“David has made a significant impact to the Employees’ Retirement System of the State of Hawaii since he joined in 2019. He brings over 10 years of investment experience into the team, serving in various roles, including as interim CIO. David has been relentless in driving HIERS towards best-in-class investment management practices, instituting rigorous due diligence processes for new investments and utilizing technology and data to drive decisionmaking while at the same time improving operational efficiency. David’s commitment to enhancing investment performance and building strong partnerships with key stakeholders has been instrumental in the ERS portfolio, generating positive returns despite the volatile investment environment. His ability to balance the need for short-term performance with long-term strategic objectives has enabled the HIERS portfolio to remain resilient and agile while achieving its investment goals. In addition to his technical expertise, David continuously demonstrates strong leadership and communication skills, inspiring his team to achieve excellence and fostering a culture of collaboration, diversity and inclusion. He has also been recognized by his peers for his thought leadership and has been invited to speak at various investment conferences. His contributions to the investment management industry are outstanding, and he is a leader who will undoubtedly shape the industry’s future.”
—Kristin Varela, CIO, Employees’ Retirement System of the State of Hawaii
The CIO Editorial Team shared a dozen questions with all our NextGen nominees and asked them each to pick six to answer. Their answers informed our decision to include them as a NextGen. Below are the answers from David Okamoto.
CIO: How are you dealing with rising interest rates and economic uncertainty?
Okamoto: For most of the last decade, the risk-free rate was also return-free. The benefit of rising interest rates is that fixed income looks more attractive going forward, which may allow investors to meet their return objectives without taking on as much equity risk.
CIO: What is the best way to bring more diversity to the financial industry?
Okamoto: Programs that reach students in high school or even earlier to introduce the variety of opportunities available in finance. When I entered college, I had no idea there were careers in public pensions.
CIO: What asset classes offer the best options for avoiding or mitigating drawdown risk in an institutional portfolio?
Okamoto: A combination of assets that are defensive and anti-correlating to equity risk, such as long-duration government bonds, trend following and tail hedging, and strategies that are uncorrelated to growth risk, such as fixed-income relative value and global macro, or more illiquid strategies, like catastrophe reinsurance and litigation finance. There should be enough liquidity in the portfolio to allow for rebalancing to take advantage of price dislocations.
CIO: What roles do AI and large language models have in the future of institutional investing?
Okamoto: AI and large language models could be helpful in writing policies and procedures, a thankless but still necessary task. As it develops, I think AI could assist in the manager research process.
CIO: Which component of ESG-driven investing do you think will have the most influence on institutional investing going forward, and why?
Okamoto: Judging by the number of new managers and funds I’ve seen recently across private equity, real assets/infrastructure and private credit, I’d say the environment and energy transition.
CIO: Which asset manager (exclusive of their firm) has most influenced your growth as an institutional asset manager?
Okamoto: At one of my first job interviews, I was told to read David Swenson’s Pioneering Portfolio Management. It was not only a good introduction to the different asset classes I would soon be working with, but also illustrated how a perpetual pool of capital, whether it be an endowment, foundation or pension plan, could ultimately benefit broader society across multiple generations.
