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Newsmakers

Hawaii ERS Names Kristin Varela as New CIO

Coming from New Mexico’s PERA, where she was deputy, the new chief replaces Elizabeth Burton.

By Larry Light

Kristin Varela

The State of Hawaii Employees’ Retirement System has hired a new CIO, Kristin Varela, who has been No. 2 at the Public Employees Retirement Association of New Mexico. She succeeds Elizabeth Burton, who served almost four years as the Hawaii plan’s head.

“It’s an honor and an enormous privilege to be appointed to this position,” Varela said in a statement. “I am excited to join such a prestigious team and look forward to serving the hard-working employees of Hawaii.”

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Burton stepped down in June, citing family and personal concerns, and a nationwide search for her replacement ensued. The Hawaii program is slightly larger, at just under $22 billion in assets under management, than the New Mexico plan ($17 billion).

Varela became interim CIO in New Mexico in 2021 after the departure of Dominic Garcia. She held that position until Michael Shackelford took over the top job in August.

Varela holds a B.B.A. in finance from New Mexico Highlands University and last year was nominated for CIO’s Industry Innovation Award for public defined benefit plans below $21 billion. She also was named as one of CIO’s “Forty Under Forty” up-and-comers in 2017 (the award now known as NextGens). At the time, she was focused on real assets.

The Hawaii program touts Varela’s wide-ranging experience, saying in a statement: “Varela brings broad expertise in modeling, market analysis and manager-specific due diligence across various asset classes of public, private and alternative markets. She specializes in risk-based asset allocation, innovative investment solutions and prudent portfolio implementation.”

“She comes highly experienced in the public plan arena and is particularly skilled in the institutional risk and asset classes that are the underpinnings of our successful investment strategy,” said Vince Barfield, chair of the fund’s board, in a statement.

The Hawaii program, which had a funded ratio of 58.3% as of 2021, returned 3.66% for the fiscal year 2022, ending June 30. Hawaii ERS reported three-, five- and seven-year annualized returns of 9.96%, 8.73% and 8.00%, respectively, beating its benchmarks for each period.

Hawaii ERA’s acting CIO, Howard Hodel, intends to retire next year and will stay on to assist the transition.

Related Stories:

Elizabeth Burton to Step Down as CIO of Hawaii ERS

Hawaii State Pension Fund Returns 3.66% for Fiscal Year 2022

2019 Power 100 Elizabeth Burton: After Her First Year at Hawaii ERS

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Home > News > Research > Survey: Allocators See 2023 Opportunity in Bonds
Research

Survey: Allocators See 2023 Opportunity in Bonds

Fixed income should benefit from rate increases, Natixis poll finds.
By Larry Light

 


Interest rates are on the rise, and bond prices have fallen. But come next year, fixed income will be the place to be in the eyes of global allocators, according to a Natixis survey of institutional investors.

A large majority of respondents believe the escalating interest rates, orchestrated by central banks, will make bonds attractive again.

“Given prospects for central bankers continuing to fight inflation with rate hikes in the new year,” the study said, “seven out of ten institutional investors (72%) believe rising rates will usher in a resurgence in traditional fixed income.”

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Among other findings, the survey of 500 allocators in 30 nations concluded that next year volatility will make valuations matter again after the wild tech runup that ended in 2021. Alternative investments also will provide good yields, and private markets will “offer bear market relief.”

At the moment, bonds are not delivering much good to investors. The Bloomberg Agg, which tracks U.S. Treasuries and investment-grade fixed income, is down 12.1% this year.

The consensus is that rates worldwide will continue to rise next year: 54% of those surveyed expect more hikes, compared with 20% who see none and 26% who forecast cuts. Of course, if rates keep ascending, bond buyers risk more price decreases, as fixed-income yields move in the opposite direction from prices, known as duration risk. So almost two-thirds say they will counter that risk by staying with shorter term paper, which is less vulnerable to duration problems.

Slightly more than half want to de-risk their portfolios, meaning shift from stocks into bonds. And not just any bonds—the safer, the better. Almost half intend to go into government bonds or investment-grade corporate. There’s much less enthusiasm for junk and emerging market bonds.

Following a volatile year for bonds, institutional investors are divided on how hyper-kinetic fixed-income markets will be in 2023: 36% anticipate decreased volatility ahead, while 36% expect increased volatility and 27% see no change.

Despite the renewed interest in fixed income, institutional investors see one potential downside: liquidity. stems from the fact that the Federal Reserve and other central banks are ending their asset purchase programs. A full 36% of institutional investors say liquidity is a key portfolio risk in 2023.

Two reasons exist for this, the survey indicated: “First, there is concern that in the event asset owners need to sell off securities, there may not be a ready market of buyers. Second, it could also make price discovery harder for those looking to buy.”

 

Related Stories:

Shorting Bonds? The Case for a Seldom-Used Tactic

 

Why Are Cash-Flush Big Tech Firms Issuing Bonds?

 

Why Have Stocks and Bonds Been Correlated Lately?

 

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