The use of technology has the potential to transform the investment industry bringing down the cost of asset management, exponentially increasing innovation and building more resilient and adaptive portfolios. So investors need to move now to keep pace with the change. Amanda White talks to Herman Bril about why investors need to become ‘technologized investors’.

At the beginning of this year MSCI teamed up with Google to build a cloud-native investment data acquisition and development platform using Google’s AI and natural language processing technologies. The idea is this will allow MSCI to “acquire, ingest and process” structured and unstructured data at scale and more quickly than ever before.
It’s an example of the use of technology by finance firms to revolutionise their operations and result in the ability to be more productive, have broader analysis and build bespoke strategies at lower cost. Ultimately they can serve their clients better, quicker and with more bespoke offerings.

According to Herman Bril who with co-authors Georg Kell and Andreas Rasche, published a new book in December 2022, Sustainability, technology and finance: Rethinking how markets integrate ESG, these tools and data sets are changing the landscape in profound ways and driving down the marginal cost of asset management.

“We can build tools and put technology in place to build bespoke investment strategies in 15 mins. We are getting closer to autonomous asset management which is highly bespoke and can reflect preferences and values for investors. Five or 10 years ago that would be a big job with an army of people, that is changing,” Bril said in an interview with Top1000funds.com.

The book written with a swathe of contributors looks at three broad topics ESG and technology, ESG through technology and ESG as technology.

Becoming a technologized investor

According to Bril the data available to investors today is transformational compared to the finance industry of old.
“The whole technology stack available today allows for insightful analytics,” he says. “Besides the standard ESG rating disclosures you also have access to lots of different alternative data sets. The question is how do you take that into your systems and benefit from that? How do you build insightful information with all this data suddenly available?”

Bril, now head of sustainability and climate innovation at PSP Investments, acknowledges that the data points are not “perfect” but with so many different data points available from different angles due to natural language processing, machine learning and AI “you can allow for a bit of noise in the data”.

“AI is better than humans in identifying connections and trends in a massive amount of data. We were not able to do that back in the days using excel spreadsheets.”

Bril is empathetic with the call to action by Stanford University’s Ashby Monk for investors to become “technologized”.

“Becoming a technologized investor is really to say asset managers and owners need to become more like information technology companies than traditional investment companies and start using different tools,analytics and data sets.”

This means hiring people with completely different skill sets from the traditional finance analyst sitting behind Bloomberg, and instead look for those who can code, data engineers and climate engineers.

“That is driving massive change in the asset management industry and is ongoing. More and more organisations are making big improvements and investing a lot of money to become technologized investor.”

The book has contributions from many technology experts including Ashby Monk and Dane Rook both from Stanford and an insightful chapter by PSP Investments’ CIO Eduard van Gelderen and the fund’s chief technology officer David Ouellet among others.

PSP Investments’ is now collecting and reporting on sustainability information based on a technology-enabled, data-driven approach that spans a bespoke, green taxonomy for climate investing to ESG scores derived from AI. (See How Canada’s PSP Investments is getting to grips with climate data).
Clearly forward looking data is important.

“We want to have a better assessment of where things are going,” he says. “Investing is all about the future so we need more analytics to help build a better cone of future scenarios and probabilities. Using these tools, analytics and data will increase the risk / return profile of your portfolio. The future is unpredictable, but these tools can help you to become a better, more resilient sustainable investor.”

The authors first book, Sustainable Investing: A path to a new horizon, was published in September 2020. (See Finance teaching not fit for purpose).

Swiss pension fund MPK has withstood a difficult year in bonds and equities thanks to its large allocation to real estate. More people tend to rent than buy apartments creating steady demand for rental properties says chief executive, Christoph Ryter.

A large allocation to real estate at Migros-Pensionskasse (MPK) the CHF28.25 billion ($30.3 billion) pension fund for Switzerland’s largest retailer, Migros, supported returns in a difficult year, says MPK CEO Christoph Ryter in an interview with Top1000funds.com from his Zurich office.

“Real estate has been helpful in reducing our losses in equities and bonds,” he says. “Our high strategic asset allocation to real estate has been the main reason we performed better than other pension funds.” The fund has just recorded a loss of 5.6 per cent last year and a 9.4 per cent decline in the funding ratio to 124.5 per cent.

