Art by Chris Buzelli

When he joined the Hawaii Employees’ Retirement System (HIERS) in 2011 and was selected to be its fourth CIO in 2012, Vijoy Chattergy knew the only way to dig the fund out of its bottom-quartile hole was to revamp its investment portfolio.

Chattergy, working with general consultant, reviewed the fund’s portfolio, identified its weaknesses, and eventually decided on a risk-management approach. After reaching its strategic target allocations in 2013, HIERS’ consultant suggested the fund adjust its portfolio to focus on functional risk classes. 

“I quickly came to realize that the idea of functional risk classes—and really having the transparency and flexibility into the portfolio—was critical for the way we should be thinking about our portfolio construction and the way we should actually evaluate opportunities,” Chattergy told CIO.

Around that time, Chattergy hired a five-person team of investment professionals. In 2014, the fund for the first time added three investment officers (including a risk investment officer), explored strategies to restructure the portfolio according to the new initiative, and educated the board, who greenlit the idea.

Initially, the functional risk classification entailed dividing traditional fixed-income into credit and principal protection allocations. After more passive equity and private market commitments were made, the class was dubbed “private growth.” Chattergy’s team continued the portfolio adjustments until the five risk classes of which the HIERS portfolio consists today (growth risk, principal protection, real return, crisis risk offset (CRO), and opportunities) were attained.

In 2017, HIERS broke the real estate portfolio into non-core real estate and core real estate classes, moving them into the stabilized growth and private growth exposure categories. It also moved the oversight of one of its emerging market-focused infrastructure funds into the space. The fund is also restructuring its credit exposure and examining its venture exposure. In addition, HIERS implemented its CRO class in April. The class looks to diversify growth risk via three separate strategies: Treasury Duration Capture; Systematic Trend Following; and Alternative Return Capture.

The addition of CRO necessitated hires and terminations within the fund’s managerial ranks. Additions include seven managers and a manager who manages the overall CRO platform. On April 4, 10% of the portfolio began to trade in CRO. By 2020, HIERS plans to increase that allocation to 20%.

Thanks to the transformed portfolio, the now $16.5 billion fund saw 13.7% returns this year.

When it comes to innovation, Chattergy feels that the key to extraordinary performance lies in collaborating with asset managers as well as like-minded investors. In addition to the HIERS culture, the Hawaii local is also tethered to his role not only because of dedication, but because friends and family members are both retired and working employees within the system.

“Even if I’m not sitting here in this seat, I know that for decades to come, my family will benefit from this pension plan,” Chattergy said. “It really is a unique job for me because the alignment is so strong with two generations of my family devoting nearly 100 years of service to the state of Hawaii.”