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APG manages USD 500bn (!) for Dutch pensioners. Michael Oliver Weinberg is an asset allocator for APG, and teaches investing at Columbia Business School. He is the founder of Project Punch Card and divides his time between New York and Amsterdam.
“APG has a ‘secret portfolio’ = portfolio of managers. A lot of them we have had for 10, 15 years. As a firm we are looking out 30, 40 years. 500bn for Dutch pensions. We are global. We take a global perspective on the world. We have multiple offices in Asia.”
Interviewer: “What does it take to get into this Dutch portfolio?”
“Four main factors:
- Return, it is important to generate returns for Dutch pensioners.
- Cost, we are extremely fee-sensitive.
- Socially Responsible Investing, SRI is a key differentiator. We believe businesses should be held to a high standard.”
Michael Oliver Weinberg – “What is a great return?”
Michael Oliver Weinberg’s answer: “It is uncorrelated. It is entirely driven by alpha, not beta. It is irrespective of what the markets do. We look for consistent repeatable process. Track record. Risk management. Scenario analysis. Other risk-adjusted statistics. Is their edge informational or analytical?”
“Future hedge fund managers or any fund managers will use machine learning and alternative data. Soros, Druckenmiller etc went out into the world and looked at things. In the Internet age, you cannot have an edge anymore because everyone knows the same. Machine learning has been around for decades, now it works. Storage for data has decreased exponentially for decades. Now you have data science which previously didn’t exist. And you have exponentially growing data. You take these factors together.”
Michael Oliver Weinberg furthermore: “If you would like to have a future you need to work on inefficient markets, maybe Asia or Europe. And smaller securities, places where there are more inefficiencies that lend themselves to machines.”
“In our view the next generation of money managers is largely not the same profile as people like myself. They may be scientists, PhDs in signal processing. Maybe they are in statistics, computer science, programming, they are gaming and ‘hackers’ (not real hackers), adaptive at computing and data and machine learning. But they are not the MBAs.”