Vicki Fuller had been considering a major in philosophy in college, but her mother wanted her to pursue an accounting degree. “It was a compromise,” said Ms. Fuller. “I had a degree in accounting with a minor in philosophy.”
Ms. Fuller, whose mother was a bookkeeper, said she is thankful for the motherly influence. She has been able to parlay her facility and fascination with numbers into a series of corporate finance and investment management jobs and, since August 2012, has been chief investment officer at the $160.4 billion New York State Common Retirement Fund, Albany.
Ms. Fuller was attracted to philosophy “because I loved logic,” she said. Although she confesses to being “jealous of my mother because she could add numbers in her head,” Ms. Fuller acknowledges her own skill. “I could talk in numbers,” she said. “I could see relationships in numbers. I took a lot of math courses. I was very comfortable with it.”
A native of Chicago, Ms. Fuller earned an undergraduate accounting degree from Roosevelt University, Chicago, and then an MBA from the University of Chicago. During her MBA studies, she was still debating whether to pursue an accounting career.
“I had decided that auditing wasn't what I wanted to do,” she said. “The problem for me is that it was so backward looking. It was really just what happened — but not why.”
She was interested in how “you use numbers to talk about and think about the future,” Ms. Fuller said. Taking MBA finance courses solved her dilemma. “I found my home in finance. It was creative. I found my calling.”
Prior to joining the New York state fund, Ms. Fuller had been managing director, public funds, for AllianceBernstein (AB) LP (AB), New York. “I was advising CIOs and investment staffs at public funds, so it was a natural evolution for me,” she said.
What is your biggest challenge? Resources. We are a very large plan with not enough people. The great thing about the plan is that the people have done very well with limited resources, but we need people across every strategy and risk and compliance. ... We're in New York City. Wall Street is around the corner. That's a factor that you always have to weigh.
You cannot offer what Wall Street can offer ... So the question is, “What is your value proposition?” Your value proposition is you get to work for a well-run plan, do some very interesting things that, if that sways you, have a public impact.
What is being done to improve resources? We're in the process of hiring now. We are looking for 15 people. We're working with a search firm. The long-term goal is to hire up to 40 people over the next few years.
What's the biggest financial issue for the pension fund? Do we have the right asset allocation? We have a lot of exposure to equities and we probably always will. Do we have the right allocation among the equities? Do we have the right mix of internal vs. external? Active vs. passive? We can be up to 70% in equities if you add up domestic, international and global. We have about 53%. What's the right number? What's the right mix? Can you cut the tail risk?
How far off from a target allocation can you be? The whole goal is the full rollout of real assets and opportunistic (investments), which can be 3% or 4% (of the fund's overall allocation). We can have more money in private equity than we have right now. (The current allocation is 8.6% and the target is 10%). The goal is to judiciously transition into these strategies as we have opportunities. This asset allocation study was done in 2009. One of the reasons we didn't get there — to the asset allocation study (recommendations) — was resources. This comptroller (Thomas DiNapoli) is very supportive of us correcting that. We will have another asset allocation study by the beginning of 2015. The goal that I have set for myself is to do as much I can to get to what the parameters were in the 2009 asset allocation study by 2015. I don't think, when we look at it again, that we will change anything meaningfully.
What about specific alternative investments? I don't look at it in silos. I look at the fact that we have real estate at about 7%, and a large portion of that is opportunistic. We've got an 8.6% allocation to private equity, a 3.2% allocation for absolute return. We're growing allocations in real assets and opportunistic (investments). If you add those up ... I'm comfortable with that number.
In private equity, is there any particular style or geographic area that seems most attractive to you? A couple years ago there was a strategic plan done, which I support, which had the goal of reducing exposure to large-cap buyouts, primarily North American buyouts, and adding growth equity, adding geographic exposure in Asia, Europe and Latin America. That's what we're doing now.
What role does inflation play in the fund's allocations? We have structured a real asset portfolio as a discrete allocation, and we're starting to actually make some investments there. We have a TIPS (Treasury inflation-protected securities) portfolio that's at 7.6% (of the overall allocation). ... One of the projects that we're engaged in is to really peel the onion and look at the portfolio overall from an inflation-sensitivity perspective. In other words, in real estate, what percent of the holdings are areas where the owners can increase rents in relationship to increasing inflation. ... Our goal is to take a holistic look at the portfolio and make some generic comments about the inflation sensitivity of the portfolio.
The real asset portfolio is a portfolio where we are specifically looking at the inflation sensitivity of the things we put in. For example, we are looking at some liquid strategies where they have a very high correlation to inflation. Over time, we will be looking at infrastructure investments and timber and agriculture. That's going to be the place where we make very provocative investments.
Right now the investments we're looking at will be in liquid strategies because we want to get some inflation beta. We are still determining what the mix of illiquid to liquid will be.
What are you doing with TIPS in anticipation of inflation? TIPS are an imperfect inflation hedge. The TIPS portfolio is internally managed. It's pretty much buy-and-hold. We are looking at externally managing a portion of it so that we are more active in looking at the break-evens that are implied in each of the TIPS. As we build out the real assets portfolio, that may affect the TIPS. That is a big strategic question. At this point, it's not a matter of reducing or increasing TIPS, it's a matter of are we doing it right.
How do you deal with poor performing managers? You have to ask several questions. What is the style of the manager? We review performance of all the managers. We had an informal watchlist. We are now formalizing a watchlist with sort of set (guidelines). ... We're long-term investors. We like to think (of ourselves) as patient investors — but diligent and smart investors. We will work with a manager whose strategy is out of favor; but if in fact, if there's something broken, that's what we're trying to get to. Our consultants are very important in that process.
What are the key issues for public pension plans in general? Allocation is a big one. Resources is perennial. The thing we don't have to worry about is the health of the plan. (The funded ratio is 87.3%). We're fortunate that we can really focus on the mainstay issues. n
This article originally appeared in the June 24, 2013 print issue as, "Taking her mother's good advice".