CalSTRS lands next-generation ‘superstar’

UC Regents’ Scott Chan will be second-in-command to Christopher Ailman, who has led investment at the pension for almost two decades.

The California State Teachers’ Retirement System will welcome Scott Chan as deputy chief investment officer on 1 August, taking over from Michelle Cunningham who retired last December.

Chan will report directly to chief investment officer Christopher Ailman, who has led investment at the $225 billion pension plan for almost two decades. Chan was selected after an extensive global search which considered internal and external investment professionals, Ailman said in a statement.

“Scott is viewed by the institutional investment industry as one of the next generation of top global CIOs. He is a solid and steady investor with both public and private sector experience,” Ailman said.

“His investment talents are only one side of the story. Scott also possesses the right temperament and personality to lead a very diverse – and growing – investment team. I couldn’t be more excited to team up with him in leading the CalSTRS portfolio into the future.”

CalSTRS has had a deputy CIO position since 2010, and Chan will be the third person to hold this role, according to a spokeswoman.

Chan joins the fund, the largest teacher-only plan in the world, from the University of California Regents, where he was the senior managing director of its $55 billion global equities portfolio.

In a statement, UC Regents chief investment officer Jagdeep Bachher described Chan as “a superstar”.

“As part of the leadership team, Scott spearheaded efforts to increase our active and passive investments both internationally and in the US, while renegotiating an estimated 33 percent reduction in fees,” Bachher said. “CalSTRS has landed an innovator and a talented all-around great person.

The percentage of actively managed investments within the University of California Retirement Plan’s and the General Endowment Pool’s public equity portfolio was reduced from 32 percent in 2014 to 17 percent in 2017, and the number of external managers reduced from 20 to one, according to minutes from a 13 March meeting. Active management in the overall public equity portfolio was reduced from 86 percent to 66 percent. Chan explained to the meeting that increasing passive management lowered costs

UCRP more than doubled its private equity returns over the year to 30 June 2017, delivering 14 percent across $2.8 billion of private equity holdings, up from 6.2 percent in 2016, according to its latest annual report. The university’s $10.8 billion endowment pool reported 21.1 percent returns on $1.2 billion of private equity over the period, a 6.7 percent increase from last year.

Prior to UC Regents, Chan was the chief investment officer for the $8 billion Sacramento County Employees’ Retirement System, where Ailman once worked.

CalSTRS is known and admired among the general partner community for its team stability. In an exclusive interview with Private Equity International, Ailman said that stability comes from the internal culture, as well as attracting and retaining the right people. His team of more than 150 investment staff has an annual average staff turnover of about 4 percent.

“It’s really about growing and building staff up from within, an area we are focused on,” Ailman said. “Our staff is still very lean, so we will continue to expand it in the future.”

CalSTRS had an 8 percent target and actual allocation to private equity at 31 May. As of end-April the fund posted a net return for the financial year of 13.4 percent.

Look out for our exclusive interview with CalSTRS CIO Christopher Ailman in the July/August edition of PEI.