Gregory Samorajski was appointed CEO of the $34 billion Iowa Public Employees' Retirement System in March and assumed the role May 1, right when the first wave of the coronavirus was sweeping the U.S.
"It has been an interesting time to take over," Mr. Samorajski said in an interview. "I've met all my staff on Zoom."
But although the former deputy commissioner of the Alaska Department of Revenue came to the Des Moines-based state pension plan amid a volatile environment, Mr. Samorajski noted that "we've been in volatile environments" before, citing examples such as the tech bubble and the global financial crisis.
"Volatility is something we've been used to for several decades," the new IPERS chief said. "Volatility is a fact of life in the investment world."
So, Mr. Samorajski and IPERS' senior management are looking at ways to keep the portfolio strong during such unstable times.
For example, the IPERS board recently approved upping the pension plan's allocation to private credit to 8% from 3%, or to roughly $2.7 billion from $1 billion. As a result, the retirement system launched a search Oct. 7 for opportunistic credit managers to run up to $850 million, the first in a series of RFPs seeking new managers. In addition to this opportunistic credit search, IPERS plans to issue two more RFPs over the next couple of months: one for real estate credit and another for real assets (which may include infrastructure).
Since IPERS is a long-term investor, it can afford to "have a certain level of illiquidity," which is why the board is comfortable raising its allocation to private investments.
In addition to increasing its allocation to less liquid investments, IPERS' CEO and staff are also looking into the possibility of managing some of its public securities in-house as a cost-reducing measure.
"We're very concerned about costs," Mr. Samorajski said.
The board has supported the idea of an internal investment program and has directed the IPERS staff to examine each asset class to make specific recommendations. The retirement system's staff plans to provide the board with its recommendation once its study has been completed. Mr. Samorajski said he hopes the staff will give the board its recommendations in December or March.
IPERS is also looking to increase its emphasis on absolute-return overlay strategies.
The board recently approved absolute-return bond investments managed by BlackRock and PGIM. The retirement plan staff is also considering proposals from other respondents to its RFP for absolute-return managers the plan issued October 2019.
"We think they have potential for delivering alpha. Some we think we can do in-house, some to be managed externally," he said.
IPERS' active risk target is 1.5%, with an upper limit of 3%. The current plan is to continue searching for absolute return and other alpha-seeking strategies until the policy target is reached.
Ultimately, Mr. Samorajski explained that the proposed changes he and IPERS' staff are considering are designed "to keep costs as low as possible, (seek) higher-yielding investments, and to be as efficient as possible."