MPK’s strategic allocation to real estate and infrastructure (37 per cent) is larger than most of other pension funds in Switzerland. Other allocations comprise nominal value investments (33 per cent) equities (28 per cent) and gold (2 per cent). The real estate allocation is divided between a larger direct investment portfolio in Switzerland managed internally, and an international allocation that includes infrastructure, comprising fund investment and collective vehicles.

Returns

The bulk of MPK’s local real estate allocation is invested in rental apartments where valuations have escaped the impact of rising interest rates, and demand has been buoyant thanks to a jump in the number of people coming to live in Switzerland.

Moreover, unlike the United Kingdom or US market, more people in Switzerland tend to rent accommodation rather than buy their own properties in a cultural norm that means MPK has no plans to tweak the exposure. “In Switzerland, it’s more common to rent,” says Ryter. Around 80 per cent of the local real estate portfolio is rental apartments with the remainder invested in offices and commercial premises.

A single apartment lying empty will not really influence the total portfolio, he adds. In contrast, empty shops hit malls hard. “The volatility in rental apartments is much lower than in offices and commercial spaces.”

However, Ryter believes valuations are set to decline ahead. “Real estate valuations will decline over time although there will be some lag,” he predicts. Although he expects enduring rental demand for apartments, long-term, he expects gains in valuations to vanish or turn negative.

Ryter says another ingredient adding to the success of the portfolio comes from the fact most of the people running the properties the pension fund owns (cleaners to estate agents showing people around) are also employees of MPK. The identification with the portfolio is therefore much greater, he says.

One of the biggest challenges to the strategy in recent years has been finding enough properties in Switzerland to fill the target allocation. As MPK’s assets under management grew with buoyant returns from bonds and equities, it struggled to fill the illiquid allocation where buying and selling is slow and finding projects and securing permits time-consuming. Now bonds and equities have fallen back the target allocation is back on track.

“We are under less pressure to find new projects and to increase the allocation,” he says.

ESG

MPK has long-term targets to integrate ESG across the real estate portfolio, retrofitting heating systems and installing installation. However, Ryter charts slow and steady progress  to protect returns.

“We have to be careful, and take the long view,” he says.

“Real estate is the best asset class to do something good for the environment. It is really possible to change things for good, unlike bonds or equities where you can sell but someone else buys it.”

 

European football clubs are not an obvious asset class for most institutional investors and don’t spring to mind as a typical investment for organizations stewarding the long-term health of a pension pot – or nation. Yet the $450 billion Qatar Investment Authority’s reported interest in English football club Manchester United could be the latest in a line of club purchases by Gulf SWFs.

Saudi Arabia’s $620 billion Public Investment Fund (PIF) bought Newcastle United in 2021. In 2011, Qatar Sports Investment acquired French team Paris Saint-Germain (PSG). Qatar Investment Authority, the country’s main sovereign wealth fund, is a different entity to Qatar Sports Investment, although both are state vehicles and QSI chairman Nasser Al-Khelaifi sits on QIA’s board. Elsewhere, Manchester City is owned by Sheikh Mansour, the chair of the Emirates Investment Authority (EIA), vice-chair of $284 billion Mubadala and board member of the Abu Dhabi Investment Authority (ADIA), three of the world’s top 20 sovereign wealth funds.

Soft power

The key rationale for Gulf SWFs buying these clubs is rarely financial. Amenity value in the football-crazy Gulf and soft power seem to come first.

“There is clearly both a soft power dimension and an aspect of regional rivalry to these purchases. Like in other areas of state investment, neighbours often copy each other,” says Steffen Hertog, associate professor at The London School of Economics and Political Science (LSE)

Buying a football club brings international visibility and offers a great opportunity for country branding, adds Javier Capape Aguilar, director of the Sovereign Wealth Research at the Center for the Governance of Change and adjunct professor, at IE University.

“It’s a channel to encourage people to visit a country and engage in business relationships.”

Good Investments?

What is less clear is if they are good investments – in contrast to North America where major league franchises NFL and NBA bring owners prestige and financial rewards.

“European football has not made any money historically. Look through the financial statements of any club in Europe, and there is no record of generating profits,” says Stefan Szymanski, Professor of Sport Management at University of Michigan, who says player fees eat into any profit unlike in North America, where there are salary caps on players and mechanisms to stop spending.

Still, Szymanski says profitability at leading clubs is starting to change thanks to live broadcast rights, particularly in English football, and merchandizing.

And a lack of profitability doesn’t mean they don’t make good investments. Another way to make money is profiting from the sale.

