It's no secret that 2022 was a challenging year for the financial markets. There was nowhere to hide for investors looking to escape the volatility that impacted almost every asset class, including stocks. Following strong performance in 2021, the markets faced rising inflation that soared to 40-year highs, a series of unprecedented interest rate hikes, and fears that the country would be thrown into a recession.
The State of Wisconsin Investment Board worked to navigate the volatility while seeking opportunities to keep the Wisconsin Retirement System well-positioned for the future. Because almost 50% of the Core Trust Fund and all of the Variable Trust Fund is invested in stocks, finding investment opportunities, even in a down market, is critical to SWIB’s investment strategy and the long-term success of the WRS.
Susan Schmidt, SWIB’s head of public equities in the Global Public Market Strategies Division, oversees what is sometimes referred to as a “best ideas portfolio,” an important piece of SWIB’s long-term investment strategy.
“Our strategy is relatively concentrated and very company specific,” Schmidt said. “We are looking at developed markets across the world and trying to pick out opportunities we think other investors may be missing. To do that, we turn over a lot of rocks before we find something that we want to invest in.”
To be successful, Schmidt and her team perform extensive fundamental research to find those ideas. “It is one of the hardest things we do,” Schmidt said. “We look at all global publicly traded companies for potential investment ideas. This is when our industry expertise and knowledge help to identify a smaller subset of companies to perform deeper fundamental research.”
“It’s nice to have that longer-term view,” Schmidt said “Many investors have a short-term view, quarter to quarter. SWIB has a long-term perspective for our investment strategy. We can afford to look past quarterly volatility to really see how things are developing. A lot of times that's when we can take advantage of temporary dislocations in the market.”
Schmidt said the current uncertainty and volatility in the markets does not impact her team’s overall strategy.
“We get excited when the markets are like this because it is a little bit volatile. When you are on the outside looking in, it can seem crazy. But, at the same time, this is where the opportunities really happen. This is when our skills come into play because it is a very stock-specific market. We don't think that any one sector is going to do better than others right now. Instead, we think you have to look for individual opportunities at that company-specific level where management teams can show that they truly have an expertise in operating and that they're able to continue to grow their profits even though the economy might be slowing around them.”
To learn more about SWIB’s global equities portfolio and hear more insight on the stock market’s 2022 performance and outlook for 2023, listen to episode 21 of The SWIB Podcast.
The SWIB Podcast is where members of the WRS can turn to for timely information about SWIB and its investment strategy. Find all episodes at www.swib.state.wi.us/podcasts.