Public pensions have always had a challenge cultivating investment talent. Compensation limits and a reputation for being conservative can make it difficult to recruit talented candidates. That’s why Jeb Burns, CIO at the $15 billion Municipal Employees’ Retirement System (MERS) of Michigan, has opted to take an innovative approach to this problem by building his own roster.

MERS works closely with local universities to recruit their top business and finance talent for internships with the pension. According to Burns, he encourages interns to work with the fund as an intern for a time and also do an internship round with a local investment firm. If a candidate wants to stay local, often Burns will get them to come aboard full time. As a result, MERS has been able to build a solid talent pipeline and contribute to job creation within the community.

“We’re really proud of our internship program,” Burns told CIO. “Often, working within public pensions is viewed as kind of a lifestyle choice because of the limitations and requirements of the job. By working with younger talent, we’re able to be a place where folks can develop solid investment experience and we’re also getting the benefit of fresh perspectives.”

Those fresh perspectives are likely to be helpful going forward. Under Burns’ leadership, the investment team manages a lot of its assets in-house. The investment portfolio holds a significant portion of its exposure in exchange-traded funds (ETFs)—a move that Burns said has kept fees low and enabled the investment team to create customized exposures that meet the unique needs of the pension. MERS also has significant direct investments and co-investments in real assets through its in-house team.

“Investing in real assets can often be prohibitive because of the fees,” Burns explained. “What we’ve been able to achieve with our model is the ability to make those investments—in many cases direct investments—while stripping out layers of those fees. People balk at the idea of doing direct investments, but if you have robust due diligence and a solid team, it’s absolutely manageable and it has been a significant creator of value for us.”

Maintaining a strong team was especially helpful over the past year when the fund moved to a remote environment in response to the pandemic. Now, as the team considers its working arrangements going forward, Burns said many of the discussions the staff members are having now are emblematic of what CIOs will have to contend with in the future.

“In a lot of ways, the way we work has fundamentally changed,” he said. “Investing is really collaborative. CIOs are going to have to navigate how that looks and what they are willing to offer people in terms of flexibility. Our team members want the flexibility, to be sure, but you have to balance that against the need for collaboration and also professional development, which is difficult to do over a Zoom call. I think figuring out how to put all of those pieces together in a new and positive way is going to define our role over the near term and maybe longer.”

—Bailey McCann