“The appreciation in value is not connected to a growth in profitability of the business. It is more down to the growing demand from billionaire investors and a scarcity of trophy assets,” says Szymanski.

For example, PSG’s Qatari owners bought the club in 2011 for about €70 million. Notwithstanding the billions on players and wages spent since, PSG was recently in talks with investors to sell a 15 per cent stake for €4 billion.

“They are taking risks, and in some cases, like Qatar’s very large investment into PSG, it is not clear that the investment has really been commercial,” adds Hertog. “But they can afford to take a long-term view and can absorb losses as long as the purchases help them build diplomatic relations and, at least in the Global South, prestige.”

are the Risks only on the pitch?

And as long as new owners can keep spending money on players, the risks of owning a football club are surprisingly contained. The biggest risk seems to be the team doesn’t perform in line with what the owners are spending on players.

But Szymanski’s analysis reveals player spend always, eventually, equates to achievements on the pitch.

“There is a perfect correlation between where you stand in the league and your wage bill.”

Sure enough, PIF’s spending on players has turned the fortunes of Newcastle United around and the team has risen up the league. Since Manchester City changed ownership and new money for players and wages poured in, the club has picked up multiple trophies and risen up the table. Qatar’s current investment in PSG has led to success on the pitch — the team has won eight of the past 10 French titles although, like Manchester City, PSG has yet to win the European Champions League.

Gulf sovereign’s human rights records could turn the fans and viewers off, although the evidence suggests little link between football fans’ moral stance with enduring support for their club.

“All the evidence says fans are not changing their behaviour no matter who the owner is,” says Szymanski .“Let’s face it, the current owners of Manchester United are hated by the fans. And this has done no harm to the value of the club.”

Still, owning a football club does, nonetheless, draw attention to these countries’ human rights, jeopardizing the soft power influence.

“The main non-commercial risk is that of drawing unwanted attention to local state’s human rights record in the Western public sphere, as has happened with Qatar, Abu Dhabi and KSA,” said Hertog.

Reputational damage is also a risk. Man City is currently charged by the Premier League with numerous alleged breaches of financial rules spanning a period from the 2009-10 season to the 2017-18 campaign when the club breached league rules requiring provision “in utmost good faith” of “accurate financial information that gives a true and fair view of the club’s financial position.”

“If recent allegations of financial violations at Man City in the Premier League are confirmed it could lead to Pep Guardiola leaving, which would be a big blow to the club and its commercial prospects,” says Hertog. Coach Guardiola has made it clear he will leave if the allegations are proven.

Interest in the premier league could decline – but again, this is unlikely.

“If we all decided tomorrow we wanted to watch e-sports it would be catastrophic, but I don’t think this will happen,” says Szymanski, who cites one last risk: a lack of potential buyers if the world runs out of billionaires.

Against the backdrop of tougher market conditions and its overweight to private equity, $74.4 billion Alaska Permanent Fund Corporation (APFC) will only commit around $1 billion to private equity in 2023, down half what it normally invests in “busier” years. It will mean the investor narrows down the number of funds it backs and writes smaller cheques, chief investment officer Marcus Frampton told trustees in a recent board meeting in Juneau.

Smaller cheques will make it hard to get allocations with some funds, but a smaller allocation will also hold benefits like more influence with fewer relationships. It also means successful and innovative private equity investment shows up more in the portfolio.

The board heard about the risk of elevated valuations in private equity, and a lack of valuation reset relative to public markets, particularly in the venture capital space where companies are avoiding financing rounds or employing “creative financing” to circumvent mark downs.

The only other allocation to also flash red is APFC’s dwindling risk parity, where trustees heard of the investment team’s aversion to accessing the asset class via a leveraged approach given higher interest rates.

reducing PE further

APFC’s private equity portfolio has grown from $1.7 billion in 2012 to about $15.7 billion in 2022 at an annualized rate of 25 per cent. But a significant proportion of value in the portfolio is unrealised gains. Of APFC’s $11 billion in unrealized gains, almost $6.3 billion (57 percent) is from the private equity portfolio. Drilling down further, trustees’ heard that about a sixth, or $1.1 billion, of unrealized gains pertains to investments in funds made more than eight years ago.

Trustees’ heard how the changing dynamics in private equity will test manager skills. With more than a decade of low rates and rising asset multiples, managers on average have become less adept at improving the performance of their portfolio companies as reflected in the declining revenue and margin growth.

“This shift from conventional private equity strategy may prove costly when costs and rates reverse trend and rise,” said board documents.

