It’s been a big year for Jon Glass. Known most recently as an investment adviser and hedge fund proponent, the experienced funds manager now divides his working week between Media Super, where he is chief investment officer, and one of Australia’s largest endowments.
Glass was hired by the University of Sydney’s Department of Investment and Capital Management.at the beginning of the year to conduct specialist portfolio modelling work.
He is assessing the university endowment portfolio’s tolerance of illiquidity and determining whether it should introduce a “reserving” policy to ensure it can maintain its spending obligations during financial crises, according to Greg Fernance, head of investment and capital management at the uni.
“Many things that investors thought were liquid – even fixed income – suddenly weren’t liquid when the crisis hit,” Fernance said.
In the two-day-per-week role, Glass, formerly a quantitative funds manager at AMP and BT, is running a Monte Carlo simulation across the endowment portfolio to test its resilience to various liquidity pressures. He is also assessing whether a reserve fund – built up in boom years and tapped into during downturns – would sustain the University’s spending rule of 5 per cent of the endowment’s market value each year.
Fernance said the 5 per cent rule, as it stood, was “too simplistic” because it could not be sustained throughout market crises. The rule worked during periods of economic growth, but when markets fall 50 per cent, paying out 5 per cent of the fund’s market value equated to 2.5 per cent of its bull market-era spend.
“If you had a reserve in place, in good times you could add to it and in bad times you could spend it,” he said.
In recent years, Glass has been an advocate for the Australian hedge fund industry through his position as chairman of the educational committee of the domestic arm of the Alternative Investment Management Association (AIMA Australia). This role also secured him a position on the executive committee of AIMA Australia.
Fernance, who knew Glass from their overlapping tenures at AMP, said there would be work for Glass beyond the illiquidity and reserving research as long as he wanted to remain on campus.
“I’ve got a whiteboard here full of things for him to do,” he said.