The California State Teachers’ Retirement System will welcome Scott Chan as deputy chief investment officer on August 1, taking over from Michelle Cunningham who retired last December, PERE’s sister publication, Private Equity International, reported Tuesday.
Chan will report directly to chief investment officer Christopher Ailman, who has led investment at the $225 billion pension plan for almost two decades. Chan was selected after an extensive global search which considered internal and external investment professionals, Ailman said in a statement.
“Scott is viewed by the institutional investment industry as one of the next generation of top global CIOs. He is a solid and steady investor with both public and private sector experience,” Ailman said.
“His investment talents are only one side of the story. Scott also possesses the right temperament and personality to lead a very diverse – and growing – investment team. I couldn’t be more excited to team up with him in leading the CalSTRS portfolio into the future.”
Chan joins one of the world’s largest private real estate investors. CalSTRS ranked tenth on PERE’s Global Investors 50, a list of the world’s largest investors last year, with $25.4 billion of real estate assets under management. The pension system allocates 12 percent of its $225 billion portfolio to private real estate.
CalSTRS’ real estate portfolio returned 8.1 percent in the year ending June 30, beating its 7.4 percent benchmark, PERE previously reported. CalSTRS generated a 13.4 percent rate of return overall, outperforming its 12.6 percent benchmark.
CalSTRS has had a deputy CIO position since 2010, and Chan will be the third person to hold this role, according to a spokeswoman.
Chan joins the fund, the largest teacher-only plan in the world, from the University of California Regents, where he was the senior managing director of its $55 billion global equities portfolio.
In a statement, UC Regents chief investment officer Jagdeep Bachher described Chan as “a superstar.”
“As part of the leadership team, Scott spearheaded efforts to increase our active and passive investments both internationally and in the US, while renegotiating an estimated 33 percent reduction in fees,” Bachher said. “CalSTRS has landed an innovator and a talented all-around great person.”
The percentage of actively managed investments within the University of California Retirement Plan’s and the General Endowment Pool’s public equity portfolio was reduced from 32 percent in 2014 to 17 percent in 2017, and the number of external managers reduced from 20 to one, according to minutes from a March 13 meeting. Active management in the overall public equity portfolio was reduced from 86 percent to 66 percent. Chan explained to the meeting that increasing passive management lowered costs.
UCRP’s $203 million real assets holdings returned 6.5 percent in the year ending June 30, 2017, according to its most recent investment report.
Prior to UC Regents, Chan was the chief investment officer for the $8 billion Sacramento County Employees’ Retirement System, where Ailman once worked.
CalSTRS is known and admired among the general partner community for its team stability. In an exclusive interview with Private Equity International, Ailman said that stability comes from the internal culture, as well as attracting and retaining the right people. His team of more than 150 investment staff has an annual average staff turnover of about 4 percent.
“It’s really about growing and building staff up from within, an area we are focused on,” Ailman said. “Our staff is still very lean, so we will continue to expand it in the future.”
– With additional reporting by Meghan Morris