Mark Anson, CFA: Rethinking Portfolio Construction in a Globalized, Uncertain World

Summary

Podcast Summary: Enterprising Investor
Episode: Mark Anson, CFA: Rethinking Portfolio Construction in a Globalized, Uncertain World
Release Date: August 1, 2025

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Introduction

In this insightful episode of Enterprising Investor, hosted by CFA Institute's Managing Director of Education, Chris Wease, listeners are introduced to Mark Anson, CFA—a seasoned investment professional with a distinguished career managing some of the industry's largest asset management firms and pension plans, including Nuveen Investments, Hermes Pensions Management, British Telecom's pension scheme, and CalPERS. Currently serving as the CEO and CIO of the Common Fund, Anson shares his expertise on portfolio construction, global investment strategies, risk management, and future industry trends.

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1. Navigating Global Regulations

Timestamp: 01:35 - 02:56

Mark Anson begins by emphasizing the critical role of regulation in investment management. He explains that while regulations provide necessary oversight, they also impose constraints on how businesses operate globally.

Mark Anson (01:53): "Regulation is a necessary oversight for every country. But it provides constraints on how you operate your business."

Operating in multiple countries, including China, the UK, Germany, and the US, Anson highlights the importance of understanding each country's regulatory landscape to effectively manage investment products and interactions with local investment managers.

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2. The 30-30-40 Asset Allocation Strategy

Timestamp: 02:56 - 05:34

Anson advocates for a 30% equity, 30% fixed income, and 40% alternatives (30-30-40) asset allocation model. He discusses the diminishing diversification benefits in public equities due to increased global market correlations.

Mark Anson (03:19): "The global markets have become more coordinated and they tend to react similarly. That means diversification isn't as robust in public equity markets as it once was."

The shift towards alternatives is driven by the need to seek additional diversification and yield, as traditional public equity investments no longer offer the same level of risk mitigation. Anson elaborates on how the alternative allocation includes credit, private credit, mortgage-backed securities, and other yield-focused assets.

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3. Public Equities and Emerging Markets Focus

Timestamp: 05:35 - 06:59

Discussing public equities, Anson notes a slight bias towards the US in Common Fund's portfolio while increasingly exploring emerging markets (EM) for growth opportunities and diversification.

Mark Anson (06:08): "When we look for good private equity managers, we look for those private equity managers that have one or two industry domain expertise."

He underscores the potential of EMs like China, the second-largest economy, and highlights the robust opportunity set driven by young labor forces and rising middle classes in these regions.

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4. Investing in Private Markets and Capturing the Liquidity Premium

Timestamp: 07:06 - 09:51

Anson delves into the significance of private capital within the Common Fund's investment strategy. He explains the concept of the liquidity premium—an additional return expected for investing in less liquid assets.

Mark Anson (08:21): "There's no ETF or index fund. So the way you have to do it is by finding good investment managers in the private capital space that will capture that liquidity premium for you."

He differentiates between venture capital and private equity, noting that while venture capital success depends on a few top-tier firms, private equity offers broader diversification opportunities across numerous firms focusing on specific industries.

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5. Impact of Potential Taxation on Endowments

Timestamp: 09:51 - 12:08

Addressing the potential changes in taxation policies affecting endowments, Anson discusses how increased taxes would introduce new constraints in portfolio construction.

Mark Anson (10:10): "If indeed there is going to be a tax on endowments, you would have to build this tax loss harvesting into the portfolio construction process."

He explains that endowments, traditionally tax-exempt, would need to incorporate strategies like tax loss harvesting to offset gains and balance between long-term and short-term investments to manage the tax implications effectively.

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6. Principles of Risk Management in Uncertain Times

Timestamp: 12:08 - 14:28

In the context of heightened economic uncertainty, Anson outlines his approach to risk management, focusing on both traditional risk premiums and exogenous shocks such as policy changes.

Mark Anson (12:27): "Risk management for us is not only looking at the traditional risk premiums... it's looking at these administrative shocks that will come in exogenous to the economics of the market and how they then impact the economics of the market."

He highlights current risks like the impact of tariffs, potential Federal Reserve rate adjustments, and the overall economic uncertainty reflected in high indices, drawing parallels to the volatility seen during the COVID-19 pandemic.

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7. Future Trends: Regionalization and Capital Flows into Private Equity

Timestamp: 14:28 - 16:58

Anson anticipates a shift from globalization to regionalization or even isolation due to changing geopolitical dynamics and trade policies. He foresees continued regional cooperation, especially in North America, influenced by current tariff policies.

