Austin Pension Fund Seeks New CIO | Chief Investment Officer

Three months after the City of Austin Employees’ Retirement System (COAERS) announced that Chief Investment Officer David Veal was stepping down, the $3.4 billion pension found has launched its search for a new permanent CIO.

According to the job posting on COAERS’ website, some of the CIO’s primary job functions include:

Developing, recommending, and implementing the overall investment strategy, including asset allocation, risk management, investment operations, and investment policy guidelines;
Providing analysis and ongoing review of the portfolio with respect to diversification, capital market conditions, cash flow demands of the system, and liquidity of the assets;
Researching and recommending innovative investment management practices that align with COAERS’ investment beliefs and strategic vision; and
Overseeing and reporting on all investment costs, such as manager fees, consultant and custodian costs, and internal investment resource budget.

Some of the qualifications for the job include having direct and relevant public fund experience; a proven investment track record and commitment to excellence; significant understanding of risk management; familiarity with the laws and ethical standards regarding pension fund assets; and experience working with a board of trustees.

And the pension fund’s preferred candidates would be certified Chartered Financial Analysts (CFAs) and/or Chartered Alternative Investment Analysts (CAIAs); have an advanced degree in a related field; and have investment experience with a public pension organization of similar size.

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“The COAERS investment program is a best-in-class fund,” COAERS Executive Director Christopher Hanson, who is leading the nationwide search, said in a statement. “We’re looking for forward-thinking candidates who possess strong investment credentials, embrace innovation in investment management practices that align with COAERS’ investment beliefs and strategic vision, and can navigate the intellectual challenge of guiding the board through complex investment decisions.”

David Stafford is currently COAERS’ interim CIO. He joined the retirement system’s investment team as a portfolio manager in 2018 and most recently served as the director of investment strategy.

COAERS has had financial troubles in recent years. Moody’s downgraded its AAA credit rating to the city of Austin in 2019 from stable to negative, citing the city’s “inability to manage the growth of liabilities and costs associated with the retiree benefit systems.” Standard & Poor’s maintained a stable outlook, but said the city’s pattern of raising contribution rates significantly “negatively impacts finances, or material deterioration in the long-term health of the plans could affect the rating.”

That prompted Austin’s City Council Audit & Finance Committee to vote unanimously last year to roll out a plan that would help resolve the balance sheets of COAERS and the Austin Police Retirement System (APRS).

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Tags: Austin, Christopher Hanson, City of Austin Employees Retirement System, COAERS, David Stafford, David Veal, pension CIO

Bond yields are rising—but not because of inflation, says Joe Lavorgna, chief economist for the Americas at Natixis. Rather, he says, the catalyst is the Federal Reserve’s plan to taper its massive buying of Treasury bonds and agency mortgage-backed securities (MBS).

The 10-year Treasury yield has jumped to over 1.5% lately, from a little less than 1.2% in early August. Right now, the benchmark T-note has almost reached where it was last spring, when it climbed amid sentiment that a faster-growing inflation was returning.

Well, higher inflation has indeed made its Terminator-like reappearance. The Consumer Price Index (CPI) for August increased 5.3% from 12 months before. The CPI report for September will be released in two weeks, on Oct. 13, and a number of Wall Street strategists believe it will show inflation remains just as lofty.

Meanwhile, there’s a camp that pooh-poohs the notion of a long-lived inflationary trend. Federal Chair Jerome Powell and the Biden administration have said the high CPI level is transitory and is the result of supply bottlenecks and other snafus associated with the recovery from last year’s pandemic-related economic dive.

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Whatever the inflation news up ahead, Lavorgna isn’t convinced that higher consumer prices will harm the bond market—which historically is allergic to a burgeoning CPI. He insists, with reason, that bond investors agree with him. He points out that market expectations for inflation have held steady for months now, and at a not-so scary level of 2.4%. This refers to the breakeven inflation rate, the market’s projected reading of price escalations, as divined by the difference between Treasury inflation-protected securities (TIPS) and conventional Treasury paper.

“The bond market is still not worried about inflation despite the persistence of supply-chain disruptions, rising wages, and elevated energy costs,” Lavorgna writes in a note. Instead, the market is bracing for when the tapering happens, likely starting in November and ending sometime next summer.

The Fed’s influence in the fixed-income market has been considerable ever since it began purchasing bonds in the aftermath of the 2008-09 financial crisis, in a bid to keep interest rates low and pump liquidity into the system. This effort intensified when the pandemic knocked out the economy in early 2020.

In his report, Lavorgna illustrates just how vast the Fed’s program has been, noting that the central bank has gobbled up 57% of all marketable Treasury issuance since the coronavirus appeared. And the Fed also has absorbed almost all the agency MBS during that time, he adds. This buying frenzy has help keep mortgage rates low. “It is no wonder housing is booming,” he observes.

With the Fed absent from the bond market, he reasons, the private sector will be the lone buyer of government paper. The White House’s plans for escalating federal spending will surely swell the supply of Treasury obligations for sale. Ergo, lower bond prices and, owing to the seesaw nature of fixed income, higher interest rates.