Skjervem Resigns From Oregon State Treasury

In a surprise move, John D. Skjervem, who oversaw investment activities at the $82 billion Oregon Public Employees Retirement Fund (PREF), has announced his resignation.

Skjervem, the chief investment officer for the Oregon State Treasury, will leave his Oregon post at the end of March and will join the California investment consulting firm of Alan Biller and Associates in April.

The news was announced in a release by the investment consulting firm. Oregon State Treasury officials could not be immediately reached for comment, but it is expected that they will pursue a national search for Skjervem’s replacement.

Skjervem took over the pension fund and other investment activities for the state treasurer’s office in 2012. Before that, he was an executive vice president at Northern Trust.

He held a variety of portfolio management and leadership positions at the Chicago bank, including chief investment officer at the firm’s wealth management division.

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Overall, at the Oregon State Treasurer’s office, Skjervem managed $111 billion in various funds administrated by the office.

At his new firm, Skjervem will replace founder Alan Biller as CEO. Biller will remain as chairman of the firm and will stay active in both the firm’s operations and client service initiatives, the press release said.

The firm is known as a major consultant for union pension plans and has aggressively expanded its outsourced chief investment activities over the past few years, using delegated authority to make investment decisions for many of its clients.

Biller’s largest client is the Western Conference of Teamsters Pension Trust, the largest multiemployer pension plan in the US with more than $40 billion in assets under management (AUM).

It’s expected that Skjervem will help spearhead efforts to increase alternative assets at the union plans represented by Biller and Associates.

The firm has about $100 billon in assets under advisement, and has delegated authority for nearly half of the assets.

Union plans generally have not been as aggressive as state and local pension plans in building alternative assets, and it is expected that Skjervem will use his expertise to help coordinate that effort at his new firm.

The Oregon Public Employees’ Retirement Fund has the fourth-largest private equity portfolio among US pension plans, and Skjervem has continued the high asset allocation to the pension plan. Private equity asses total about $16 billion, nearly 20% of total plan assets.

Only the California Public Employees’ Retirement System, the California State Teachers’ Retirement System and the Washington State Investment Board have larger private equity portfolios.

At the Oregon pension plan, Skjervem has emphasized de-risking the pension plan’s assets under management. Last year, he led the pension system’s efforts to reduce equity exposure to 32.5% from 35.5%. The Oregon plan also created a risk parity sleeve and a discreet diversifying strategies sleeve for alternatives.

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Tags: California, Oregon, Oregon Public Employees Retirement System (PERS), Pension, Retirement, Tax, teacher

The Texas Teachers’ Retirement System (TRS) is moving toward a new strategic asset allocation that aims to transition the portfolio to a more risk-averse stance in a downward market environment.

As part of its new target equity allocation completed in the fall, the fund’s public equity allocation was reduced to 54% from 57%. The potential switch to private credit is propagated by the market, where equities are experiencing relatively high valuations and at potential risk of a downfall, Chief Investment Officer Jase Auby told CIO.

“The TRS strategic allocation to public equity is designed to capture long-term equity risk premiums. That said, at times of historically high valuations and extended market cycles, we believe it is prudent to consider replacements for a part of that exposure where we see characteristics of equity-like returns with lower correlations to equity markets. Right now, we like private credit as it is more protected than equity in a market risk event and we can use credit to produce return profiles close to our long-term equity return assumption,” Auby said.

“We will always be on the lookout for equity alternatives to bring the best balances to the portfolio. Equity risk is still the largest risk to the portfolio,” he continued.

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“Public equity is a very difficult thing to trade out of. It is the engine behind the return of most investment portfolios,” Auby said. “It’s a difficult one to reduce but we will continue to seek ways to do it.”

In TRS’ new asset allocation, alternative asset classes received a bit of attention, including private equity, infrastructure, natural resources, and energy, which each saw a 1% increase in their overall targets. The system also got rid of a 4% target to directional hedge funds.

“To some degree we also saw low-volatility equity as a bit of an equity alternative,” Auby said. “To the extent that it provides [similar] returns with a bit lower risk, but that one’s a little bit of a stretch.”

Sub-asset classes in the global equity portfolio include 18% for US equity, 13% for international developed markets, and 9% for emerging markets.

Allocations to US Treasuries also rose by five percentage points, from 11% to 16%, in the funds’ new asset allocation. Risk parity targets increased to 8% from 5%. Cash holdings also rose to 2% from 1%.

In its last fiscal year ending fall 2019, the system returned 6.4%, shyly missing the benchmark for the $156.4 billion portfolio.