Elizabeth Burton is busy. It’s been just over a year since she took the helm at the Hawaii Employees’ Retirement System, becoming one of the youngest CIOs in the US and replacing Vijoy Chattergy, who was ousted in early 2018. Burton joined from the Maryland State Retirement and Pension System, where she served on the risk team and directed the system’s quant strategies group. Since coming to Hawaii, Burton has implemented new strategies in the investment portfolio, reorganized the structure of the investment team, and started identifying new ways to use technology. And, she’s just getting started.

Burton comes to Hawaii with a background in hedge funds, debt securities, and M&A—a circuitous route that she says gave her the ideal background for being a CIO. She’s familiar with the inner workings of a variety of asset classes and investment strategies, and she’s developed a philosophy around portfolio construction that informs her approach at Hawaii. The pension system lowered its expected rate of return to 7% from 7.55% in 2016, and broadly invests within a risk profile that focuses on downside protection and capital preservation as a result of its funded status. Rather than viewing these factors as challenges, Burton seems to welcome the opportunity to innovate.

Her most recent focus has been on the credit side of the portfolio. “Where other plans may have charted their path decades ago with respect to private credit programs, we have the opportunity to start fresh,” she says. “We are trying to build out an all-weather credit program. Not many other public plans are in the position where they are starting to build that out.” In practice, that means diversifying the credit portfolio to include a broader range of securities and credit strategies. Burton isn’t afraid of the private markets or active management. She notes that diversification is important and, in fact, prudent if backed by a rigorous selection process.

An all-weather approach is something Burton brings to portfolio management broadly as well. Burton wants a variety of tools at her disposal if markets start to slow down or high-performing asset classes start to cool off. “I’m not alone in saying that everyone is kind of nervous about private equity, but you need to have it in your portfolio to meet target portfolio return expectations. I am concerned about challenged performance in the future and exit strategies,” Burton says. “We’re looking for innovative structures or vehicles where we can protect ourselves or mitigate the impact.”

Burton spent the last year underwriting a new real estate investment strategy that has a very attractive return profile, should create jobs at a local level throughout the mainland, and will positively impact the community in Hawaii as well. It’s an uncorrelated source of return that is designed to build Hawaii’s position as a long-term investor.

She’s also leaning on technology to improve asset management. Although Hawaii is budget constrained, Burton was able to implement new portfolio management technology by offering to be a case study for the vendor. The compromise kept implementation costs low while the vendor got a new sales and marketing tool.

Internally, Burton is reorganizing the team so that it more closely resembles an investment house. She says she wants to give employees clear forward trajectories, reward investment performance, and allow people to work across asset classes. Her hope is that it will keep her veteran staff engaged while enticing new prospects to give Hawaii a shot. Living and working in Hawaii may sound like a dream on paper, but in reality, it’s a 12-hour-plus flight to get anywhere, which leaves some people feeling disconnected from family and friends. Add to that the difficulty of attracting talent to public sector jobs and it can be challenging to get people to sign on. Technology can play a role here and Burton is already thinking through how best to use it.

“Investing in technology is one way public pensions plans can catch up quickly with the resource capabilities of the rest of the private world efficiently,” Burton says. “You can leapfrog generations of underinvestment.” Over the long term, Burton is considering satellite teams on the ground in major investment hubs as well as making a senior operations hire to help manage and streamline the technology Hawaii relies on. Her strategy will improve Hawaii’s ability to engage with new investment opportunities while building in greater efficiency.

One year in and Burton has already reshaped Hawaii. She hopes that over time, Hawaii will be known as a great place to build an investment career, much in the same way her mentors at Maryland helped her to get where she is today. “If there’s one thing that people see about me, I hope that it is that Hawaii is a meritocracy. If you’re hungry, humble, and smart I’ll help you move to the top.”

—Bailey McCann