81: TCorp's Tanya Branwhite – Total Portfolio Approach and Diversification

[i3] Institutional Investment Podcast

Tanya Branwhite is the Head of Portfolio Construction at the asset manager for the state of New South Wales, TCorp. In this episode, we speak about Tanya's early career, including ruffling some feathers at Macquarie Group, TCorp's interpretation of a Total Portfolio Approach and the lessons we should have learned from the GFC. Enjoy the show! Overview of Podcast with Tanya Branwhite, TCorp: 01:00 Starting out as a credit analyst with Elders Finance Group: “It was a fairly interesting baptism of fire…” 03:00 The Macquarie years. The ‘loose/tight’ culture of rules and entrepreneurship 05:30 During the GFC, I wrote research highlighting that a number of Macquarie vehicles had significant financial risk. That wasn’t well accepted within the organisation at the time. But I learned to stand by the rigour of my analysis. 07:30 Ultimately, it made my career at Macquarie, because I became sought after for client work 09:00 Leaving Macquarie for the Future Fund 11:30 The Future Fund didn’t feel like it was a restrictive environment from a government-owned perspective. It is a company that is owned by the government, not a department of the government 13:30 How has a Total Portfolio Approach changed the investment portfolio? 17:00 Risk is at the heart of what we do, because we can only control risks and outcomes are the result of that risk. 18:00 Equity risk is at the centre of this model. 21:00 Diversification away from equity risk in an environment where equity and bond correlations are positive 23:00 Not just unlisted assets, but illiquid assets can help diversification. For example, we own a number of hydroelectric dams in Canada. 26:00 Challenge in fixed income is even higher than before, because real returns are a challenge 26:00 Bonds almost had their own global financial crisis last year; it was a three standard deviation event 28:30 We prepare, but we can’t predict 34:00 On valuation frequency of unlisted assets: we do try to de-smooth valuations of unlisted assets. And sometimes these assets need additional capital from investors during periods of crisis; that is not often thought about 36:00 Managing liquidity 39:00 We are looking at natural capital and opportunistic liquidity 40:00 Reducing the number of managers, has this work finished? 42:00 On implementation and efficiency