Chief Investment Officer

THE CIO INDUSTRY INNOVATION AWARDS

Rich Nuzum, CFA

Wealth Leader, Growth Markets, Mercer New York, New York
Art by Chris Buzelli / chrisbuzelli.com

Rich Nuzum determines his clients’ sources of competitive edge and then matches them to investments that are less correlated to stock markets. In order to achieve diversification in an innovative way, he searches out the far corners of the globe for opportunities, often finding them where public market investment isn’t possible.

Of the $10 trillion in assets under consultation with Mercer, $4 trillion is in the growth markets, and Nuzum is responsible for building its wealth business in Africa, Asia, Latin America, and the Middle East.

“If you make an infrastructure
investment in an emerging market, you
get a different set of risk factors,” said
Nuzum. “You get local per capita GDP
growth and other risk factor exposures
that are less correlated with global
stock markets, and you can get a high
expected return.”
Using acumen acquired from 25 years at Mercer, including
living and working 11 years in Asia, Nuzum works to find projects
that need investors for reasons other than money, such as technology
transfer and operational know-how. He then digs deep into clients’
unique experiences and weighs their liquidity tolerance in order to
make a match.

“The local government is picking you as a partner because you
know how to run airports, or water treatment facilities,” he explained.
“They may not actually need your financial capital at all, but, they’re
willing to let you take an ownership stake and get a fair return on
your capital in return for that technology transfer.”
This type of investment pairing is specifically relevant for those
asset owners such as sovereign wealth funds, national security funds,
and other large investors who aren’t chasing past returns, and who are
seeking to diversify risk away from public market stocks as the market
reaches new record highs after an eight-and-a-half-year bull market.
Emerging markets infrastructure and real estate assets are particularly
attractive to those who can tolerate illiquidity and complexity.

Nuzum’s advice for 2018 is to further increase exposure to
alternative investments and hedge funds, which he admits can seem
counterintuitive.
Although US stocks have had a
long run, “one asset class can’t outper-
form forever,” he said. Nuzum believes
the expected return premia to taking
liquidity risk in private equity, real
estate, or infrastructure versus equiva-
lent assets that are publicly traded are
relatively high, ranging from 2% to 4%
over a full market cycle. “If you can lock
in a 3% expected return premium, and
get diversification, that’s a pretty good
opportunity. Now, the reason I think
that’s an opportunity for 2018 is, if you
want to outperform in investments, you
need to be early and be right,” he said.
During his career, Nuzum has
worn many hats. He helped launch
Mercer Investments in Asia during
the 1990s, was an early proponent of
licensing Mercer’s global manager
research to large institutional investors
with in-house staff through MercerIn-
sight, which now has more than 150 subscribers representing more
than $6 trillion in assets, and led the launch of MercerFund Watch.
com. After returning to North America, Nuzum helped launch
Mercer’s Dynamic De-Risking Solution and Pension Risk Exchange.
Nuzum was asked in 2008 to lead Mercer’s OCIO business
globally, which has grown from $20 billion in assets under delegated
management when he took the helm to more than $213 billion today.
Mercer’s success as an OCIO, he said, has come from bundling stra-
tegic investment advice with delegated implementation. As an invest-
ment consultant, Nuzum has worked with clients in more than 20
countries, including some of the world’s largest institutional investors.

“Capturing innovation is the key to long-term outperformance”, Nuzum said, repeating his mantra that, “if you want to outperform in investments, you need to be early and be right.” —Christine Giordano