Finance Leaders Forum: A Conversation with Joe Dowling, Global Head of BAAM, and Steve Meier, CIO of the New York City Retirement Systems

October 31, 2023

Paul Hughes, Head of Strategy at Mizuho Americas, moderated a Q&A on the CIOs’ Perspective with Joe Dowling, Global Head of Blackstone Alternative Asset Management (BAAM), and Steve Meier, Chief Investment Officer at the New York City Retirement Systems. A new investment paradigm brought on by tighter monetary policy is taking shape and will lead to more investing in alternative assets, Mr. Dowling told forum members. Mr. Meier outlined the New York City pension system’s strategy for investing its quarter of a trillion dollars in pension assets.

Joe Dowling on the QT Playbook

Steve Meier on Asset Allocation

The CIOs’ Perspective: A Conversation with Joe Dowling of Blackstone Alternative Asset Management, and Steve Meier, CIO of the New York City Retirement Systems 

Long-term correlation between stocks and bonds means traditional investors like pension funds are considering a move away from the traditional “60/40” portfolio split and expanding their allocations into alternatives. 

This was among the investment tenants outlined by Steve Meier, Chief Investment Officer of the New York City Retirement Systems (NYCRS), and Joe Dowling, Global Head of Blackstone Alternative Asset Management (BAAM), during Mizuho’s Inaugural Finance Leaders Forum which was targeted to a group of finance executives. 

“Between the two of them, they managed over $340 billion in assets,” said Paul Hughes, Head of Strategy at Mizuho Americas who anchored the interview. “So I think it's safe to say that the audience is going to listen very carefully to your responses today.” 

As the Fed moves from quantitative easing towards tightening, correlation between stocks and bonds will become more pronounced, Dowling told the group. Post-2008 the Fed loosened monetary policy and bought securities from the banks to free up capital on their collective balance sheets in order to lend money and jump-start the economy. Stocks and bonds largely remained uncorrelated during that time, Dowling said.  

The Fed has begun to reduce its balance sheet assets - by roughly $800 million since September 2022. Quantitative easing has given way to monetary tightening as the Fed raised interest rates to a more than two-decade high to quell inflation and help the economy recover from the effects of the Covid-19 pandemic. The net result is assets are more expensive and liquidity more sparse.  

“I think what we're encountering is a shift from QE to QT,” Dowling said. “I call it the new QT investment paradigm, and that is making liquidity tighter and it has implications for all asset classes.”  

Pension systems have started playing catch up with alternatives. Last year, New York State Governor Kathy Hochul signed into law a bill that allowed New York State pension funds to increase their investment allocations in private markets (including hedge funds, infrastructure, real estate and private equity) from 25% to 35%.  

“So we're going through the process of reviewing a strategic asset allocation, again, with that additional capacity, a less constrained opportunity set,” Meier said. “And we actually are looking probably to increase our holdings of alternative investments, private credit, private equity, venture capital, core, non-core real estate infrastructure and hedge funds meaningfully.” 

Yet, in terms of investment values, Meier said, the NYCRS still engages with portfolio companies on social and environmental issues such as treatment of employees and ability to unionize, disclosure, transparency and sustainability issues such as energy efficiency.   

It will also be a while before the pension fund can put the money to work.  

Credit would be a natural place to look with the amount of refinancing coming due, Dowling said. Credit is offering “equity like returns” with trillions of dollars of refinancing on real estate assets coming due and regional banks under water and unable to lend, he added. 

Loan refinancing will offer a lot of investment opportunity but so will the amount of capital needed for the “green” energy transition.  

Investment in technology and infrastructure to support the transition to green energy will require some $44 trillion by 2030, and more than $100 trillion by 2050, according to the International Renewable Energy Agency. 

Explore our insights

Center Stage
Digital Horizons
Markets Mindset
Intellectual Curiosity
Back to top