2018 NextGen

“Shar is known as a reformed lawyer that is definitely Type A.  She is diligent, aggressive when needed, but very thoughtful in generating results. She is known for her energy, desire for fair play and for advancing diversity, emerging managers and a better balance of gender representation in the investment workplace.  Although she works with all the asset classes, her current expertise lies more with the alternative asset classes.  I consider Sharmila as an excellent resource in developing strategic direction, strategy, goals, and objectives for the investment program and its future.”

—Tom Tull, CIO, Investments Division, Employees Retirement System of Texas

Sharmila Chatterjee Kassam has a talent for strategy and her experience spans across asset classes, with a special strength in alternative investments. The deputy CIO of the $30 billion defined benefit plan at the Employees Retirement System of Texas led a year-long study to refine the portfolio to take advantage of her team’s strengths. The changes nearly doubled infrastructure allocation for long-term yield-producing strategies and created a multi-asset opportunistic credit bucket to provide consistent cash yield and predictable outcomes, among other things. 

This year, she’s working with an eye toward tactically expanding risk management across the trust. Ever vigilant against complacency, she is known to challenge investment programs in order to drive innovation. 

She brings a vast amount of work experience from her many different roles. She started her career as an auditor in public accounting, went on to take on financial and operational roles at a number of start ups and technology companies,  practiced as a corporate lawyer in the venture industry, and began at the Employees Retirement System of Texas as assistant general counsel of investments and securities in 2008 at the inception of the alternative investments in the investment program.

CIO: What are the accomplishments you are most happy to have achieved recently, and why?

Kassam: I’m proud of a recent asset allocation that my organization has adopted after a year-long study I led. This asset allocation is one that builds upon prior shifts of the trust to move from a traditional pension 60/40 model to a more long-term focused, progressive model that strategically leverages private asset classes and capitalizes on our competitive advantages of the team.  Highlights of this asset allocation include:

•  Nearly doubling our infrastructure allocation from 4% to 7% for long-term yield-producing strategies
• Acting on the desirable risk-adjusted returns of private equity secondaries by allocating an additional 3% to private equity to build our secondaries program
• Creating a multi-asset class opportunistic credit bucket that allows us to take advantages of private credit strategies throughout the credit cycle with moderate time horizons, predictable yields, strong covenants, and collateral
• Balancing our long-term horizon and liquidity to take advantage of opportunities

I think the key difference in this allocation versus prior allocation studies is that we focused not only on the capital market return assumptions but also the factors that play into execution. This execution is not dependent upon any one person but on a broader team that has developed certain differentiating skills with this final allocation resulting in leveraging where we have strengths.  

In addition to defining the investment strategy, I’m also proud of the process for adopting the asset allocation, which was an engaged, collaborative dialogue among the board, staff, and advisors and consultant to the board. These efforts among all the stakeholders support the governance model we’ve developed and are proud of at the organization. This iterative process along with the pension experience study allowed us to make the strategic move from 8% target returns to 7.5% on a long-term horizon. The governance structure is reinforced when significant decisions like these are made in the manner they were. We are very mindful that  good governance is critical for realizing the most prudent execution of any asset allocation.

CIO: What would you be most excited to accomplish in the year ahead, and why?

Kassam:  I would like to expand our risk management efforts to better prepare us for future major market corrections in a tactical manner so we are positioned to take advantage of buying opportunities yet providing liquidity needed for annuity payments.  


CIO: What’s the most rewarding aspect of being an asset owner?

Kassam:  The most rewarding aspect to me is the intellectual stimulation of the investment strategies, structures, and working with the team we have to execute our investment program. We have built an amazing team and I’m proud to work with them.  Our objective is to be a competitive private investment firm serving the sole mission of meeting the retirement needs of state employees and their beneficiaries.

CIO: What’s the most challenging?

Kassam:  Most challenging is maintaining the governance structure so that we can execute on prudent, desirable investment strategies and also maintaining the team to continue execution of the investment program. I believe being a CIO more than ever requires being a crusader for good governance, catalyst for innovation, and a champion for a dynamic culture.

CIO: What are you most hopeful about in the future of the industry?

Kassam:  I hope for a better understanding about the need for (1) managers to appreciate US public defined benefit plans as a reliable source of long-term capital and (2) the better branding by managers of their investment strategies so US public plans are better positioned to explain the need for active management, particularly in private equity and other private asset classes. Managers can help investors in my shoes explain how strategies like private equity work to build companies and create jobs as well as emphasize the importance of aligning interests with investors when it comes to fees and governance.  

CIO: What are you most cautious about?

Kassam: I am cautious about complacency. We can’t be complacent about the markets continuing this long bull run. We can’t be complacent about the funding issue with public pensions because investment returns cannot make up for not making actuarial sound contributions. We also have to continue to challenge our investment programs by looking for creativity from our teams so we are not limiting ourselves to what has always been done.

CIO: As a leader, what are the most important aspects of the industry you hope to change over your career?

Kassam:  I would like to change how the industry looks at diversity, including gender and race, but also in terms of backgrounds and skill sets.  It takes cognitive diversity in the composition of our staff for us to develop the most talented teams and challenge the “status quo” thinking and produce better outcomes.

CIO: If you had one piece of advice for your peers, what would it be?

Kassam: Patience and resilience. I had been tested in the private sector for the first half of my career, but I have really learned these lessons over this last decade in the public sector. Patience sets the stage for better execution and resilience keeps you pushing forward even in difficult times.  These traits really have to be core to who you are and guide your decisions.

CIO: What are the biggest current trends you are seeing that have surprised you?

Kassam: Investors not appreciating that technology like artificial intelligence has a place in the industry, but not to take over the industry, rather to enhance it.  We should all learn from it since it seems to me that we going through a technological revolution similar to what other industries experienced in prior decades.