Mark Anson (14:46): "It's no longer globalization. It might be regionalization or maybe even isolation."

Additionally, he observes a significant trend of increasing capital flows into illiquid assets like private equity. Despite concerns about crowding in this space, Anson believes opportunities remain abundant by carefully selecting specialized private equity managers.

Mark Anson (15:46): "There's still a lot of opportunity to extract value from private equity and other illiquid asset classes."

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8. Advice for Young Investment Professionals

Timestamp: 16:58 - 19:22

Concluding the conversation, Anson offers valuable advice for aspiring investment professionals. He strongly recommends pursuing the CFA charter, emphasizing its long-term career benefits.

Mark Anson (17:23): "Take the CFA. It's well worth it. Don't put it off. Do it as soon as you can."

He also encourages young professionals to seek international experience, leveraging the global nature of the CFA designation and the investment industry to gain diverse perspectives and opportunities.

Mark Anson (17:50): "Get outside the US. Getting a different perspective helped me so much in my career."

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Conclusion

Mark Anson's comprehensive discussion provides deep insights into modern portfolio construction in a globalized and uncertain environment. His emphasis on adaptive asset allocation, the strategic inclusion of alternative investments, proactive risk management, and the importance of professional development serves as a valuable guide for investment professionals navigating today's complex financial landscape.

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Notable Quotes

• On Regulation:
  "Regulation is a necessary oversight for every country. But it provides constraints on how you operate your business."
  (01:53)

• On Public Equity Correlation:
  "The global markets have become more coordinated and they tend to react similarly. That means diversification isn't as robust in public equity markets as it once was."
  (03:19)

• On Liquidity Premium:
  "There's no ETF or index fund. So the way you have to do it is by finding good investment managers in the private capital space that will capture that liquidity premium for you."
  (08:21)

• On Taxation Impact:
  "If indeed there is going to be a tax on endowments, you would have to build this tax loss harvesting into the portfolio construction process."
  (10:10)

• On Risk Management:
  "Risk management for us is not only looking at the traditional risk premiums... it's looking at these administrative shocks that will come in exogenous to the economics of the market and how they then impact the economics of the market."
  (12:27)

• On Future Trends:
  "It's no longer globalization. It might be regionalization or maybe even isolation."
  (14:46)

• Advice for Young Professionals:
  "Take the CFA. It's well worth it. Don't put it off. Do it as soon as you can."
  (17:23)

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This in-depth summary encapsulates the key points discussed by Mark Anson, providing valuable takeaways on portfolio construction, global investment strategies, risk management, and career development in the investment management industry.

Transcript

[Mark Anson]

Foreign.

[Mike Wahlberg]

Hello and welcome to the Enterprising Investor, the flagship investment podcast for CFA Institute. I'm Mike Wahlberg and I'm pleased to hand the reins again this episode to CFA Institute's Managing Director of Education, Chris Wease, who interviewed Mark Anson at this Institute conference in Chicago last May. Mark will be a well known name to many listeners as he's led many of our industry's largest asset management firms and pension plans over the including the bass family office, $900 billion juggernaut Nuveen Investments, Hermes Pensions Management and both Britain's largest pension plan for British Telecom and the U.S. s largest institutional investor, CalPERS. An award winning author, he's published over 100 journal articles and literally wrote the textbook for the Kaya program. With a PhD from Columbia, a CFA charter along with CAIA, CPA and Chartered Global Management Accounting designations, he threw in a law degree because why not? Today Mark is the CEO and CIO of the Common Fund and chairman of Common Fund's capital and asset management companies. In their chat, the two cover key lessons Mark's learned managing money across the globe. They touch on his 303040 asset allocation process, trends in asset correlations, his focus within EM markets, the recipe for success when investing in private markets, the impacts of current White House policies on taxation of endowments and managing risk. And he finishes up with a discussion of future trends in our industry. It's a packed 20 minutes. Here they are.

[Chris Wease]

Well, thank you for joining us.

[Mark Anson]

A pleasure.

[Chris Wease]

Mark, you've led major institutions like Calpers, British Telecom, Pension scheme, Nuveen. What are some of the key lessons that you have learned from managing investments across different regions and regulatory landscapes?

