By Muskan Arora
Fabien Delessert, Co-CEO/CIO of the $7.4 billion FCT Pension Group, takes inspiration from both Howard Marks and David Swenson.
To focus on "second-level thinking" to avoid common investment pitfalls, the CIO looks to Howard Marks, co-founder of Oaktree Capital Management, focusing on "second-level thinking" to avoid common investment pitfalls, and to David Swensen, the former CIO of the Yale Endowment for the fund’s governance and portfolio management.
This strategic blend has served Delessert well, especially in his role as co-CEO and CIO that he has had since February, as through second level thinking he has been able to focus on underlying potential outcomes in different scenarios which are generally overlooked. Over the previous five years, as a member of the investment committee, he played an instrumental role in the fund's growth from $4.2bn to $7.1bn.
For high-return investments in areas like
real estate and private markets, Delessert employs active management
strategies, while passive approaches are preferred for more conventional asset
classes such as equities and fixed income.
Despite the volatility and challenges
facing the international real estate (IRE) market, particularly in office
spaces, Delessert remains optimistic.
"We are seeking managers who can
capitalize on the current market distress and leverage what appears to be an
attractive entry point," he explains, noting the potential for growth in
international real estate amid market corrections and opportunities.
Delessert’s strategy focuses not just on
specific sectors but on identifying managers with the flexibility to pivot
across sectors as opportunities shift. This approach has enabled the pension
plan to diversify into infrastructure and real estate, providing a hedge
against inflation and rising interest rates, particularly through the
infrastructure portfolio.
With core infrastructure prices rising,
Delessert is now turning to more opportunistic managers who integrate an ESG
focus within their investment process.
"We want managers who can pursue
secondaries, co-investments, and direct investments, ensuring access to a full
spectrum of opportunities," Delessert told Markets Group in an exclusive
interview.
"This flexibility allows managers to
allocate where the best opportunities are, without being restricted to less
attractive sectors," said the CIO.
The CIO primarily invests through funds
rather than actively selecting individual stocks, and has observed strong
performance from managers like JP Morgan and Partners Group within the
infrastructure portfolio.
In line with FCT Group's commitment to
sustainability, FCT’s infrastructure managers are not only investing in data
centers but also focus on reducing the carbon footprint of the portfolio.
Delessert anticipates growth in renewable
energy sectors such as energy storage, smart grids, and innovations in energy
production and consumption—areas he believes will see significant expansion in
the coming years.
FCT Group typically allocates about 20% of
its real estate investments within Switzerland, with an additional 5% allocated
internationally.
Despite the relatively small size of the
Swiss real estate market, it has outperformed international real estate over
the past two years, providing stability and resilience to the portfolio due to
its higher exposure to residential real estate notably.
Looking ahead, Delessert identifies one of
the key challenges as the "renovation of existing real estate to meet new
environmental standards," highlighting the significant capital deployment
and investment required for these upgrades in Switzerland.
As vetting managers is a big part of how
the system’s investments look like, the CIO seeks managers who use AI alongside
focusing on whether the manager has the capacity to be active.
“I think that it’s important for us that
they have this capacity to do many different things,” said the CIO.
“The manager should not only have a bottom-up
approach but also a thematic approach in their area of expertise,” added the Swiss
head.
