The New York State Common Retirement Fund, Albany, with $209.1 billion in assets is a lot bigger today — by about 39% — than when Vicki Fuller became chief investment officer in August 2012.
However, Ms. Fuller, who announced she will retire this summer, said she's as proud about what's happened under the hood of the pension fund's management as she is of the annualized returns on investment of about 8.75% during her tenure compared to the pension fund's 7% assumed rate of return.
"We've modernized investment guidelines and strategies," she said in an interview. "We've sharpened investment meetings with managers and internally. We're looking more like how we made decisions when I was in the private sector." Prior to joining the pension fund, she had been managing director of public funds for AllianceBernstein (AB).
Ms. Fuller didn't say why she was retiring other than to note that she wanted to pursue several other goals. She didn't reveal immediate plans, adding that she will consider private-sector or public-sector work. "I do want to stay in the markets," said Ms. Fuller. "Teaching isn't off the table."
Ms. Fuller will leave the fund at a still-undetermined date this summer, remaining to help a new CIO during a transition period.
She cited the pension fund's expansion of its ESG efforts as one of the major advances during her tenure. "We have taken it from engagement to having ESG deeply ingrained in the investment process," she said. "It will grow. Sustainability is important for the long term."
Describing the pension fund's approach to ESG investing, she said: "We tell companies we're interested in your long-term success."
Asking companies questions and encouraging improvements is a better approach than divesting the pension fund's holdings, she said. "When you divest, you don't change the equation."
She pointed to the support of state Comptroller Thomas DiNapoli, the pension's fund's sole trustee, for a low-emissions equity index as an example of the fund's broadening ESG efforts. In January, he announced a doubling of the index's assets to $4 billion.
Ms. Fuller will be leaving at a time when the pension fund is still looking to expand its in-house management capabilities. She said the pension fund is looking at bringing non-U.S. equity index strategies in house, but is encountering the same problem that she cited when she talked to Pensions & Investments in 2013. Having adequate resources "is still a challenge," said Ms. Fuller, remarking on struggle to compete with private-sector salaries in its pursuit of talented managers. Currently, about half of the pension system's assets — all domestic equities and most fixed income — is managed internally.
Ms. Fuller said the pension fund's overall long-term target allocation is 50% public equity — 36% domestic and 14% international — compared to the Dec. 31 total equity allocation of 58.1%, which featured 40% domestic and 18.1% international.
The long-term target allocation is 30% for alternatives — private equity, absolute-return strategies, real estate and opportunistic alternatives — compared to 18.1% as of Dec. 31.
Ms. Fuller said the various alternative groups serve as a diversifier to equities. Private equity investments are less volatile than public equities, said Ms. Fuller, adding that the pension fund hopes to increase its exposure to Asian and European private equity. Right now, the U.S. accounts for 85% of private equity assets; the fund's goal is to reduce it to 75%.