Making their mark: Face to Face with Nancy Everett and Tony Kao

General Motors Asset Management Corp. in March was rebranded Promark Global Advisors Inc. The move is an effort to forge a separate identity from its automaker parent company in the institutional asset management marketplace as the firm courts external clients. General Motors Corp.'s pension and other funds still remain the biggest clients, accounting for $112 billion of Promark's assets; external client assets are about $20 billion. Leading the effort at Promark are Nancy C. Everett and Tony Kao. Ms. Everett, former chief investment officer for the Virginia Retirement System, joined GMAM as CIO in 2005 and the following year also became its CEO. Mr. Kao was named CIO in January after serving as GMAM's senior managing director of global public markets, responsible for managing GMAM's global equity, fixed income and trading activities for pension/health-care benefits funds, insurance companies and 401(k) plans.

Snapshot

Doug Goodman

Nancy Everett and Tony Kao

• Everett
• Position: Chief executive officer, Promark Global Advisors Inc.
• Education: B.S. accounting, Virginia Commonwealth University.
• Associations: Investment advisory committee, Randolph-Macon College; trustee and investment committee memeber, Virginia Commonwealth University School of Business Foundation.

• Kao
• Position: Chief investment officer, Promark Global Advisors Inc.
• Education: M.B.A. finance, New York University.
• Associations: Editorial boards , Financial Analysts Journal, Journal of Investment Management and Journal of Investment Consulting; program committee, Q Group, Institute for Quantitative Research in Finance; advisory board, Salomon Center of New York University.
• Awards: R.L. Rosenthal Award for Innovation in Investment Management/Corporate Finance (1991); National Asian-American Corporate Achievement Award (1992).

Related Content

To what extent does a corporation such as GM and its financial troubles affect your pension management investment strategy? Ms. Everett: The evolution in thinking, especially on the corporate side, has been focusing on risk management, including the liability side. So while it certainly is an example that General Motors, which has fallen to a very low market cap and pension liabilities in relation to that are so enormous it can have an impact on the ability to more forward. For the most part that's manifested strictly by looking at risk management from the perspective of trying to preserve a surplus, or maintain a well-funded pension plan and that might inure to the benefit of the parent. But you can't make that the primary objective.

Do you think it will bring long-term changes in investment strategies? Mr. Kao: I'm not sure. In our business, people have a very short memory. This area — risk mitigation, risk management — people wrote a lot and discussed a lot in the late "80s, but I think the market or industry wasn't ready. I think this time people will pay more attention to it. In the case of GMAM, we have been addressing this question since really 2002.

Why do you think the GM pension fund appears in a better position than others? Ms. Everett: What we have been able to do with the GM pension fund is to think a little bit out of the box. The focus on the GM pension plans was to preserve the funded status.

You were smart in doing that. Ms. Everett: I think it speaks volumes about how we see pension funds going forward; you know, the willingness to think about the active side of managing your pension fund to your own specific objective. It was a risk, historically. We all remember the '80s and '90s — when you had equity markets trending up up up. If you did anything that focused on risk management or liability management, that you moved yourself significantly away from what would have been the status quo of pension management, the so-called 60-40 mix. The fortitude that would require on the part of the sponsor to withstand this kind of relative comparison might have been difficult to deal with.

But I think going forward — because of the magnitude of what we are experiencing now — people who are focused on pension management are really starting to understand it isn't really that important to worry about whether you outperform, if you will, the universe of other pension funds. What is really important is: Did you deliver to the beneficiaries and to the viability of the fund the right mix from a risk management perspective to ensure that the liabilities can be met in the future. That means focus more on risk management and preservation of capital than on trying to take on a significant amount of risk at the potential expense of the fund. So I think that going forward this is going to get people much more focused on surplus management and understanding risk on an individual pension fund basis, not ... “how did this pension fund do vs. that pension fund” from just a return perspective.

In terms of the market meltdown, can pension funds recover? How soon? Ms. Everett: I think they can recover. I think the 64-gazillion-dollar question is, how quickly. But you know markets come and go. And let's face it: If they don't come back, then we have greater problems than the pension funds. So my thinking in the long term is they will come back. The question is the ability to maintain, in the interim, how you want to structure (the fund's investments) in order to try — if there are places you can take advantage and earn some additional return — how to weave that into the structure appropriately and still be mindful of the amount of risk you are taking vis-a-vis your liability. So the challenge is not whether markets will recover or not. The challenge is ... time and being, I guess, nimble.

You have a private equity operation in Connecticut. Ms. Everett: We have a joint venture with GMAM; they are our old private equity team. We spun them out in a joint venture. They are called Performance Equity Management. They have a fund-of-funds business and they are located in Greenwich, Conn.

Do you have any other investment joint ventures? Ms. Everett: No.

Internally what does GMAM manage? In what types of investments? Ms. Everett: I think about 15% of the assets we manage are internally managed. Mr. Kao: We cover really a variety of asset classes as well as investment styles. So equity, fixed income, taxables, high-quality assets. We also have internally managed derivative accounts for the risk mitigation and the asset mix management.

Do you manage a hedge fund? Mr. Kao: A hedge fund of funds.

What are your plans and targets for managing external assets? Ms. Everett: We obviously plan to grow that business. We don't have a hard and fast target but since we offer a fairly customized solution, especially in plan outsourcing, we want to make sure we dedicate enough resources to it. Our ultimate goal for a large client would be perhaps to add one or at most two a year. We also really think there might be an opportunity to take on small pension funds, maybe $200 (million) to $500 million size, where we can really be value added to those types of funds because they often can't attract an internal staff and they rely on consultant relationships and things like that.

So you don't have plans for individuals? Ms. Everett: We are not in the DC business or the high-net-worth business.

Is there any breakthrough in investment management coming along? Mr. Kao: It would be hard for me to picture a breakthrough in the next 12 months. But I think as we discussed, it is recognizing the importance of surplus-driven investing.

Nancy, what's the difference between working at a corporate fund and a public fund? Ms. Everett: I would say very, very similar. For the most part, the exercises are the same. Kind of saying, "What are we up against here? How do we get from point A to point B? What do our liabilities look like?" From the asset management perspective, it is very similar.

— Contact Barry B. Burr at bburr@pionline.com