Washington State Investment Board responds early to coronavirus hit

An early response to the COVID-19 crisis and the lessons learned from the financial crisis of 2008 have served the Washington State Investment Board well, said Theresa Whitmarsh, executive director of the Olympia-based board.

Even though the circumstances of the current crisis are unique, Ms. Whitmarsh said those lessons have benefited the board, which oversees $141.8 billion in assets including $109.8 billion in defined benefit plan assets.

"We really learned leading up to the market crisis how to prepare a board and stakeholders for a market correction," Ms. Whitmarsh said in a telephone interview.

In fact, the board has been in a role of preparedness for the last year and a half, Ms. Whitmarsh said. They just knew some kind of market correction had to occur because the 12-year bull market was not sustainable.

"We sent that same kind of message to our board and stakeholders, just preparing them for some kind of correction," Ms. Whitmarsh said.

That education included making sure the board and beneficiaries are well aware that the board is a long-term investor, and it seems to have worked out, she said.

"There has been very little concern or questions voiced to us from any of our beneficiaries or our board, and I think part of it is that the Great Recession is still relatively fresh in the mind of a lot of people and we came out of that," Ms. Whitmarsh said.

Other lessons included how to maintain liquidity during a crisis.

"We began increasing our Treasury holdings probably a year and a half ago," Ms. Whitmarsh said, and the board now has about 6% of its total assets in U.S. Treasuries.

"Our liquidity position is much stronger going into this crisis than in the last crisis," she said.

Also following the financial crisis, the board improved the quality of its real estate portfolio by reducing debt holdings, lowering the portfolio's leverage considerably, she said.

From an operational standpoint, Ms. Whitmarsh said it was fortunate in some ways that Washington state had the very first coronavirus case in the U.S.

"It was an early warning signal for us," she said. The health and safety of staff became a top priority.

"One of the things that as an investor we're used to is assessing risk. We see it in two dimensions: the probability of the risk and the impact. Even though we thought the coronavirus actually affecting our employees was a low probability, the impact would be devastating."

"We made the decision really early to shut down operations basically," Ms. Whitmarsh said. "We stopped travel, (issuing) an all-staff alert on Feb. 26. We had seven or eight employees in travel status at the time."

Upon their return, the employees self-quarantined for 14 days. Ms. Whitmarsh immediately closed the Seattle office as well and canceled all money manager visits.

"I think the good thing that's come out of (the crisis) is we're all working from home and we're doing just fine, and here we're running a $140 billion-plus global portfolio across all asset classes and we're all doing it because technology has advanced so much that we can truly be virtual."

This Thursday, the board is holding its first virtual meeting following a couple of practices with all-staff meetings online, Ms. Whitmarsh said.