U. California Stacks Talent with Another CIO Hire

ScottChan_TimBower Art by Tim BowerThe University of California’s (UC) investment office has further deepened its bench with the addition of Sacramento County pension chief Scott Chan, CIO has learned.

Chan has been named senior managing director of public equity, responsible for upwards of $35 billion in endowment, retirement, and operational assets.

The former hedge fund manager took over the Sacramento County Employees’ Retirement System in 2010. Under Chan’s leadership, the $7 billion portfolio climbed from five-year returns in the bottom quartile of public plans to the 53rd percentile as of September 30, 2014.

He spearheaded several opportunistic plays, including a separate account for purchasing discounted infrastructure secondaries. Last month, Chan and the fund took home the CIO Industry Innovation Award for public plans under $15 billion.

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Chan is scheduled to begin the new role on February 17.

In addition to filling the public equity post, CIO Jagdeep Bachher has promoted real estate specialist Cay Sison from investment officer to director. Sison also arrived at UC from a California public pension, having spent a decade as an analyst with the Los Angeles County Employees Retirement Association.

Sison and Chan join more than 14 new hires and promoted staff members that have entered new roles at UC’s investment office over the last few months. Several professionals have also retired or left during this period.

Bachher, who took over as CIO in April 2014, has executed a nearly wholesale overhaul of the division’s staff, organizational structure, and compensation scheme.

Identifying and promoting internal talent was his first step in the reorganization, the Canadian sovereign wealth fund alum told CIO in November.

“Second,” he said, “you need to bring in external people. Target those with experience who’ve had leadership roles. Hence, CIOs at other institutions who want to go back to investing have been very attractive.”

External Hires:

Scott Chan, Senior Managing Director, Public Equity (ex-Sacramento County Employees’ Retirement System)
Arthur Guimaraes, COO & Associate CIO (ex-AIMCo)
Brian Gibson, Senior Investments Advisor to the CIO (ex-AIMCo and Ontario Teachers’)
Ashby Monk, Senior Advisor to the CIO
Sam Kunz, Managing Director, Asset Allocation & Investment Strategy (ex-CIO of the Policemen’s Annuity and Benefit Fund of Chicago)
Niclas Winterstorm, Director, Operational Risk Management (ex-Norges Bank Investment Management)
Lindsey Adams, Director, Real Estate (ex-San Francisco Public Employees’ Retirement System)
Jessica Hans, Senior Investment Analyst, Private Equity & Real Assets (ex-Monsanto and Blackstone)
Matt Webster, Senior Investment Analyst, Private Equity & Real Assets (ex-Chertoff Group)
Sheng-Sheng Foo, Senior Investment Analyst, Public Equity (ex-California Endowment, a $3 billion foundation)
Thomas Fischer, Investment Officer, Real Estate (ex-Otto Finlay Investment, a real estate operating company)

Promotions:

Cay Sison, Director, Real Estate (formerly Investment Officer)
Paul Teng, Director, Deputy Head, & Acting Head, Public Equity (formerly Investment Officer)
Edmond Fong, Managing Director, Cross Asset Class Investments (formerly in absolute return unit)
Susie Ardeshir, Investment Officer

Exits:

William Coaker, Senior Managing Director, Public Equity (now CIO of San Francisco Employees' Retirement System)
Mel Stanton, Deputy CIO (now retired)
Peter Taylor, CFO (now president of a private foundation)

US endowments recorded an average return of 15.5% in fiscal year 2014 and increased outsourcing and their focus on risk management, according to NACUBO and Commonfund.

The joint study of 832 institutions representing $516 billion in assets found 2014’s figures exceeded the previous year’s 11.7% average gain, driven by a robust domestic equity market.

Institutions also enjoyed strong longer-term returns. Three-year net returns averaged 9%, while average five-year and 10-year returns came in at 11.7% and 7.1% respectively.

NACUBO-Commonfund1 (Source: 2014 NACUBO-Commonfund Study of Endowments)

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The data revealed the largest endowments—those with assets exceeding $1 billion—beat their smaller counterparts by 90 to 170 basis points.

While asset allocation changed little from 2013, there was a small decline in exposures to alternatives—from 53% to 51% in 2014—and a 1% bump in US equities to 17%.

More specifically, larger institutions had the highest allocations to private equity and hedge funds, whereas smaller funds with less than $25 million had the most exposures to domestic equities at 43%.

NACUBO-Commonfund2 (Source: 2014 NACUBO-Commonfund Study of Endowments)

There was a hike in outsourcing among all endowments, the report said, with 43% of respondents stating they have “substantially outsourced the investment management function.” In 2013 and 2012, the percentage of outsourcing was 40% and 38% respectively.

Institutions relied slightly less on consultants in 2014, with 82% of respondents using their services compared with last year’s 85%.

The NACUBO-Commonfund study revealed endowments turned their attentions to strengthening their risk management in 2014.

“Institutions appear to be remaining vigilant with an eye to avoiding a repetition of their experience in the financial crisis of 2007-2009,” John Griswold, Commonfund’s executive director, said.

Nearly 60% of respondents said they employed risk limits while more than three-quarters said they used volatility calculations. Some 61% said they utilized measures such as alpha and beta and almost half of the institutions reported using stress testing or scenario analysis.

However, implementation of environmental, social, and governance investing was still lagging, the study found, with just 7% stating they would consider integrating it into their investment policies.

According to NACUBO and Commonfund’s data, Harvard University had the largest endowment with $35.9 billion in assets under management. The University of Texas System and Yale University followed closely with $25.4 billion and $23.9 billion respectively.