New CIO for Pennsylvania’s $25B Pension

PSERS_Bryan Lewis Bryan Lewis, Incoming CIO, SERSThe Pennsylvania State Employees’ Retirement System (SERS) has hired a new CIO from the Illinois state universities’ pension funds.

Bryan Lewis will lead the $25 billion fund, succeeding Thomas Brier who announced his plans to retire on June 24, 2016.

“Bryan’s strong public pension experience and investment background stood out to the board,” said David Fillman, SERS board chairman.

The chairman continued that Lewis will be a right fit to guide SERS through “funding challenges while working to strike a balance between generating returns through all sorts of markets and being responsive to taxpayers’ desire for transparency.”

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Lewis has been serving as executive director of the $20 billion Illinois State Universities Retirement System for a little more than a year. There, he leads fund administration and investment management for two defined benefit plans and one defined contribution plan.

Previously, Lewis spent six years as manager for the North Carolina Department of State Treasurer working on the state’s retirement systems. He also holds a bachelor’s degree in economics from the University of Maryland College Park.

Recruiting firm Korn Ferry helped conduct the search.

Outgoing CIO Brier has spent 16 years in various senior investment positions at SERS. He was tapped as investment chief in December 2014, replacing Tony Clark, who was investigated for potential illegal behavior during his tenure.

Clark had allegedly misled the pension board about a $250 million investment with Tiger Asset Management and trading on his own account using the fund’s information.

In September 2014, Clark was cleared of all illegal allegations. He currently works as an investment adviser for individuals and institutional capital in Virginia.

How do you measure success in the subjective world of outsourced-CIO (OCIO)? It’s easier said than done, according to Russell Investments’ Bob Collie and Peter Corippo.

Many elements—such as the quality of administrative and operations teams, the ability to suggest “ongoing enhancements,” the proactive identification of evolving issues, and the ability to work within each client’s culture—can only be evaluated subjectively, the pair wrote.

“‘Did we achieve our desired outcome?’ is not the same question as ‘Did the OCIO provider do a good job?’.”Collie, Russell’s chief research strategist, and OCIO Senior Strategist Corippo added that it can be difficult to assign responsibility for decision making, as the investor and the OCIO provider often jointly make important decisions. Assessing the success or failure of strategic asset allocation is also “less straightforward” than a single asset class’ performance, the duo continued.

“While OCIO often looks past a market benchmark to the investor’s end objectives, ‘Did we achieve our desired outcome?’ is not the same question as ‘Did the OCIO provider do a good job?’,” Collie and Corippo said.

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For these reasons, the authors argued that comparisons across OCIO providers aren’t strictly apples-to-apples, and difficult to encompass in league tables.

Instead, comparisons and evaluations should be multidimensional, focusing on “measures that fall within the OCIO provider’s control,” Collie and Corippo said.

Investors could also implement secondary objectives to assess more subjective elements beyond strictly quantitative performance benchmarks, and whether the OCIO helped the fund get closer to its end goals.

Russell emphasized that these quantitative and qualitative metrics should be agreed up front, and built into the OCIO provider’s reporting processes.

Russell is one of the largest OCIO providers, with more than $100 billion in outsourcing assets under management across 375 clients, according to CIO’s most recent survey of the sector.

Russell OCIO Evaluation Metrics1 Source: Russell Investments