[Mark Anson]

Well, let's start with regulation. Regulation is a constraint. Now the basic idea of regulation is to just have some oversight on what you do. Now of course, here in the United States we have the securities and Exchange Commission and they have very clear and strict laws with regard to being an investment advisor and how you construct your business around that. So that's one of the things you have to think about when you operate on a global basis is what are the regulations in the country in which you're operating. You know, at Common Fund, we have offices in China, London, Munich, as well as Connecticut, New York and San Francisco. So we have to understand what the regulatory landscape is in each one of those countries in which we have an office and then what that means in terms of not only the investment products we might sell, but also how we interact with investment managers in those different landscapes. So again, regulation is a necessary oversight for every country. But it provides constraints on how you operate your business.

[Chris Wease]

Let's talking about how you operate your business. You're a proponent for the what, 30, 30, 40 asset allocation screen, right? 30% equity, 30% fixed, 40% alternatives. Would you like to talk about that a bit and how that, how you come to that within the space you operate?

[Mark Anson]

Well, first with regard to 30% public equities, what we've seen over the last couple decades now is the landscape for public equities in terms of diversification has shrunk. It used to be that a lot of diversification just through investing across boundaries, geographic borders, US versus international versus emerging markets. But what we've seen over the last 20 years, particularly with China joining the World Trade Organization, is the investment across borders doesn't bring you the same level of diversification as it once did. It's just a fact of the correlation of the markets. It used to be the G7, the seven largest economies, then it was the G10, then the G15, now it's the G20. So what you see on a global scale is indeed we invest in global markets and those markets are becoming increasingly synchronized and coordinated both on monetary and fiscal policy. Now what's interesting, just as I say that we've actually seen a little divergence right now, there's arguments to be made here in the United States that the Federal Reserve bank should be raising rates or cutting rates. And it's not clear what they're going to do. At the same time, we see Japan becoming more aggressive in raising rates, the ECB lowering rates. So suddenly, even despite what I just said, there seems to be a bit more diversification or certainly diversion of monetary policies around the world. All that being said, if you look at for instance the S&P 500, the correlation that with, let's say MSCI, EFA today, that's about 95%, very different from 20 years ago when it was only about maybe 50 or 60%. So the global markets have become more coordinated and they tend to react similarly. That means diversification isn't as robust in public equity markets as it once was, which is why you then have to expand your portfolio into alternatives a bit more than you used to. And when I think of 30, 30, 40, that 30% is not just traditional bonds, it's credit and private credit, it's mortgage backed securities. It's looking at everything that might have a yield component to it as opposed to a growth component in public equities or private equity. That was a long winded answer. But let Me stop. There's a lot to unpack there.

[Chris Wease]

Yeah.

[Mark Anson]

So when you.

[Chris Wease]

Let's take the public equities component and the high degree of correlation you talked about. So how much energy do you put into balancing your exposure in different markets, given that?

[Mark Anson]

So at Comic Fund right now as an example, we tend to have a bias towards the us in fact, when we look at our public equities portfolio, there's a slight leaning towards the US but we've also begun looking more carefully at emerging markets. We still see good growth opportunities there and a bit more diversification than what you get in developed markets. X the US now of course, when we think of emerging markets, you've got China, the second largest economy in the world, still an emerging market. Right. Even though it's our second largest economy. So that sucks up a lot of volume or investment capital. But certainly there's other places to find value in emerging markets. And so we look for managers that are just doing emerging markets as opposed to global mandates. And one of the things that we have found of course is when you think of the growth trajectory of emerging markets with young labor forces trying to build up middle class, just like we have here in the US at a consumption driven economy, you see all that coming through the emerging markets, which is why we think that gives us an opportunity set maybe a bit more robust than looking at just developed market economies.

[Chris Wease]

And through what mechanism do you the alternative allocation, through all mechanisms do you get into that?

[Mark Anson]

So we are at Common Fund, we invest significantly in private capital and then for us that's private equity. So leveraged buyouts, it's venture capital, it's natural resources, it's sustainable resources, it's secondaries and then it's private, private real estate. And we've been longtime investors in private capital going back 40 plus years in our client portfolio. So early adopters into private equity, venture capital and the other illiquid asset classes. One of the things that we did several years ago at Common Fund was produce a paper that actually identified the liquidity premium, that extra premium you should get for investing in illiquid assets. Long term average is about 3.6%. So that's one of the things we identify the size of that premium over the last 20 plus years. We then shock that premium to see if it was indeed a standalone risk premium compared to the equity risk premium or duration or credit. And indeed it is. The catch is, is to get that liquidity premium, you can't capture that premium passively. There's no ETF or index fund. So the way you have to do it is by finding good investment managers in the private capital space that will capture that liquidity premium for you.

