Florida State Board of Administration

Art by Chris Buzelli

From the Global Financial Crisis to hurricanes, Ashbel “Ash” Williams is a man who seems to be able to head into the stormiest of investment markets and steer his ship to positive returns.

After the crash of 2008, Williams could have weathered fairer seas at his job as a managing director of the hedge fund Fir Tree Partners, but left it in October to return to his native Florida and the SBA at one of its most critical times in the state’s financial history.

Following the devastating stock market crash, Florida’s SBA had just witnessed the Florida Retirement System’s assets go from the previous high of $141.3 billion in October 2007 to $83.7 billion on March 9, 2009. Florida’s local government investment pool, operated by the SBA, also saw a classic ‘run on the bank’ when participants were made aware that a small percentage of asset-backed investments were downgraded, with outflows approaching $14 billion, cutting the fund’s balance in half before the trustees froze the account. This was all following a torrent of eight hurricanes that had hit Florida in 2004 and 2005 that fully utilized the resources of The Florida Hurricane Catastrophe Fund, also administered by the SBA. Williams was taking the helm arguably during one of the worst years in SBA’s history.

But Williams had taken risks before. Early in his career, Williams gained his political sea legs by working as an executive assistant to two House speakers—J. Hyatt Brown and Ralph Haben—in the Florida House of Representatives. From 1991 through 1996, he worked as executive director of the Florida SBA, and then left the state where his fore fathers resided for more than 100 years for chilly New York and the private sector.

“Leaving a comfortable life at Florida SBA in 1996 for the private sector and New York City was risky, but it proved to be a positive, life-changing event for our entire family,” he said. From 1996 to 1999, he was president of Schroder Capital Management, the US asset management arm of Schroders, before becoming a managing director at Fir Tree Partners.

Upon returning to Florida’s SBA, Williams knew the tasks ahead were as much about rebuilding confidence after the shock of the financial crash as they were about improving its funded status.

“I returned to the SBA to rebuild the organization and its reputation after a crisis of confidence and reputational damage arising from credit-related liquidity problems and redemptions from an SBA-managed local government cash pool,” he told CIO. “Occurring at the onset of the great financial crisis, the cash pool problems led into a protracted period of painfully public SBA criticism and doubt that worsened with the GFC.”

Luckily, the SBA has always been inclined to take a calculated political risk to capture needed investment authority or resources, he said, and has since reaped the benefits. When the FRS was created in the early 1970s, the only allowable investments were treasuries and investment-grade bonds.

“Over the years, we have worked with the legislature and earned the trust to expand investment authority to include almost everything from treasuries to frontier equities, including real estate, private equity, venture capital, distressed debt, infrastructure,” Williams said.

As executive director and CIO, Williams is responsible for SBA’s total assets under management of $195.9 billion, with $159.2 billion of that in the Florida Retirement System Pension Fund, the fifth-largest public plan in the United States.

Since his return, the fund had aggregate gains of more than $92.4 billion, outperforming its benchmark by $9.2 billion. The fund’s annualized return is 8.11% versus a benchmark of 7.21%.

Michael Price, chairman of the Compensation Subcommittee of the Investment Advisory Council (IAC), told the council in September, “I think it’s been a tremendous run. I think the Investment Advisory Council is doing better than ever.”

For the fiscal year ending June 30, 2016, the plan’s funded status was 85.4% based on an actuarial basis.

Investment philosophy

Williams is in the rare position of being able to compare working both in the public and private sectors.

“Maintaining focus and capturing good long-term results is more challenging in the public sector,” he told CIO. “On the private side, objectives tend to be very focused and aligned with governance, stakeholders are clear: owners and clients. Public entities have potentially unlimited stakeholders and infinite objectives, depending on governance and politics.”

An increasing portion of SBA’s assets are now managed in-house: 43.3% at December 31, 2016, versus 36.3% at December 31, 2010. The Florida Retirement System Pension Fund has gained nearly $52 billion since (net of $475 million per month in net outflows to beneficiaries), and despite the shift to in-house management, the SBA is considered a low-cost provider among its peers, according to the performance analysis firm CEM Benchmarking.

“While operating efficiencies and asset allocation make up a large part of our cost savings, the evolution toward increasing the portion of assets managed in-house, careful stewardship of external manager relationships, and the prudent use of passive investing have also been contributors to effective cost management,” said Williams.

The Florida Hurricane Catastrophe Fund represents 7.3% of the SBA’s assets under management. Following the fund’s depletion after Florida landed in the path of eight storms in 2004 and 2005, cash resources increase to $17.6 billion ahead of this year’s devastating storms, which put the fund in its strongest cash position ever. Williams directed the fund to purchase $1 billion in reinsurance for the past three years. While this year’s storm battering was not to the level of 2004 and 2005 hurricane activity, November estimates show 2017 storms will claim anywhere from $2 billion to $6 billion from the Florida Hurricane Catastrophe Fund.

Having brought the SBA back to health, Williams will be refining existing strategies “to reflect where we are in the market and economic cycles,” he said. He plans to continue the globalization of the SBA’s private-market strategies. 

Like many CIOs, he is also working on projects to drive internal asset management improvements in information technology and project management, while keeping pace with cyber-security and mobility demands. Also on his agenda: A formal Governance, Risk, and Compliance (GRC) review will soon influence the evolutions of the organization, consistent with best practices. He is “always refining portfolio structure in all asset classes to reflect our perception of current opportunities and risks.”

His priorities for the coming years will continue to be building and maintaining the organization’s team, culture, reputation, credibility, and resources “at a strength that empowers mission and vision fulfillment,” he said.

“Our most visible output is investment results, the goodness or inadequacy of which is readily seen. What is less visible is the team building, policy, and strategy formation, risk management, and execution. If the team, culture, processes, and resources are right, the probability of investment outcomes that earn trust, enhance reputation, and build brand value is vastly enhanced,” he said.

Despite being in a stormy state, Williams believes the greatest risk posed to investments is geopolitical, “because of the near-­impossibility to underwrite and the potential for catastrophic disruption,” he said.

His investment philosophy is a combination of “understanding the risks you are taking and pricing them accordingly; avoiding uncompensated risk while looking for areas where you have a demonstrable advantage, and allying with “partners of sound character and skill, and prospering together.” He told CIO, “There is no hedge like a good valuation margin of safety.” 

Ash Williams received BS and MBA degrees from Florida State University (FSU), and completed post-graduate programs at University of Pennsylvania’s Wharton School and Harvard’s John F. Kennedy School of Government.