Class of 2017 Forty Under Forty

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Kristin E. Varela Senior Portfolio Manager, Real Assets, Public Employees Retirement Association of New Mexico
(Santa Fe, NM) 30
Kristin E. Varela
(Art by Marcellus Hall)

She helped flawlessly reconcile the 10,000+ securities, 150+ accounts, and 70+ countries.

How have you been a change agent at your organization? What have you done that you’re particularly proud of?

I’m particularly proud of the progress that’s been made on the Real Assets portfolio. Over the last 1.5 years, I’ve focused my efforts on transforming a highly concentrated and significantly under-allocated portfolio into a well-balanced portfolio that’s aligned with its long-term objectives. To date, and with the help of the entire PERA team, I’ve implemented full mandate restructures, incorporated new mandates, completed several RFPs, and have increased capital deployment across the portfolio by approximately $1B in assets.

What is the asset class or investment that keeps you up at night, and why?

Consistent with our strategic asset allocation and the importance of its role, I don’t believe I can speak to one specific asset class. We manage highly liquid strategies right alongside long-term illiquid strategies, and balance those risks accordingly. I admit it’s harder to stomach the volatility in some of the liquid Real Assets strategies, but in those instances, we focus on risk management, market fundamentals, and manager accountability.

What methodologies have you adopted within your institution?

Implementing an analytical framework and a formal portfolio construction process to the Real Asset portfolio.

Where do you fall in the passive vs. active debate?

I support passive investment opportunities in the most efficient markets, where alpha has historically been less attainable. My belief is that the primary consideration for a long-term portfolio is less about implementation-level decisions and more about asset allocation and prudent diversification.

What are the changes you’d like to see the institutional investing community make in 10 years?

Stronger alignment between investors and the managers we partner with. The amount of institutional capital in the market compared to the terms and conditions that are at times agreed upon are quite unbalanced. PERA requires fiduciary alignment, favorable fund terms, full transparency, and strong corporate governance from our partners.

Who is a manager you don’t currently work with whose brain you’d like to pick?

Recognizing that my choice is not manager-­specific but more focused on a leader within the industry:  John C. Bogle. I’m fascinated by his accomplishments, and admire his success in providing efficient and affordable investment solutions to all investors.

Ideally, where would that meeting take place?

I’d hope Mr. Bogle enjoyed craft brew, because we’d meet at my favorite local brewery, Santa Fe Brewing Company!

What is the software investment tool that helps you most?

I spend a lot of time researching managers and running analytics through our consultant-provided information databases. Also, our cash flow analytic software is helpful when underwriting illiquid opportunities.

What would improve the relationship between you and managers?

Meetings and communications that aren’t centered on the current fundraise. The most productive and informative interactions are when a manager isn’t in the market for their next opportunity. Also, more emails providing meaningful content and fewer cold calls.

Why did you choose your current path?

My mentors have recognized potential and guided me toward professional milestones. I’m most passionate about this path because it’s an opportunity to apply my efforts in a meaningful way. This fund isn’t simply a pool of institutional capital, it serves over 100,000 participants across the state, some of which I know and relate to personally.