Writing smaller cheques means APFC may lose its seat on Limited Partner Advisory Committee boards where LP investors in the fund take an oversight role.

“If you’re writing smaller cheques, you’re not offered a LPAC seat,” said Frampton. “But all else being equal, I’d rather the right portfolio exposures ahead of getting a board seat.”

APFC’s private equity fund commitments in quarter ending December 2022 ranged between $8 million to $50 million.

Today’s reduced allocation to private equity is a sign of things to come, and APFC is likely to pare back its allocation to private equity ahead. Existing investment policy targets a 19 per cent allocation to private equity in 2025 (compared to 17 per cent today) but Frampton’s CIO Recommended Asset Allocation suggests a 15 per cent allocation in 2025.

increasing Absolute Return and RE

Reflecting on other portfolio tweaks, Frampton is also seeking to increase diversification with a little less equity and boosted allocations to absolute return and real estate. In real estate, APFC can earn “CPI plus five” without taking on more equity risk, he said.

“Absolute return and real estate are areas where I suggest we increase.”

Success in the $6 billion absolute return portfolio, and its ability to run a low correlation to equities, depends on execution – and increasing the allocation to hedge funds could make execution more challenging. However, although hedge funds may not  fit in a typical pension fund portfolio, he argued hedge funds could do better than stocks, and suit APFC.

“If we can execute well, it’s worth having a bigger hedge fund portfolio.”

The absolute return portfolio has returned 6.8 per cent since inception with a volatility of 3.4 per cent.

Frampton said APFC’s public equity allocation is overweight value and small cap.

“I’ve been surprised how strong the market is given inflation and rate hikes,” he said.

The last time equities fell so much without the Fed pivoting to easing was in the inflationary ’70s. One again it makes execution, and timely rebalances, central to strategy, he said.

Reflecting on other allocations, Frampton welcomed a real return in TIPS and corporate bonds for many years. Other adjustments to the portfolio that have worked well include increasing exposure in early October to REITS in “a good trade.”

Frampton described office and retail real estate as “tough” but with good fundamentals and said the pricing “looks good” on industrial apartments.

APFC is on track to commit around $1 billion to infrastructure and private credit this year.

In private credit APFC favours drawdown, private equity style funds in contrast to open ended allocations where the capital is drawn up front and investors are redeemed on a quarterly basis.

Denmark’s AkademikerPension, the member-owned pension fund for 150,000 academics, has just notched up another important milestone in its ambitious sustainability strategy. Pressure from the fund’s CIO and chief financial officer Anders Schelde on Denmark’s Danske Bank contributed to the lender announcing plans to end new financing to oil and gas E&P companies that don’t have a credible transition plan in line with the Paris Agreement.

Last year, Schelde stood up and challenged Danske executives at the bank’s AGM, the only institutional investor to ask the bank climate questions. Schelde, who describes his approach as “polite, constructive criticism, focused on the bank’s lending policy,” contributed to Danske drawing up a more comprehensive climate strategy that included axing large parts of its fossil fuel financing programme.

Acting on behalf of AkademikerPension and client fund LD Pensions, he says a close relationships with the Danish companies that make up a large chunk of AkademikerPension’s internally managed equity portfolio is a central seam to strategy.

“Danske Bank is now demonstrating leading practice in some areas with its updated policy. They have committed to stop asset or project finance and corporate finance of new upstream oil and gas exploration and production,” adds Kelly Shields, campaign and project manager at London-based pressure group ShareAction.

Danske Bank’s commitment is important because it restricts corporate finance which accounts for the vast majority of bank lending, and much more than project finance. “The frontier is shifting in the level of ambition of investors and their asks of banks. We are seeing a growing interest from investors to tackle the financing of oil and gas expansion.”

Now she says Danske Bank should go further still by also restricting finance to infrastructure related to new oil and gas like pipelines.

New frontier

Like Shields, Schelde is also convinced more banks will stop financing fossil fuels and believes investor pressure on bank lending to the industry is the “next frontier” in engagement and divestment. The reason, he explains, is because despite selling all its upstream, fossil fuel-related investments in oil majors bar an allocation to Italian oil group ENI, the pension fund remained exposed indirectly to the industry via investments in banks’ lending to oil groups.

“Recent shareholder proposals at HSBC and Barclays show we are influential, and that investor pressure is speeding up the process,” he says.

