Prudent risk management and a value-oriented approach helped David Villa, CIO of the $78 billion State of Wisconsin Investment Board, avoid the worst of the carnage in 2008. Unlike many pension investors, the 56-year-old Villa was not afraid to rebalance as stock and credit markets spiraled downward. He moved money from fixed income to equity, knowing that his fund would take a hit in the short term but benefit over the long haul — and that is exactly what happened. Wisconsin’s core fund lost 26.2 percent in 2008, but it bounced back in 2009 to end the year up 22.4 percent.
Villa, formerly chief investment officer of the Florida Division of Investments, was pleased in 2008 when the Wisconsin state legislature passed a law allowing the board to invest in hedge funds, a change he had pushed for. With economic conditions worsening, however, Villa did not rush into the asset class, and his caution paid off. Now, two years later, he and his team are implementing an ambitious hedge fund strategy, bypassing funds of hedge funds and investing directly in single-manager firms.
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