[Chris Wease]

And I imagine a lot of them, like, I imagine you have to be very well diversified there.

[Mark Anson]

You do. But you know what, in some places, it doesn't work very well. Venture capital would be a great example. Venture capital. To perform well in venture capital, you really are investing with just a handful of the best known venture capital firms. Venture capital really is a game of access as well as an asset class itself. So it's an access class and asset class at the same time. And that means that there is probably about 10 great venture capital firms, Sequoia, Kleiner Perkins, Lightspeed, et cetera, that tend to have a virtuous circle of getting the best entrepreneurs coming to them and finding the best opportunity set. So in venture capital, broad based diversification really doesn't work. If you diversify away from those top names, you're really diversifying down towards the median. Now back though, with private equity. So that's leveraged buyouts, traditional growth capital. There are literally now thousands of private equity firms out there. So there's plenty to choose from and plenty to diversify in. What we have found, investing in the buyout space, what we call private equity, is you want to invest with those firms that bring operational experience to the table, and typically they're just focusing on one or two industries. Could be franchise it, could be the automotive industry, it could be banks and finance. But we look for private equity managers that focus and have a target of just one or two industries. We find that's where we capture the best returns.

[Chris Wease]

Let's go back at a portfolio level. I know you're concerned about taxes, and I think you're following the potential for taxation on endowments and changes there. So how does that affect your view on how you run things?

[Mark Anson]

At Common Fund, our goal is not to be political, but to assess what political ramifications might be as they impact our client portfolios. And our clients are endowments and foundations. And as we have heard from the current White House administration, they are proposing some level of increased tax on endowments. And what that means is you're now adding a new constraint to the portfolio construction process. One of the wonderful things of an endowment or a foundation has been their tax exempt status, that you construct a portfolio without having to allocate or plan for taxes. Now we might have to do that. Before Common Fund, I worked for the Bass family office, which is the billionaire family based out of Fort Worth, Texas. Every Year we would go through what's called tax loss harvesting. We looked to see where there were losses in our portfolio that we could capture, harvest and used to offset the gains in other parts of the portfolio. So that you could lower your overall tax bill for endowments and foundations. You haven't had to consider that, but that would be potentially a new part of the portfolio construction process. If indeed there is going to be a tax on endowments, you would have to build this tax loss harvesting into the portfolio construction process. The other thing that taxes on endowments would do is it makes you burn the candle at both ends. On the one hand, to shrink your tax bill, you want to invest long term for long term capital gains. But the flip side is you have to pay taxes, so you need some short term investments as well. And that's the candle burning at both ends that you're going to have to learn how to balance. So we'll see what the potential tax rate might be, but it definitely will have a significant impact on how we construct portfolios if our clients start to become taxable as opposed to tax exempt.

[Chris Wease]

How about a similar topic I noticed on everyone's mind at the moment is risk management. So given your experience at some of the world's largest pension funds and what are the principles that guide your approach to risk management, especially in an environment like we're dealing with year to date?

[Mark Anson]

Well, most certainly one of the risks we've had here is a new administration in the White House bringing a new policy shift regime, tariffs. And we're all trying to sort out what the impact of tariffs will be. Again, when you read the economists out there, some say the Fed should be raising rates to fight potential inflation from tariffs. Others say the Fed should be reducing rates because tariffs may slow down the economy and potentially push us into a recession. So that's one key risk. And the risk there is not just the tariffs themselves is what will be their economic impact. What we've seen is what are called the uncertainty indexes. So the Federal Reserve bank of St. Louis produces an uncertainty index. And what they measure are such things as just what's the number of newspaper articles and journal articles about the uncertainty, the economic uncertainty. They measure the dispersion of economic forecasts. Anyways, when you look at this uncertainty index, it's spiked almost all time highs close to where we were in the middle of COVID And what that demonstrates again is when you have uncertainty dispersion in the market, that increases the volatility. And so that's one of the things that we're worried about right now as we look at risk management. One not only will be the impact of tariffs on the economy in the US Will it result in higher inflation? Will it result in slower growth? Could it be stagflation? How will that impact our client portfolios? And then how do we think about our portfolio construction process around that? So risk management for us is not only looking at the traditional risk premiums such as duration and credit and liquidity premium, the equity risk premium and where they are today and how they're impacting our portfolios. It's looking at these administrative shocks that will come in exogenous to the economics of the market and how they then impact the economics of the market. And that's where we're focused on right now. Again, a very long winded answer, but hopefully that got to the question you asked.