Last year, HSBC announced plans to cut direct financing and advisory ties to new oil and gas fields and metallurgical coal projects after coming under fierce criticism over its climate change policies from shareholders and environmental activists.

And Schelde is convinced investors will successfully influence banks’ lending policies because they are targeting bank behaviour, rather than their core business.

“It’s very difficult to persuade, say, Shell to stop taking oil out of the ground. But it’s easier to get HSBC to stop lending to Shell.”

It’s why Schelde has no plans to divest AkademikerPension’s holdings of banks with oil and gas lending programmes. “If we stay invested we can try and change their behaviour. However, one factor that might make us divest from a bank is if we got no response from the board.”

Divestment at AkademikerPension is based on two key criteria – it must have a positive, or at least neutral, impact on the portfolio’s long term returns and be “the responsible thing” to do.

Schelde says the pension fund would consider investing in oil groups again if they aligned their business with the goals of the Paris Agreement. “They can continue to produce oil and gas,” he explains, continuing. “It’s pretty clear what oil majors need to do. They need to stop exploring for new reserves; pay out that capex spending to investors or invest in renewable energy.”

Yet despite record profits, oil majors don’t seem to be changing strategy. “Some money is going back to investors and they are investing more in renewables, but it’s only a fraction compared to their fossil fuel business where we are seeing money going into exploring and building out reserves.”

ARTICLE 9

Alongside successful engagement, AkademikerPension’s sustainability strategy encompasses a new allocation aligned to Sustainable Finance Disclosure Regulation (SFDR) Article 9 whereby 100 per cent of the assets in the fund must be sustainable. The strategy uses a quant process to select equites, after which the allocation is actively managed.

“We use quantitative methods to narrow down the universe,” says Schelde.

The new allocation builds on a similar portfolio in place for the last three years. However, this allocation was unlikely to hit strict Article 9 criteria because it also had “some tech stocks” in the portfolio.

CalSTRS, the $310 billion fund for California’s teachers, has restructured the investment team with an eye on its future growth and the best people and processes to achieve its mission of securing the retirement of one million Californian teachers.

This includes examining the complexity of the portfolio and the skills required to manage it effectively in the future, in a bid to be at the forefront of “how allocators’ allocate capital”.

“Everything we do relates back to our mission, it’s always our focus,” says deputy chief investment officer, Scott Chan in an interview with Top1000funds.com.

As part of the new structure CalSTRS has split the private and public markets, appointing Geraldine Jimenez as senior investment director of public markets and Mike DiRe as senior investment director of private markets.

“As we thought about the future, we thought about what staff structure would equip us for that future,” Chan says.

But before the right structure was settled the team explored five key opportunities centred around recognising the fund’s strengths, the exponential growth of its asset base, being at the forefront of how capital is allocated, overseeing total portfolio management and evolving business functions.

“We had built solid strengths across asset classes, and we have deep expertise. I think we have the number one team in the country – I’m bullish on our team,” Chan proudly explains. “We want to make sure we build upon that. And what stands out is we have such a strong culture, focused on the mission and a great set of values in how we operate.”

This translates to delegated authority and plenty of time and money spent on training, not just for technical skills but in how to manage teams. Chan said the idea was to build on that culture and value proposition.
Every eight to 10 years the fund doubles in size, which Chan describes as “creating a whole new CalSTRS every decade”.

“We have $310 billion in assets today, but we will be $600 billion in the future. To prepare for that we will be managing more assets, so we will be managing more people to manage those assets. We have to be forward thinking for that structure and how to build the team,” he says.

Cutting edge allocator

CalSTRS has an aspiration that Chan describes as “being at the forefront of how allocators’ allocate capital”. [See also Investors prioritise governance, tilts and liquidity]

This includes leveraging the fund’s outsourced asset management partners alongside bringing more investment inhouse.

“We have saved $1.2 billion in five years in fees. In public markets most of our assets are inhouse. On the private side we won’t build a private equity firm within CalSTRS because of compensation but we leverage our partners, and we own asset managers either partially or wholly.”

CalSTRS also engages in co-investments and joint ventures and is creating innovative structures to boost returns, save costs and manage risks.

“The cost savings is a chart of beauty,” says Chan.

At the end of 2018 the fund had about 100 collaborative-type structures and about $150 million in cost savings. Now that has jumped to more than 300 collaborative model transactions, and last year alone the fund recorded annualised savings of $437 million.

