time. But look, there's also a potential reputational cost of not being a long-term partner. And you don't want that either. So, I don't really think about it in that, OK, these are the managers that I need to put in now that I've always worked. Look, I'm always looking to be disproven as well. So, what I would say is start with coming in and looking at what they have and thinking about really more program design. And if there's literally no change in program design, what we currently have is probably fine. So overall, not looking to change really for the purpose of changing, I would say that doesn't achieve anybody's objective. So, I would start there. And then you're trying to understand, OK, well, if there's a new overall program objective, how do the things in the current portfolio fit that objective and what things don't? And look, it has nothing to do with the manager or their proposition. You try to be upfront. You try to have a lot of lead time. You try to manage that relationship. There might even be other strategies that are running that might be a better fit for what you're doing now. So, there's a bunch of those kind of factors. And then to be very frank, it's like I started back in 2011, so there's lots of managers I've invested in, but they are capacity constrained. So regardless of how much relationship pull I might think I have, there is now not the same opportunity to do everything that you could do in 2011, or 2015, or 2018.
Robert Morier: I would like to hear your thoughts on some of the challenges and opportunities you see on the horizon for pension funds in particular, like CIBC's. Correct me if I'm wrong. I believe CIBC's pension fund, is it the only open pension fund?
Yasir Mallick: Very unique. So typically, you're used to corporate entities having more of like a closed plan, a legacy plan that is then really more fixed income or annuitized. But here, it is open for new employees. They have not closed it. And it's the only Canadian bank that still has it open. And I think the only one that's listed on the Canadian Stock Exchange. So that presents its own kind of challenges. But setting that aside, I guess my comments on that question about challenges today is really, I would say, more from a Canadian investor perspective because this might be very different in other places. I think in the past we made a lot of general views that it was better to be globally diversified. Reducing home bias was part of that push. When we thought about public equities or private equities and hedging, that meant it's better not to be hedged because it was risk-reducing, and exposure to the US dollar helped, and interest and rate volatility was relatively low for like a decade or non-existent for almost 20 years. It was, I would say, a much more simpler kind of calculation. I think the greatest challenge now is what to do about that home-country investing, or what will regulators impose legally. There's a lot of discussion in Canada too about the lack of Canadian institutional pension plans really investing in Canadian equities and a bunch of these things. And leaving the entire market has maybe created more inefficiency actually in our markets. So that's one thing. My earlier comment about what should be the DM and EM split in your worldview, I think a lot of plans in Canada have moved to an ACWI home base, which is basically all-country world, right? That includes EM. But the EM weight in that index is kind of driven by MSCI. So, you're kind of left to the index weighting scheme. So that is front and center for me as well, what to do with currency management in general because that seems to have picked up in terms of volatility. And that's just a function of, I would say, the end of global coordination and synchronization of macro and monetary policy. So overall, that's how I think about it. And so, what that leads you to is even geopolitics and domestic politics and social tensions maybe amplified by COVID… there's a lot here. But I think the biggest thing is what to do about geographic or global diversification of all your assets, both equities, privates, whatever. Because even privates, things like infrastructure, it was really predicated on a lot of trade, free trade like ports and airports and all these things. So, what happens when it's more like to-each-their-own type of philosophy going forward, where you're not really maximizing for both you and global GDP, but you're only focused on? So, there's no longer this Nash-equilibrium type of thing. There's just prisoner's dilemma. Everybody's on their own. And if that's the world, then we need to really think about how we get comfortable with Canadian asset exposure, US asset exposure, European, or DM exposure, and then EM, and China. These things are, I would say, challenging at this moment. Because there's really no kind of McKinsey Report out there that says this is what the world is going to look like in 2050 that has any sort of credibility right now in my perspective.
Robert Morier: Thank you for sharing all of that. Well, we're getting close to the top of the hour here. This has been an incredible conversation and very insightful. Just a couple of questions left purely for selfish reasons because my New Year's resolutions have completely fallen apart. But it seems like Yasir is still able to navigate his to-do list much better than I ever could. You said… and, Yasir, we've known each other for a while now… you said that you read Cal Newport's book, Deep Work, A Guide to Seeking Focus in a Distracted World. I think artificial intelligence is trying to solve part of that. But what have you done to just manage all this information that you're going to be receiving over the next 12 to 18 months and then actually having to formulate it into a strategy?
