Chris Ailman has a successor. Scott Chan, deputy CIO of the California State Teachers’ Retirement System, will take over on July 1 as CIO of the world’s largest educators’ pension fund. Ailman, has served as CIO since 2000, is among the longest-serving CIO of any organization.
CalSTRS announced Chan’s appointment Wednesday. Ailman will step down from his duties as CIO on June 30, but he will advise Chan in the role until the end of the year to ensure a smooth transition.
“I am honored to oversee CalSTRS investments and lead our amazing team,” Chan said in a press release. “Securing the retirement of our members is extremely meaningful to me personally, as the husband of a California educator, and professionally, as we seek innovative opportunities in ever-changing financial markets.”
In his new role, Chan will oversee CalSTRS’ 225 investment staff, and will spearhead the investments of the pension’s $332.5 billion in assets, which provides retirement and benefits to more than one million members and beneficiaries.
Chan joined CalSTRS as deputy CIO in 2018, succeeding Michelle Cunningham, who had retired the previous year. He was hired from the University of California Board of Regents office of the CIO, where he oversaw a $55 billion global equities portfolio as senior managing director.
As deputy CIO, Chan has helped develop a collaborative model investment strategy for CalSTRS, which aimed to bring asset management in-house, an approach that CalSTRS says has saved the fund more than $1.7 billion since 2017.
According to a CalSTRS spokesperson, two finalist candidates were identified for interviews that took place in April. The search for a new CIO began in February, shortly after the announcement of Chris Ailman’s retirement in January.
According to a job posting from CalSTRS earlier this year, the salary range for the CIO is between $408,000 and $612,000, not including an up to 200% performance-based bonus or a 5% monthly base pay increase for individuals with CFA charters or similar certifications.
Prior to his career at CalSTRS and the UC Board of Regents, Chan was CIO of the Sacramento County Employees’ Retirement System, a position which Ailman also held — from 1985 to 1996. He also held positions including partner and portfolio manager at the hedge funds SF Global, Magnum Opus and TLB Capital.
Chan was a member of the CIO Power 100 list in 2013. He is also a board member of the Toigo Foundation and is a member of the Milken Institute Executive Counsel for Diversity, Equity and Inclusion in Asset Management.
He also serves on the advisory boards of the Alternative Investment Management Association, Chartered Alternative Investment Analyst Association, The Investment Diversity Exchange, The Investment Diversity Exchange, the Alternative Investors Forum and the Kroner Center for Financial Research.
Chan holds a Bachelor of Arts in economics from UCLA, and a Master of Business Administration from The Fuqua School of Business at Duke University. He is also a CFA charterholder.
“I am committed to driving excellence in how we invest, including advancing sustainability practices and promoting diversity across CalSTRS, our portfolio companies, partners and the industry,” Chan’s statement continued. “I’m humbled to follow Chris Ailman, a great friend and mentor, in maintaining our collegial and inclusive workplace culture and continuing to work with our CEO, Cassandra Lichnock, and our board’s Investment Committee to achieve our goals.”
Amanda White of Top1000funds also reports Scott Chan replaces Chris Ailman as CalSTRS CIO:
Scott Chan has been named chief investment officer of the $332 billion CalSTRS, replacing long-time investment leader, Chris Ailman, who will retire after 23 years at the helm.
In the past few years Chan, who has been deputy CIO since 2018, has been instrumental in restructuring the investment team with a particular eye on positioning for future growth; as well as directing the fund’s ‘collaborative model’ which has saved more than $1.6 billion in costs since 2017.
Like Ailman, Chan is deeply committed to the mission at CalSTRS of providing a secure retirement to California’s educators (on average, members who retired in 2022–23 had 25 years of service and a monthly benefit of $5,141). Chan also has a personal connection to the fund as the husband of a California educator, and his wife is a member.
In his new role, Chan will be responsible for developing and implementing CalSTRS’ investment policies, strategies and initiatives; managing a significant and complex budget; fostering a collaborative culture of excellence and diversity, equity, and inclusion; and overseeing all CalSTRS investment portfolios.
“I am honored to oversee CalSTRS investments and lead our amazing team,” Chan said in a statement. “I am committed to driving excellence in how we invest, including advancing sustainability practices and promoting diversity across CalSTRS, our portfolio companies, partners and the industry. I’m humbled to follow Chris Ailman, a great friend and mentor, in maintaining our collegial and inclusive workplace culture and continuing to work with our CEO, Cassandra Lichnock, and our board’s Investment Committee to achieve our goals.”
Chan has always been supportive of his team and quick to give praise to others.
“We had built solid strengths across asset classes, and we have deep expertise. I think we have the number one team in the country – I’m bullish on our team,” Chan said in an interview last year. “We want to make sure we build upon that. And what stands out is we have such a strong culture, focused on the mission and a great set of values in how we operate.”