“The aggregate number looks good but also the graph looks good, it’s linear. We want to attract folks with more direct investing skills, and skill sets that fit increasing complexity and the ability to transact in innovative structures. It’s a big opportunity.”

The total portfolio

Like many large institutional investors, CalSTRS is paying more attention to overseeing management of the total fund including short and medium tilts and whole of portfolio challenges like taking advantage of the energy transition and diversity of managers and internal teams.

“We are looking at the fund as a total and the power of one platform. Combining asset classes together to do great things and do them at scale, these are some of the opportunities in front of us,” he says.

This total fund view includes looking at investments across public and private markets, and within and across asset classes.

“If we can do that in the future it will unlock a lot of opportunities. As we were thinking about organisational resources it starts to make it structurally easier to think about the total portfolio. As we double every 10 years, we want people who can operate in a multi asset class framework and we are preparing for that future.”

This total portfolio view also ties into the evolving business functions for the fund including the framing of enterprise risks alongside HR practices and improved communication.

“As we grow, we need to become more sophisticated in those functions. Also, things like balance sheet management, being able to manage liquidity, how we think about leverage and the denominator effects.”

Asset liability study and future asset allocation

CalSTRS has just embarked on its four-yearly asset-liability study and while it is yet to recommend any future asset allocation to the board, the fund has identified some important areas for investigation.

“We are under allocated to the broader area of private credit and we think this is a great opportunity in the next 12-18 months,” Chan says.

Other US public fund peers have around 6-7 per cent allocated to private credit but CalSTRS sits at around 2.5 per cent.

“We will expand our direct private lending and as we think about the long-term future we are studying whether it should be well north of that.”

It is also examining whether to expand the “opportunities” portfolio from a target of 0-2.5 per cent to 5 per cent.

“We believe being more flexible in an environment where there could be a paradigm shift in the volatility of markets,” Chan says adding that geopolitical events, a more volatile and structural shift in inflation and funding the transition to net zero are top of mind.

“In a more volatile environment we want to be more flexible to take advantage of opportunities. With a total fund platform we want to have flexibility to work across asset classes, in between asset classes and scale things up.”

A larger allocation to the opportunities bucket would allow the fund to scale into positions a little more assertively.

In the past the opportunities allocation has acted as a testing ground for new investment ideas and this is where direct private lending started before moving to fixed income.

“All of the directors in the asset classes are seeing opportunities and we are working with some of the premier partners in the world. They could find things that don’t fit in their asset class and benchmarks but could be an amazing opportunity for the fund as a whole. Or they might want to allocate $200 million but we think we should allocate $400 to $500 million and we can use the opportunities allocation for that. We haven’t used it to scale into positions but that’s the aspiration.”

The final asset class under consideration is fixed income and whether to increase its size. At the end of January, it had 10.26 per cent allocated to fixed income against a strategic allocation of 12 per cent.

“After years of moving from fixed income to infrastructure and risk mitigating strategies, at higher interest rates we are thinking should we be allocating more to fixed income?”

New team

If CalSTRS filled all of its vacant positions the investment team would number around 225 people. It’s halfway through a five-year plan which saw the hiring of an additional 91 people.

Chris Ailman, the fund’s long-time CIO, oversees the entire investment division including middle and front office. As deputy CIO, Chan is focused on the front office and implementation. Part of the new senior hires is a reflection that the deputy’s role has expanded so much in the four and a half years Chan has been in the role.

“It makes sense to have them overseeing the asset classes, and me overseeing the investment division reporting to Chris.”

Chan says about 60 per cent of the time Jimenez and DiRe will be leading and overseeing the public and private markets respectively, with 40 per cent of the time focused on working through and managing the total portfolio issues with the rest of the team responsible for the total portfolio that also includes investment strategy and risk director (Jimenez’s old position) and the director of sustainable investment and stewardship strategies, Kirsty Jenkinson.

“We used to meet with all of the asset class heads but now we can save them from being in meetings. We want them to focus on investments and we have a group now focused on the total fund.”

CalSTRS is also looking to recruit some senior portfolio manager positions that will sit between the asset class heads and portfolio managers.

This is partly for succession planning but also a reflection of the volume of more complex transactions, and the expansion and growth in the leadership.

“We have thought very deeply about how to do this and what each of the positions will be doing. This is really exciting for CalSTRS. It makes me really excited about the mission and what we can accomplish.”

And for Chan thinking about the mission does not stop when he closes his computer each evening, his wife is a California educator and a member of CalSTRS.

Talk about skin in the game.