[Chris Wease]

Well, let's, let's maybe take it up to a little bit higher level. So this next question, I'll let you choose your own adventure to a bit future trends in investment management. And I'll let you decide whether you want to address that from a geopolitical perspective or a technological perspective or otherwise.

[Mark Anson]

We'll start with politics and economics. I mentioned World Trade Organization earlier on in my comments. You know, formed many years ago to try and bring countries together, share information, coordinate fiscal and monetary policies, share supply chains that seems to be breaking apart. I think we all see this more local onshoring, whether it's the US or Mexico or Canada, and the traps of course are reinforcing that. So I think that's one trend we have to deal with. It's no longer globalization. It might be regionalization or maybe even isolation. And so that trend, at least for the next four years, I would expect to continue while we have the current administration working through their tariff policy. So that's one trend. I'd say another trend that we see is that there is a lot of capital flowing into illiquid assets. Commentary around private equity being the new crowded trade is so much capital is flowing into that and there's so many private equity managers now we're less concerned about private equity as a crowded trade. Again, it comes back to what I mentioned earlier. When we look for good private equity managers, we look for those private equity managers that have one or two industry domain expertise. Again, you know, I mentioned we invest with one great manager out of Atlanta and all they do is they look at franchises, things like Arby's or Subway or Jimmy John's sandwiches or Planet Fitness. The franchise model is all they do and know, and that's where they operate in terms of finding good investment opportunities. Those are the type of private equity firms we look to invest with. So even though there's this trend towards investing more and more capital in private equity, there's still a lot of opportunity to extract value from private equity and other illiquid asset classes. It doesn't mean that more capital won't flow into it. That seems to be a big trend. You just have to be a bit more precise about with whom you're going to invest and how they're going to generate those good returns in the private equity space. I'll stop there. Those are two trends that I think are pretty clear to everyone.

[Chris Wease]

Well, one last question. I mean, you've had a successful career and you've been active with CFA Institute for over the years. I think you've directly and indirectly touched a lot of young professionals. So speaking to that group, what, what advice would you give young professionals working to build a place in this industry in terms of the mindsets and the skills to have and, and really to lay the foundation for a good career?

[Mark Anson]

A wonderful question. I, I, I often get asked, you know, by people who are, you know, early in their career, you know, Mark, should I go through the CFA program? And my response is, well, think where you might be three years from now. Would you like to be three years from now with your CFA or not? Then I believe the question is, oh, sure, for years, and I'd love to have my cfa. I said, there's your answer. Go do it. It won't be easy. We all have a story to tell about how we, we suffered through those study programs and those classes, but we all made it through. The second thing is, is Tom, is when I first heard about the CFA program, I was in graduate business school. At that point, I thought, oh, I'm getting my graduate degree in business school. The CFA thing, no, I probably don't need that. And that was a mistake. Wasn't until I got out of business school, began working on Wall street, got in the asset management industry, and then recognized and realized just how valuable the CFA certificate was, and so went back and did it and wish I had done it when I was in grad school. It would have been so much easier. But I had to learn that lesson. And the other thing that I try and tell young men and women in this industry is if you get the opportunity to work overseas, do that. You know, the CFA platform is now a global platform. And not only is that, but the asset management industry is a global platform. I learned so much by living and working in London for a few years. Just getting outside the US Getting a different perspective. Getting a perspective that wasn't through the lens of sitting within the United States helped me so much in my career. And again, you know, because I had the CFA degree behind me at that time and it had my charter, I had the confidence that I could take that step to work outside the U.S. so again, for young men and women, take the CFA. It's well worth it. Don't put it off. Do it as soon as you can and then take that charter and, you know, do creative things with it. Go work outside the US if you get that opportunity.

[Chris Wease]

That is awesome. Well, on that note, I'll. We'll stop and I'll thank you so much for joining us.

[Mark Anson]

Oh, it's a pleasure, Chris. Thank you. That was so much fun.

[Chris Wease]

Thanks.

[Mike Wahlberg]

I'm Mike Wahlberg, and this is being the enterprising investor.

[Mark Anson]

Sam.