Washington State Investment Board, Olympia, has determined that data and technology are so important to managing its $134.4 billion in commingled retirement assets that it has budgeted $7 million over the next two years to their use.
The funding "is helping us evolve and develop our data warehousing, performance measurement and risk analytics capability," said Chris Phillips, institutional relations and public affairs director for the board, which had $171.5 billion in total assets as of March 31. "This work is used as an intelligence bank for our investment teams, so if they need data on slicing and dicing different exposures or risk factors, they can rely on the data warehouse and this team to help with their research."
Mr. Phillips said data warehouse development is overseen by the board's risk management-asset allocation team and investment data team, "two groups that are now combined into one unit" to bring together their knowledge of investment needs and data technology.
The combined team emphasizes the integrity of the data it receives — "what's noise, what's not, how does the source of the data fit into the platform we're using for analysis, is there distortion created by bringing it in?" Mr. Phillips said. "They spend a lot of time working through these issues."
Eighteen percent of the board's commingled retirement assets are run internally in fixed income. The rest of its investment portfolio — 32.8% in public equity, 24.6% in private equity, 16.8% in real estate, 5.6% in tangible assets including infrastructure, and 2.2% in cash and other assets — is run by external managers. Mr. Phillips said those managers are overseen by internal, independent asset-class teams.
A big reason for investing in data warehousing is "to see what the level of risk at the total portfolio might be," Mr. Phillips said. "The risk at the asset-class level is well known, but when all of that rolls up to a total portfolio side of what we're dealing with, there's a real need for risk analysis at that level. For example, in one asset class, the currency-level risk could be nil, but it could be at a different level in another asset class."
WSIB also has "a high exposure in private equity and real estate, so there's a lot of customization," he said. "You can't go buy an off-the-shelf data or research product to do what we do, so we have built out our own data warehouse."
Among the combined team's oversight responsibilities are return attribution, investment risk assessment "and all kinds of portfolio modeling in support of asset allocation," Mr. Phillips said. "What they're trying to get at is, are there hidden or more subtle risks that are coming with the exposures that we're creating, and how should we manage those risks? That's their charge," he said.