National Conference on Public Employee Retirement Systems

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From Public Pension CIO to Managing Director of Monroe Capital: Andy Kiehl Shares Perspective on Institutional Investor Landscape

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  • On: 04/24/2024 12:19:58
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"I believe the single characteristic of the institutional investment world that has changed the most is complexity. It is not just about equities, fixed income, and commodities when determining portfolio construct anymore," said Andy Kiehl, Managing Director of Monroe Capital.

By: Reshana Peters, Digital Media & Marketing Coordinator, NCPERS

As part of an ongoing series of public pension executive profiles, NCPERS spoke with Andy Kiehl, Managing Director of Monroe Capital, and former Deputy CIO of the Kentucky Retirement System (now the Kentucky Public Pensions Authority). We dive into his career path, what to look forward to at the Annual Conference & Exhibition (ACE), and the investment risks and opportunities ahead. 

Q: What initially drew you to the public pension space? 
I first began working for an asset management firm, building and maintaining relationships with corporate and public pension plan investment staff. When I joined the Kentucky Retirement System, I was instantly engaged in the investment process.  With an active allocation across multiple asset classes and a steady flow of capital from the state, our small staff needed to have a constant flow of current information.  The transition from a narrow focus on the private side to developing a broader perspective of institutional investments as an asset allocator was a tremendous opportunity for me to expand my understanding of multiple asset classes and the industry as a whole. 

Q: How did your time with the Kentucky Retirement System inform your current approach as the Managing Director at Monroe Capital? 
As Deputy CIO in an understaffed public pension system, along with the CIO, I was responsible for overseeing multiple asset classes, overall portfolio construct and the governance and compliance structure—not just a single investment focus. My understanding of governance and fiduciary responsibility has been very helpful. Knowing how an investment committee operates and understanding the questions that trustees will be asking helps frame the conversation with a staff considering an investment in Private Credit. At Monroe, my conversations with pension plan staff and investment professionals go beyond just an investment allocation. Having been in their seat, my experience with Kentucky Retirement System gives me a unique perspective that allows me to expand my conversations with pension plans beyond a single investment consideration.  

Q: Having worked in the institutional investing space for over 20 years both as a Limited Partner and Asset Manager, how has the industry evolved in this time? 
The industry has evolved in many facets including technology, compliance, benchmarking, reporting, and portfolio construct among others. I believe the single characteristic of the institutional investment world that has changed the most is complexity. It is not just about equities, fixed income, and commodities when determining portfolio construct anymore. There are now additional asset classes and complex investments which have made portfolio construction more complicated. With the introduction of new investment types and asset classes, additional understanding and due diligence is required for nearly every allocation. Capital can be deployed in dozens of asset classes and sectors via investment vehicles and structures that are also more complex than ever before.   

Q: In the ever-evolving investment landscape, what advice would you offer to a new trustee or staff member who wants to stay informed?  
I would encourage staff and trustees to foster mutually beneficial relationships with members of the asset management community. This includes companies and individuals who are willing to share resources that can help you grow your understanding of a particular subject. For instance, a friend of mine in the public pension community used to include a clause in his asset manager contracts that allowed his staff to observe and learn the process on-site, with direct access to the resources of the firm. Another way to stay informed is by asking colleagues, vendors and asset managers to forward article recommendations and to be included in distribution lists. Leveraging others to be your “eyes and ears” can provide valuable perspectives from a number of resources. 

Q: What advice would you give to a CIO at a public pension plan today? 
First, I would encourage them to evaluate and select asset managers and service providers with a single phrase in mind, “Alignment of Interest”. Ensuring alignment of interest in issues like risk tolerance, time horizon, economics, performance, deliverables, ethics, and fiduciary responsibility increases the probability of achieving the desired objectives for the portfolio and the constituents. I believe it is critical that the interest of the plan and partners are as aligned as possible. Also, again, I would encourage them to leverage the asset management community, rely on service providers as an extension of staff, and ensure that we are all well-informed. So, my advice would be to use those service providers—many of whom are NCPERS members—as a resource to develop knowledge and expertise.   

Q: How has your perspective on the value of educational conferences changed during your time in the institutional investing space? 
Despite the different conference objectives as an LP or asset manager, there are similarities. Representing a thinly staffed public pension plan, I needed to be more of a generalist, so it was useful to be in a room with multiple asset managers with expertise in many different strategies. For instance, if a member fund of NCPERS allocates money to an asset manager, other members could use their experience as a basis for conducting their own due diligence. It was invaluable to be able to speak with so many asset managers and investors in one place. Now, as a representative of Monroe, I want to be not only a subject matter expert for Private Credit, but also a resource to plan staff on issues beyond my own asset class. 

Q: What are you looking forward to most at the upcoming Annual Conference and Exhibition
The agenda looks fantastic, and I'm excited to attend. During the sessions, I'll be gauging attendees' attitudes and finding out what the staff and trustees consider their most pressing concerns. I'm looking forward to every session, especially the “Behind the Scenes with Public Plan CIOs” session, but I'm confident that I'll enjoy all of them. I'm eager to learn about the current issues surrounding pension plans, including investment, governance, fiduciary and funding levels among others.   

Q: What risks do you anticipate for institutional investors in the next five years? 
Four years ago, the COVID-19 pandemic had a significant global impact, and although we have recovered swiftly, the ultimate effects on our society domestically and globally have yet to be realized. From an investment perspective specifically, the next five to seven years are likely to reveal the true impact to sectors such as commercial real estate, banking , housing, and transportation. At a minimum, I believe we will find there has been tremendous disruption and substantial shift in business structures and processes.  

Additionally, considering the interconnectivity of the global economy, we must not disregard the existing geopolitical risks on the world stage. Events which are out of our control could likely have a direct impact on our capital markets.

Thirdly, the public markets. While the public equity markets continue to perform well, we must be mindful of its narrow leadership. There is increased vulnerability to the broader market when only a few companies are responsible for driving the indices forward. Interest rates, too, remain a challenging influence on the economy as a whole as inflation has proven to be more persistent than originally thought.   

Q: Considering the risks you identified, what opportunities do you anticipate? 
Despite the complexity of investment offerings and portfolio management, traditional sources of capital are either diminishing or disappearing entirely. There is a great opportunity for pensions to provide capital for more diverse and complex investment strategies. Providing capital where needed affords public plan investors the opportunity to receive returns in vehicles beyond the traditional public markets.    


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