An investment team restructure last year was deliberate in its focus on how to position the fund for future growth with assets doubling every eight to 10 years. It also intentionally took a close look at the ongoing complexity of the portfolio and the skills required to manage it effectively in the future.
One of CalSTRS’ identifying factors is its ‘collaborative model’ which includes more internally managed assets, with 62 per cent of the portfolio now managed internally. But as the fund moves more into private assets, the collaborative model has focused not just on internal management but how CalSTRS can partner with external providers in innovative ways to achieve similar benefits.
SMAs and co-investment have been a feature of the model so far and Chan has said as the fund moves into the next phase of the collaborative model it will move more into joint ventures and revenue share and ownership.
A direct result of the collaborative model is that CalSTRS internally is taking on more execution risk, which has a direct implications for the size and quality of the team.
In its most recent five-year plan, the fund outlined 91 new hires and has developed a plan to hire more staff to manage and mitigate the execution risk and to train and equip the current staff. The CalSTRS investment team currently numbers 225 and Chan has said a focus will be on hiring people with a background suited to those types of investments, such as a recent portfolio manager hired from KKR.
In an interview last year about the collaborative model he said:“All the credit goes to the team; they have executed this excellently. We have a great team and culture, they feel empowered and have delegation up and down the chain. We have a streamlined decision-making process and they can be nimble in the marketplace.”
Like many large institutional investors, CalSTRS is paying more attention to overseeing management of the total fund including short and medium tilts and whole of portfolio challenges like taking advantage of the energy transition and diversity of managers and internal teams.
And Jennah Pendleton of the Sacramento Bee reports CalSTRS hires new chief investment officer from within its ranks:
Following a global search, California’s educator-only pension fund has appointed a new chief investment officer from within its ranks.
Scott Chan will lead the California State Teachers’ Retirement System investment strategy beginning July 1, following former CIO Christopher J. Ailmen’s retirement. Chan has worked under Ailmen as deputy CIO since 2018.
“As deputy CIO, Scott has already brought so much value to CalSTRS,” the pension system’s CEO Cassandra Lichnock said. “He is helping lead the alignment of our organizational sustainability goals with our sustainable investing and net zero goals. I look forward to his partnership as we continue to fulfill our promise to California’s teachers.”
Chan played a role in the direction of CalSTRS’ Collaborative Model investment strategy, which brings more assets in-house and leverages external partnerships to help protect and grow the fund. The model has reportedly saved CalSTRS $1.6 billion since 2017, the pension system said in announcing Chan’s appointment.
“I am committed to driving excellence in how we invest, including advancing sustainability practices and promoting diversity across CalSTRS, our portfolio companies, partners and the industry, “ Chan said.
As CIO, Chan will manage $332.5 billion in assets.
Chan’s annual salary will be $540,000 plus an incentive opportunity of 200%, the pension system said.
Lastly, CalSTRS put out a press release naming Scott Chan as chief investment officer:
WEST SACRAMENTO, Calif. (May 15, 2024) – The California State Teachers' Retirement System, the world's largest educator-only pension fund, is pleased to announce the selection of Scott Chan as chief investment officer.
Chan, who has served as CalSTRS deputy chief investment officer since 2018, will replace longtime CIO Christopher J. Ailman, who is retiring.
The Teachers' Retirement Board conducted a global search before selecting the new CIO. Chan's first day in his new position will be July 1, 2024. He will report to the board's Investment Committee and the CEO.
"Scott has a unique combination of deep institutional investing skills and experience plus a down-to-earth leadership style, and he is committed to upholding the CalSTRS culture," Search Committee Chair Harry Keiley said. "He is unquestionably the right person to lead our talented and diverse team on behalf of California's public educators and their loved ones."
In his new role, Chan will be responsible for developing and implementing CalSTRS investment policies, strategies and initiatives; managing a significant and complex budget; fostering a collaborative culture of excellence and diversity, equity and inclusion; and overseeing all CalSTRS investment portfolios.
"As deputy CIO, Scott has already brought so much value to CalSTRS," CEO Cassandra Lichnock said. "He is helping lead the alignment of our organizational sustainability goals with our sustainable investing and net zero goals. I look forward to his partnership as we continue to fulfill our promise to California's teachers."
Chan will draw on his decades of financial expertise and institutional investment experience in directing a growing Investments Branch of more than 225 staff and continue contributing to the CalSTRS executive leadership team.
As deputy, Chan has been instrumental in the vision and direction of the Collaborative Model investment strategy, which brings more assets in-house and leverages external partnerships to save money, manage risks and increase expected returns to help protect and grow the Teachers' Retirement Fund.
The Collaborative Model has saved CalSTRS more than $1.6 billion since 2017, thanks in large part to Chan's thoughtful oversight, and has helped position CalSTRS as a premier global investment partner.
