Scott Chan Named CalSTRS’ New CIO | Chief Investment Officer

Chris Ailman has a successor. Scott Chan, deputy CIO of the California State Teachers’ Retirement System, will take over on July 1 as CIO of the world’s largest educators’ pension fund. Ailman, has served as CIO since 2000, is among the longest-serving CIO of any organization.

CalSTRS announced Chan’s appointment Wednesday. Ailman will step down from his duties as CIO on June 30, but he will advise Chan in the role until the end of the year to ensure a smooth transition.

“I am honored to oversee CalSTRS investments and lead our amazing team,” Chan said in a press release. “Securing the retirement of our members is extremely meaningful to me personally, as the husband of a California educator, and professionally, as we seek innovative opportunities in ever-changing financial markets.”

In his new role, Chan will oversee CalSTRS’ 225 investment staff, and will spearhead the investments of the pension’s $332.5 billion in assets, which provides retirement and benefits to more than one million members and beneficiaries.

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Chan joined CalSTRS as deputy CIO in 2018, succeeding Michelle Cunningham, who had retired the previous year. He was hired from the University of California Board of Regents office of the CIO, where he oversaw a $55 billion global equities portfolio as senior managing director.

As deputy CIO, Chan has helped develop a collaborative model investment strategy for CalSTRS, which aimed to bring asset management in-house, an approach that CalSTRS says has saved the fund more than $1.7 billion since 2017.

According to a CalSTRS spokesperson, two finalist candidates were identified for interviews that took place in April. The search for a new CIO began in February, shortly after the announcement of Chris Ailman’s retirement in January.

According to a job posting from CalSTRS earlier this year, the salary range for the CIO is between $408,000 and $612,000, not including an up to 200% performance-based bonus or a 5% monthly base pay increase for individuals with CFA charters or similar certifications.

Prior to his career at CalSTRS and the UC Board of Regents, Chan was CIO of the Sacramento County Employees’ Retirement System, a position which Ailman also held — from 1985 to 1996. He also held positions including partner and portfolio manager at the hedge funds SF Global, Magnum Opus and TLB Capital.

Chan was a member of the CIO Power 100 list in 2013. He is also a board member of the Toigo Foundation and is a member of the Milken Institute Executive Counsel for Diversity, Equity and Inclusion in Asset Management.

He also serves on the advisory boards of the Alternative Investment Management Association, Chartered Alternative Investment Analyst Association, The Investment Diversity Exchange, The Investment Diversity Exchange, the Alternative Investors Forum and the Kroner Center for Financial Research.

Chan holds a Bachelor of Arts in economics from UCLA, and a Master of Business Administration from The Fuqua School of Business at Duke University. He is also a CFA charterholder.

“I am committed to driving excellence in how we invest, including advancing sustainability practices and promoting diversity across CalSTRS, our portfolio companies, partners and the industry,” Chan’s statement continued. “I’m humbled to follow Chris Ailman, a great friend and mentor, in maintaining our collegial and inclusive workplace culture and continuing to work with our CEO, Cassandra Lichnock, and our board’s Investment Committee to achieve our goals.”

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CalSTRS Begins Search for Next CIO

Tags: California Teachers’ Retirement System, CalSTRS, CIO, Scott Chan

How will climate change affect investments? Common sense says: Nothing good will happen. But when the serious environmental problems intensify, planet wide, how economically damaging would they be?

The deterioration of the environment will be a slow-motion process, with few sudden jolts likely, according to Riccardo Rebonato, an academic who studies risk management and its intersection with climate change, in an interview with Net Zero Investor, a London-based periodical. Rebonato, the former global head of rates and foreign exchange at asset manager PIMCO, is a professor of finance at France’s EDHEC Business School, and the scientific director of its Risk Climate Impact Institute.

“No Minsky Moment” will occur, said Rebonato, meaning a collapse in asset prices—a term associated with the late economist Hyman Minsky, who studied financial bubbles.

Rebonato declared that, with climate change, it “is difficult to conceive a particular event like Lehman Brothers that could trigger” an economic plunge as the collapse of that investment firm did in 2008.

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“What is more likely to happen is that, over time, actual earnings, actual cash flows, disappoint,” he said. “It is going to be a death by a thousand cuts.”

He did not quantify what that would entail, although others have. The economic damage from climate change may lead to a 19% slump in the global economy over the next 25 years, according to the scientific journal Nature.

That, he contended, means a steady erosion of stock prices would occur, but few now can see that, as the onset of any harsh effect from climate change seems far distant to most people. So right now, “Equity markets do not seem to reflect any substantial adjustment for climate change,” he remarked.

To Rebonato, a recurrent drip-drip-drip of bad corporate returns will eat away at equity markets. The progression, he explained, would be “serious, if not catastrophic,” leading to “continuously negative surprises.” And no market turnaround would appear to erase the damage, in his view: “When you have a big shock like Covid, you get a massive fall of equities, but then a rebound. Here, there is no mechanism for a rebound.”

Rebonato argued that his dire scenarios were not based on worst cases, as set out by the Intergovernmental Panel on Climate Change, a United Nations body that formulated several possible outcomes for the environment as the planet warms, from relatively mild to truly horrible. Still, even moderate scenarios would harm stocks and other investments, Rebonato stated.

Government payments to try to offset climate change’s impact would be expensive, he admonished, with either higher taxes or increased public debt footing the bill. If greater government borrowing is the predominant path, that would lead to lower interest rates—ordinarily a plus for stock valuations. Trouble is, he added, amped-up inflation could also result, which would harm both stock and bond investors.

Nonetheless, combating climate change would be a business opportunity for some that could benefit investors, Rebonato acknowledged. At this stage, though, the fortunate businesses are difficult to pinpoint: “You might get the clever person who has picked the right sectors. Good for her; she is cleverer than me.”