Yasir Mallick: When we last spoke about that too, it was a different period. I would say since then, a lot's changed, had to move, kids, a bunch of different things. So, I will say right now, I'm not practicing as much of that as possible. I will say it's more firefighting and like, OK, the trials and tribulations of raising a four and seven-year-old and then on top of a demanding job, and so what's more top of mind and what's more impactful right now. So, I say focus for me, honestly, is current portfolio in terms of managers and keeping up to date with them. But then really that total equity strategy, like trying to really advocate for how that's going to look like or if there's going to be differences. So that's on the work front. I committed to myself to not getting on a plane for any event or any diligence until I have a clear line of sight of what the optimal strategy is going to look like. Right now, my inbox is not down to 0 like it used to be. I have a lot of emails to get back to people on, which typically, you might have had a 48-hour turnaround on inbound prospects on these types of things. Right now, I'm not achieving any of my metrics on those.
Robert Morier: Well, you still have time. It's only January. Thank you for sharing that. We really appreciate it. Last question, Yasir, and we always like to ask this at the end are the mentors, the people that were important to you over the course of your career and maybe before, and maybe some of the advice that they gave you along the way.
Yasir Mallick: Really my parents, just hard work, choosing to come to Canada, and then, I would say, probably the greatest lottery ticket from my perspective. And so continuously hard working, so I would say that's what I learned from them. And just, I would say, the importance of education in these things. Then I think the next one was really my first CIO role at OPG just gave me a tremendous amount of accountability and opportunity to lead projects and initiatives. And so, keeping that kind of context in mind as I think about people that I have to mentor or those that have reported to me in the past. Making sure that, look, we're given opportunities to take ownership over something, drive change, or suggest, or take control and show their own work, I think it's important for our development. And I think there's a challenge right now where young people, it's hard to get the same level of breaks and entry jobs and opportunities that maybe people had between 2000 and even earlier. There's a lot of stories of people doing things in the '90s and early 2000s, like managing a book that there's probably a lot of controls on right now. So, I would say that was an important lesson. And then my two CIOs, CEOs, at UTAM, I'd say just work ethic, and then their level of technical expertise that I learned a lot from them, both due diligence about specific strategies, how you think about value-add, risk-adjusted. And then even my short stint in management consulting at KPMG, the partner there, just client-relationship management, being impactful on presentations. Like you can't have all this detail, and you really need to be succinct. And it needs to be, I would say, flashy or look very, I would say, client-oriented, even if you're doing something for internal purposes. So that was an important, I would say, step in the overall journey. But yeah, those I would say are the main ones. Obviously, a lot of managers that have come through that I think highly of and are sophisticated that I've learned a lot from as well.
Robert Morier: Wonderful. Thank you for sharing all of that. Well, we learned a lot today in this conversation. I'm sure Dan agrees.
Dan DiDomenico: I could not agree more. Yasir, you were so generous with your thoughts, your transparency. We really appreciate that. So, we wish you the best of luck at CIBC. Best of luck with your family and enjoy that Batman phase. It sounds like Robert might still be in the Batman phase.
Robert Morier: We both have a four and a seven-year-old, so I'm definitely—
Dan DiDomenico: You're in that phase.
Robert Morier: I'm in that phase.
Dan DiDomenico: Enjoy it, please.
Yasir Mallick: Well, thanks a lot. Appreciate it.
Robert Morier: Yeah, absolutely. Congratulations on all of your success.
You can find this episode and past episodes on Spotify, Apple, or your favorite podcast platform. We are also available on YouTube if you prefer to watch while you listen. If you'd like to catch up on past episodes, check out our website at dakota.com. Finally, if you like what you're seeing and hearing, please be sure to like, follow, share these episodes. We welcome your feedback as well. Yasir, thank you again for joining us. Dan, as always, it's great to see you.
Dan DiDomenico: Robert, thank you. Thank you, Yasir.
Robert Morier: And to our audience, thank you for investing your time with Dakota.
