Susan E. Oh Senior Portfolio Manager, Risk Parity and Currency Hedging, Commonwealth of Pennsylvania, Public School Employees’ Retirement System Art by Victor Juhasz
Susan E. Oh

“Susan is a talented, driven, innovative investment professional who is very dedicated to her craft. She is a valuable senior member of the investment team at PSERS who has contributed to our success over the past 23 years. She is passionate about the importance of balanced asset allocations which inspired her to successfully start and manage the internally managed risk parity portfolio at PSERS.”

— James H. Grossman, Jr., Chief Investment Officer, Commonwealth of Pennsylvania, Public School Employees’ Retirement System

For 23 years, Susan Oh, a dedicated stalwart at Pennsylvania Public School Employees’ Retirement System, has been what her colleagues call a “serial entrepreneur,” seeing what’s needed and developing solutions to meet the challenge. Years ago, Oh received invaluable advice from a boss: “Put yourself in the CIO’s shoes and be the change you want to see.” It led her to get her CFA charter. In 2006, the first year she was both a CPA and CFA, she recommended and implemented a swap overlay program, which grew from $150 million to $8 billion today. 

This “tool” which started as a portable alpha strategy in the Non-US equity portfolio, is now in use plan-wide, and equipped PSERS to increase liquidity, boost alpha and diversification of the total fund, and increase assets managed internally. “It allowed us to be more liquid during the Global Financial Crisis.    The internal Risk Parity portfolio I manage now would not have been possible without having the swaps as a tool,” says Oh.  

Other entrepreneurial ideas she’s had have included applying risk parity and a currency hedging program to the public plan, which have led to significant value add. As the sole woman investor for much of her PSERS career, she is a strong proponent for diversity in both leadership and junior investment roles.

After graduating Indiana University of Pennsylvania with a degree in accounting, Oh began her career as a supervising senior at KPMG before starting at PSERS as an investment accounting manager and rising through the ranks from analyst to senior portfolio manager.

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

Oh: I am thankful to be part of a team whose eyes are on one thing:  what is best for our members.   We are not afraid to be different from our peers if it means we have a better chance of building higher value of wealth for the same level of risk.  We embrace innovation to get there.   As the chair of the newly created Asset Allocation Committee, I led the development of an investment process that focuses on the importance of good asset and risk allocation for the Fund.   The process we built is proactive, intentional, and continuous while retaining a long-term focus and balancing risk in the strategic asset allocation.  The Fund’s asset allocation and policy benchmarks are not selected simply to provide hurdles for us to outperform but to reflect our best thinking.   We use moderate amounts of leverage to balance our Fund’s concentration to economic growth risk and have added diversifying assets over time.  I launched the internal risk parity portfolio (accounts for  50% of PSERS’s Risk Parity mandate) to deepen the understanding of risk-balanced portfolio construction and to further build out our infrastructure for swaps and futures.  I also launched a plan-wide developed market currency hedging program to manage foreign currency risk, an often-unwanted risk.  This timely hedge has added a significant positive return or protection to date without committing sizable capital as it is implemented through use of forwards. These innovations have become large contributors for diversification and alpha generation, and a greater proportion of assets managed internally.

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

Oh: I was asked to speak recently at investment conferences on women and their increasing role in investment management. Being the sole woman investor for much of my 23-year career at PSERS, it is an important goal of mine to honor those who are not, or seldom, heard in our industry. In the year ahead, I want to lead in building a team that will continue to cultivate our competitive advantage through diversity of thoughts both here at PSERS and beyond. There are just 16% women CFA charterholders in our industry, and women portfolio managers, managing directors, and CIOs represent an even smaller percentage.  I am still puzzled why our profession has not made progress like CPAs or physicians. This reality persists despite the fact that the female investor base currently represents over 50% of US investable wealth, and the percentage is expected to grow to be over 60% in 10 years. I think it is imperative that we embrace diverse thoughts and perspectives in order to achieve good, holistic solutions. I believe we each can see only a partial picture of issues at hand. Even great leaders, hence, need to surround themselves with others who can constructively challenge them. We are in the process of building our investment team, as our board and state leadership are supportive of adding investment professionals to increase our internal management. We currently manage over 60% of our public market allocation internally. I believe gender diversity will give us competitive advantage and help us to generate better returns and risk management for our industry.

CIO: What’s the most rewarding aspect of being an asset owner?
Oh: Being able to work for our members who educate our children and to help them build a secure retirement as a reward for their labors is an honor I get to do every day.

CIO: What’s the most challenging?
Oh: Discerning voices with believability and continually being full of hope and courage to act on what our team believes to be best for PSERS in the long term.  

CIO: What are you most hopeful about in the future of the industry?
Oh: Accelerated genuine desire for thoughtful governance with integrity in our industry. Diversity in senior leadership and reasonable fees will be a few of the most noticeable outcomes. 

CIO: What are you most cautious about?  
Oh: Asset allocation. Asset allocation. Asset allocation. Asset allocation is generally responsible for over 80% of the risk and return of the portfolio with the residual 20% coming from alpha. We want to continue to keep our eyes fixated on our asset allocation, as this is what moves the needle. Traditional asset allocation, which has worked well for the last several years, may not do well in the future as we enter into a period of monetary tightening. It is important to continue putting great effort into building the optimal asset allocation for the current market environment while we cultivate alpha generation ideas.  I am also cautious about keeping our portfolio liquid. Pursuit of alpha and lower expected returns has led to more capital being invested in illiquid assets. Right sizing is very important.

CIO: As a leader, what are the most important aspects of the industry you hope to change over your career?  
I would like to see more buy-side and sell-side resources invested in a more optimal asset allocation or multi-asset portfolio construction. This will be imperative for the outcome of both institutional and retail investors’ wealth generation. It is often an area that goes under-appreciated and under-resourced as the industry is focused on the search for alpha. This is strange as alpha only makes up less than 20% of the return and risk of the portfolio. When we have diverse thoughts intentionally focused on this important task, I believe we will be able to improve portfolio construction and build greater wealth over time without taking more risk.

CIO: If you had one piece of advice for your peers, what would it be?  
Oh: Let’s be courageous to do the very things that we fear most. Of course, we need to exercise wisdom and discernment in choosing what that is. On the other hand, we may discover that it may be the very attribute you are called to contribute the most to our industry.

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

Oh: Complacency with status quo in institutional investment management is surprising and real, but the necessity to shatter the status quo is also growing. This necessity will lead us to innovate. I want to continue to be a part of “true” innovations that bring forth greater solid wealth accumulation for PSERS and beyond. We have noticed some amazing innovations in other industries that has changed people’s lives. I believe that the investment industry is coming in alignment as one force to bring greater innovations that changes the world, not just for a few, as diverse thoughts and perspectives come together under a common vision. We realize we cannot do this alone. We value relationships here at PSERS. We continue to build and nurture relationships with one another, and with our strategic partnerships with like-minded, passionate, solid innovators in our industry to be a part of this trend.   

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