From the CIO: Here's Why "Investment Excellence" Is Crucial for Wespath

   By Johara Farhadieh
   Chief Investment Officer (CIO)

It’s hard to believe, but it’s been nearly a year since I joined Wespath as the incoming chief investment officer (CIO), and I’ve now been CIO for over a month. Time flies! In that time, I’ve had the great privilege to meet so many of our institutional investors and participants—and learn how your investments with Wespath make a difference in your lives and people’s lives all around the world.

One of the reasons I was so excited to join Wespath was the opportunity to build on the strong foundation that had been established. For instance, we support our institutional investors with industry-leading client service. Going forward, I want to prioritize providing our institutional investors what they want and what they need to be successful in their missions. For our participants, I want to help them feel more confident about retirement.

In my new role, I think it’s important I explain these priorities—and provide the opportunity for you to get to know me a little better. There are a few phrases I use often, and I thought it might be helpful if I went into a little more detail about what I mean. These concepts help explain not only who I am as an investor, but who I am as a person.

That’s the idea behind this blog post and two additional blogs planned for the coming weeks. I also filmed a video to go along with each blog.

The phrase you will likely hear me say most often is “investment excellence.” As in, at Wespath, we provide investment excellence. For an asset allocator like Wespath, the primary way we provide investment excellence is to hire and provide access to the best asset managers. Our asset managers make the buy, sell and hold decisions on the stocks, bonds and other securities in our funds—so it’s critical that we get it right and work with the best.

It is our job at Wespath to establish guidelines for our asset managers, and then monitor, scrutinize and conduct research on the work they do. And then terminate an asset manager if it is not delivering as expected. We also must foster relationships with other asset managers, so we maintain a deep bench of potential replacements in the event we terminate an existing asset manager or seek a new type of investment strategy for our funds.

Another important consideration here is fees. Any good asset manager makes sure it is paid accordingly, but it is our job at Wespath to ensure that we pay fees for value. That doesn’t mean paying the lowest fees. But it does mean that the asset managers we hire are incentivized accordingly to add value for our investors. Since I started, we have negotiated reduced management fees that I’m confident will reduce costs for our investors—just as I did at my previous job.

In the below video, I spoke with my colleague Ryan Nilsson from our communications team about the critical role asset managers, fees and Wespath staff play in providing you investment excellence:

While I didn’t talk about it in the video, there’s another crucial element of investment excellence I’d like to highlight here: providing choice.

While I believe in the foundation of fees for value and strong asset manager selection, I also believe investment excellence does not look the same for every investor. Instead, we need to provide our investors options to meet their specific risk and return objectives.

Wespath manages funds for an array of institutional investors. We also administer defined benefit (pension) plans and defined contribution (403b and 401k) plans for current and future retirees. For pension recipients, investment excellence means the monthly check arrives on time for as long as they and/or their spouses are alive. For a college endowment—which has an annual spending rate—investment excellence means being able to support their mission in perpetuity.

Wespath is already enhancing its fund lineup to provide more choice. Last year, we launched the Alternative Asset Fund to provide institutional investors additional access to private market investments. Earlier this year, Wespath made the U.S. Equity Index Fund available to participants with defined contribution retirement plans. Later this year, the Social Values Choice (SVC) equity and bond funds will launch for institutional investors. The SVC funds adhere to heightened environmental and social investment criteria and give faith-based institutions the option to align their investments more closely with their values.

And there are more ways to offer greater choice that we are considering for the future. For example, at the moment, Wespath offers all investors an International Equity Fund, which holds stocks in companies based in both developed and emerging markets. While Wespath and its asset managers can articulate the risks and opportunities of investing in emerging markets like China, India and Brazil, we need to recognize that not all investors want that direct exposure for one reason or another. And that’s OK. Whether someone wants to exclude emerging markets for investment or non-investment reasons, I think it’s important to offer choice to them. It’s possible we will one day offer investors exposure to international stocks exclusively in developed markets like the United Kingdom, France and Japan.

I am very excited about what the future holds. I am excited to not only grow Wespath’s investment department to best meet your needs, but also to see our institutional investors serve more people and our participants feel more confident about retirement.

Up next: I encourage you to check out the “Investment Insights Blog” again next week to learn why casting a wide net and being inclusive in our search for asset managers improves returns.