“Evril has a boundless curiosity for active management strategies that has become well-known throughout the money management industry. The dedication he brings to his engagement with active managers and his passion for understanding how money managers can add value to the pension fund’s portfolio have underpinned his great success in constructing a winning portfolio in volatile times.”
—Anastasia Titarchuk, CIO, New York State Common Retirement Fund
Evril Clayton, the New York State Common Retirement Fund’s deputy director of global equity, has logged some fine returns during his tenure. The entire pension plan rose 33.5% in its fiscal year ending March 31. He also oversees a bevy of outside asset managers. “We’re always looking for new ways to get alpha,” he said.
Up ahead, he see more volatility, which he believes will make getting market-beating returns tougher.
Clayton started out with a bachelor’s in business administration from the State University of New York in Potsdam, and joined Merrill Lynch as a financial adviser. There, he decided that he wanted to get a taste of institutional investing. He got experience in endowments at Rensselaer Polytechnic Institute (RPI) as a senior investment analyst. Then, he jumped over to a new firm started by RPI investment folks, Kuramo Capital Management, which did hedge fund and private equity investing in Africa.
After receiving his MBA from Clarkson University and in a new role at New York Common, he was identified as a leader within the Global Equity team, and won promotion to his current position in 2019. The Global Equity portfolio currently is 55% of the fund’s $255 billion in assets.
CIO: How would you deal with rising inflation and interest rates?
Clayton: I think the most important step in protecting your portfolio from rising inflation and interest rates is to have a well-diversified portfolio. An important part of this diversified portfolio would be real asset exposure, which offers a means of addressing inflation.
I have a slightly optimistic outlook on risk assets, given the potential for a further steepening of the yield curve, and continue to favor shorter-duration fixed-income assets with relatively less sensitivity to rising rates. While many asset classes have already priced in a strong and sustained recovery, over the next six to 12 months, we continue to find risk assets more attractive than risk-free assets.
CIO: What is the best way to bring more diversity to the financial industry?
Clayton: This is an important question for me, personally. I do not believe that there is one answer to this question, I believe a multi-pronged approach must be taken. I think the first step is for asset owners to ask questions about diversity of their managers and make it very clear that they will be evaluated on these metrics. Second, I believe the industry must do a better job of working with young people from diverse backgrounds to ensure that they are aware of the many different verticals within the financial industry.
Third, I believe that this effort of working with younger people must start much earlier, even at the high school level. Helping young people develop a road map earlier on, I believe, will lead to a greater percentage of individuals from diverse backgrounds pursuing a career in the financial industry. Fourth, there also must be a focus on mid-level and senior level investment professionals. I believe this is a critical area of the financial industry that often gets overlooked. Having a generation of leaders and mentors that are vested in seeing the new entries in the industry succeed it is critically important.
CIO: Is cryptocurrency a flash in the pan, or an asset of lasting value?
Clayton: A flash in the pan, I would disagree with that. Regardless of where the price of Bitcoin goes next, I feel comfortable saying that cryptocurrencies are here to stay and will be part of the digital revolution going forward. The entire space is still very young, but there are also some interesting components—i.e., speed, transparency, and low fees—that traditional payment channels cannot match. Cryptocurrency is not only Bitcoin. It broadly includes smart contracts (programmable money), stablecoins, wholesale and retail CDBC [central bank digital currencies], and other e-money projects currently being developed and researched across the world.
CIO: How will the pandemic have changed the economic/financial world?
Clayton: Perhaps most importantly, the pandemic has proven the importance of the digital revolution. Though it typically takes time for revolutions to gain critical mass, the technology wave is likely just in its early days and its impact will likely grow in coming decades.
CIO: What place does blockchain have in tomorrow’s financial scene?
Clayton: In a world with growing data, ownership, governance, security, and privacy concerns, blockchain technology provides innovative database/ledger solutions that were historically not available with traditional physical and manual records. The underlying technology allows for numerous innovations, including improvements around asset ownership records, potential for faster cross border transactions and lower costs. I believe we are still in early stages of this development and that legacy financial infrastructure will also require changes to support future innovations around blockchain and cryptocurrencies.
CIO: How will ESG change investing going forward?
Clayton: ESG considerations have already changed investing, arguably faster than many predicted even just a few years ago. I am seeing a maturation within the industry of ESG investing. It has now developed into a critical part of all investments and, in my view, and has a clear risk management component. I am now observing a clear focus on climate and various investment managers developing ways to quantify climate risks within their investment process. The last thing I will say on this topic is that I believe that there is now a clear understanding that it’s not ‘either or’ when it comes to generating high-risk adjusted returns and factoring in ESG considerations. Investors are beginning to recognize that funds with high quality companies and forward-looking management teams that incorporate a focus on ESG tend to be more resilient than their traditional counterparts.
CIO: What should be an investment trend, but isn’t (yet)?
Clayton: Under Comptroller [Thomas] DiNapoli, the New York State Common Retirement Fund aggressively seeks out talented, diverse investment managers, but this should be a broader investment trend.
CIO: Who is the manager you don’t currently work with whose brain you’d most like to pick for an hour?
Clayton: The late David Swensen [of Yale].