"I am honored to oversee CalSTRS investments and lead our amazing team," Chan said. "Securing the retirement of our members is extremely meaningful to me personally, as the husband of a California educator, and professionally, as we seek innovative opportunities in ever-changing financial markets."
"I am committed to driving excellence in how we invest, including advancing sustainability practices and promoting diversity across CalSTRS, our portfolio companies, partners and the industry. I'm humbled to follow Chris Ailman, a great friend and mentor, in maintaining our collegial and inclusive workplace culture and continuing to work with our CEO, Cassandra Lichnock, and our board's Investment Committee to achieve our goals."
Before joining CalSTRS, Chan was senior managing director of the University of California, Office of the CIO of the Regents, where he oversaw the $55 billion global equities portfolio. While at UC, he sat on the investment committees of the Los Alamos and Livermore National Laboratories defined benefit and defined contribution pension plans. Chan also served as chief investment officer for the Sacramento County Employees' Retirement System and was a partner and portfolio manager for several hedge fund partnerships, where he gained direct investing expertise.
Chan is a board member of the Toigo Foundation, co-chair and board member of the Institutional Investors Roundtable and serves on the Milken Institute's Executive Counsel for Diversity, Equity and Inclusion in Asset Management.
Chan earned a master's in business administration from Duke University's Fuqua School of Business and a bachelor's degree in economics from the University of California Los Angeles. He is a CFA Institute Chartered Financial Analyst.
About CalSTRS
CalSTRS provides a secure retirement to more than 1 million members and beneficiaries whose CalSTRS-covered service is not eligible for Social Security participation. On average, members who retired in 2022–23 had 25 years of service and a monthly benefit of $5,141. Established in 1913, CalSTRS is the largest educator-only pension fund in the world with $332.5 billion in assets under management as of April 30, 2024. CalSTRS demonstrates its strong commitment to long-term sustainability principles in its annual Sustainability Report.
Alright, let me begin by congratulating Scott Chan for being named the next CIO at CalSTRS and also wish outgoing CIO Chris Ailman all the best as he gets set to retire after 23 years as CIO of this venerable organization.
I can't say I was shocked with this nomination. Chan was being groomed for this position and even though there was a "global search", he was a shoo-in for all the reasons cited in the articles above.
Not only was he instrumental in the vision and direction of the Collaborative Model investment strategy, which brings more assets in-house and leverages external partnerships to save money, and has saved CalSTRS more than $1.6 billion since 2017, he also takes DEI and sustainability very seriously and is a great leader who praises his team.
That's what strikes me reading the articles, he is always praising his team and understands fully well the culture of the organization.
This is critical because CalSTRS has a lot of work ahead in the coming years and they needed to ensure they have the right person in charge of investments to ensure a continuation of execution and make sure the culture stays the same.
So, I commend the Search Committee led by Chair Harry Keiley who summed it up well in the press release: "He is unquestionably the right person to lead our talented and diverse team on behalf of California's public educators and their loved ones."
And Scott Chan's wife is a teacher so he has an extra reason to make sure the Fund continues to deliver solid long-term returns.
He has big shoes to fill and was right to praise Chris Ailman, his friend and mentor.
Being the CIO of any US state pension fund isn't easy, you need to navigate through an increasingly more complex investment landscape and also deal with a lot of politics, especially in California.
Notice how Chris Ailman and Scott Chan have moved CalSTRS in the direction of the Maple Eight funds, managing 62% of the assets internally.
It's not quite the 80%+ threshold of the Maple Eight of assets managed internally but they are definitely moving in the right direction through more co-investments and segregated managed accounts (SMAs).
Also notice how Chan’s annual salary will be $540,000 plus an incentive opportunity of 200%, according to the pension system.
That basically means his bonus is capped at $1,000,080 which is decent but in my opinion, it should be a lot higher.
It also shows you how well compensated Maple Eight pension fund managers are relative to their large US peers, many of which like Scott Chan, are highly educated, qualified and experienced.
The key difference is governance. In Canada, it isn't the government that sets the compensation, it has moral suasion if things get out of control, but it's the independent board which decides compensation based on market trends to attract and retain highly qualified candidates.
Alright, let me end it there and once again wish Scott Chan all the best in this new and important role and wish Chris Ailman a happy retirement (he should start a show on CNBC or Bloomberg covering markets and pensions).
Below, watch the latest CalSTRS Investment Committee from two weeks ago and forward to minute 5 to listen to Chris Ailman's departure speech and his coverage of investments at CalSTRS over the long wrong. Also watch an homage to him around minute 39.
Lastly, Chris Ailman is very worried about climate change and he talks about sustainability with conviction at minute 1:33. He states unequivocally: "I've been saying that Mother Nature has been slapping us in the face but I really believe over the next three years, Mother Nature will be punching us in the face."
Super nice and smart guy, love listening to him talk shop and more and not surprised he will be sorely missed at CalSTRS but his successor is more than capable to continue in his footsteps.