As the newly elected Connecticut state treasurer and principal fiduciary of the state's $34 billion Connecticut Retirement Plans & Trust Funds, Shawn T. Wooden has big shoes to fill.
But Mr. Wooden said with a laugh: "I've got big feet."
After taking office in January, Mr. Wooden replaced Denise L. Nappier, who previously served as state treasurer and principal fiduciary of the CRPTF for 20 years. He said in a phone interview his primary goal with regard to the pension funds "is to be very mindful of being a fiduciary."
As sole trustee of the Hartford-based state pension funds, Mr. Wooden sees it as his job to "maximize the returns of the pension system while minimizing the risk." And with the economic environment looking to be volatile in the future, the state's new treasurer believes that "risk factoring and risk control is going to be key" to achieving strong returns for Connecticut's pension assets.
In addition to working closely with state's investment advisory council, Mr. Wooden hopes to do this "through prudent asset allocation to achieve a diversified portfolio and liquidity management."
He defines risk control as "constructing a diversified portfolio of assets and rebalancing to established asset allocation targets to mitigate the variability and the volatility of investment returns over the long term," adding that risk control "also includes maintaining proper liquidity to manage benefit payments and to support our private market investment programs."
Mr. Wooden plans to hire a principal investment officer responsible for risk management, a position that has been vacant for several years.
"I certainly expect some choppy waters ahead," Mr. Wooden said. Before being elected treasurer, Mr. Wooden was a partner at law firm Day Pitney LLP, where he led its public pension plan investment practice. He was also a member of the investment section of the National Association of Public Pension Attorneys.
Mr. Wooden's office will look to reduce its exposure to public equities while upping its exposure to fixed income. Allocations to private investments, meanwhile, will remain as diversifiers in the overall portfolio and won't change significantly. However, the treasurer's office does plan to increase its exposure to private real assets such as core infrastructure "to further reduce the risk profile of the portfolio and provide an additional hedge against inflation," Mr. Wooden said. CRPTF had an allocation of 50.7% equities, 24.4% fixed income, 21.6% alternatives, and 3.3% cash as of Sept. 30, according to Pensions & Investments data.
When it comes to active vs. passive investing, the treasurer's office hasn't changed its position too much. "In general, we utilize passive strategies in areas that we feel are efficient and will employ active strategies in less efficient markets that have the ability to generate alpha, net of fees," Mr. Wooden said, adding: "We may also use active strategies to take advantage of opportunities that come about through market dislocations."
The treasurer said he believes one way to maximize the state pension funds' returns while minimizing the risk is to form a strong collaborative relationship with the state's investment advisory council. The CRPTF, which was about 45% funded as of April, consists of six state pension funds and nine state trust funds.
"I intend to work very closely with our IAC. I've already had a meeting with the group, I've spent time with the chair, so I expect a very good and collaborative working relationship going forward," Mr. Wooden said. "Council members are required by statute to have experience in matters related to investments, and they actively participate in asset allocation/liability discussions and advice on all aspects of the investment program."