Investment Strategies under Challenging Markets

Steve Mahoney 1

Steve Mahoney

CFA, FSA, CAIA, PRM

Chief Investment Officer
Nova Scotia Pension Services Corporation
Steve Mahoney was appointed Chief Investment Officer for Nova Scotia Pension Services Corporation on April 1, 2022. In advance of Innovation and Resilience Forum this October, Institutional Connect interviews Steve on how he and the organization work with constituents under the current market volatility, to achieve investment objectives.
Institutional CONNECT: You were appointed Chief Investment Officer for Nova Scotia Pension Services Corporation on April 1, 2022. What were key priorities for your first several months in office?
Steve: Engaging with our board and stakeholders to take a step back and examine some of our existing processes, as well as discuss future initiatives. There’s a lot of investment work we can do but I appreciate you need buy-in before going too far down the road and having to start over with education or discussion. I’m working with our boards now to explore areas such as how we manage existing allocations, tactical asset allocation, efficient and optimal uses of leverage, where and how we employ risk vs. managing beta, house views on asset classes, etc. Not to mention the ongoing pursuit of ESG goals as well. It’s a long list of ideas that will take a few years to play out but certainly some exciting projects on the horizon and already underway.
Institutional CONNECT: With rising inflation and interest rates, as well as market volatility, 2022 has been a challenging year so far for institutional investors. How do you position the portfolio to meet long-term objectives?
Steve: We are comfortable with how we are positioned and certainly don’t want to make any major changes during times of volatility. Real assets and commodities were always regarded as inflation hedging assets and we have recently hit our targeted allocation to these types of investments. We are carefully monitoring the interest rate increases and actually believe there may be a point where an opportunity to reposition our fixed income presents itself. As painful as rate increases have been, they are also putting fixed income yields back to levels where we see opportunity and of course our liability calculations benefit from this as well.
Institutional CONNECT: Medium-sized pension funds like your firm would partner with investment managers to execute investment strategies. What would you like to see more from investment managers in establishing strategic partnership with them?
Steve:I always thought this was an under-utilized function of the outsource model – a vast wealth of resources and information available to plans to use from firms they work with but information overload can make it difficult to process and take action from. We are looking at expanding our capabilities in tactical asset allocation and I would like to find a way to marry that with the information our partners can provide in order to challenge, enhance or validate our views. We have already done some product enhancement with existing managers as we gain a comfort level with them and a better understanding of what they do, these expanded relationships do take time to evolve as trust and understanding of systems and processes evolve.
Institutional CONNECT: How do you work with board of directors to gain support when the investment team is pursuing new strategies?
Steve: I alluded to this in my response to first question – we have a few new initiatives on the go for the next few years. It is imperative we have stakeholder buy-in and support so we are spending some time with our board and committee members to discuss the concepts, provide research and background, explore and outline how others approach the same ideas, etc. Education and transparency are paramount to moving anything forward. We’ll take as much time as needed to get buy-in and comfort from our trustees.
Institutional CONNECT: What considerations are you taking when developing a risk framework for the portfolio?
Steve: We are enhancing our risk framework to incorporate market volatility and forward-looking market pricing mechanisms in the context of our weighting around various asset classes. We would like to be more opportunistic in terms of where and how we exercise risk allocations but are at the early stages of this work, likely will move through the next year or two. I view these questions as all intertwined – key priorities, working with our boards, partnering with external managers, positioning the portfolio and managing within a risk framework. The entire process evolves continuously and we are looking to add value where opportunities present themselves at each step along the way.
Steve Mahoney, Chief Investment Officer, Nova Scotia Pension Services Corporation, will speak at Innovation and Resilience Forum 2022, held on October 24 – 26, at Pillar and Post | Niagara-on-the-Lake ON.
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Steve Mahoney

CFA, FSA, CAIA, PRM

Chief Investment Officer

Nova Scotia Pension Services Corporation

Steve Mahoney was appointed NS Pension’s Chief Investment Officer on April 1, 2022.
Steve was born and raised in Nova Scotia. His career started with the Maritime Life Assurance Company as an Investment and Actuarial Analyst. He then moved on to Keel Capital as a Risk Manager and then to the Halifax Regional Municipality Pension Plan also as a Risk Manager. Steve worked for six years at Morneau Shepell (now LifeWorks) as a Partner in their investment consulting division. He was then with Connor, Clark & Lunn Financial Group in Toronto as Vice President of Institutional Sales prior to joining NSPSC in 2022 as Chief Investment Officer.
Steve’s education includes a Bachelor of Science (Mathematics) degree from Mount Allison University and a Bachelor of Education degree from St. Francis Xavier University. He also holds several professional designations including Chartered Financial Analyst (CFA), Chartered Alternative Investment Analyst (CAIA), Fellow of the Society of Actuaries (FSA), and Professional Risk Manager (PRM). 

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