Exclusive: Texas Treasury Safekeeping Trust Co. CIO Retiring

Paul Ballard approached investing with an eye for uncorrelated sources of return, ran the $80 billion sovereign wealth fund since 2003.

Art by John Jay Cabuay

Paul Ballard, chief executive officer and chief investment officer of the Texas Treasury Safekeeping Trust Co., is retiring at the end of the month, CIO has learned.

Ballard, who confirmed the news via email, has been with the sovereign wealth fund since 2003 to see it grow from $70 billion to $80 billion today. Last year, he took home CIO’s 2018 Industry Innovation award for the sovereign wealth fund category. 

The outgoing chief is an innovator through and through, running the Lone Star State’s Texas Treasury Safekeeping Trust Company —composed of 11 endowments, two local government investment pools, a treasury pool, a long-term draw-down fund to subsidize Texas water projects, the state’s “Rainy Day” fund, an early stage venture capital fund, and separate funds for various state agencies — with speed, flexibility, and a healthy appetite for risk diversification. He also likes to hire unconventionally to dodge groupthink. His goal is to seek as many different, uncorrelated, independent sources of return that can assemble, to lower the overall portfolio risk but not at the expense of returns. It kept his fund in the positive with about 1% returns for 2018, when more conventionally deployed portfolios returned -1.5% to -2.5%.

“Creative thinking is especially important in an environment of low returns,” Ballard told CIO in his award profile . “Where an abundance of available capital quickly arbitrages away excess returns from new opportunities as they emerge.”

Ballard also likes to move fast on unconventional strategies such as buying up single-family homes at scale and leasing them as rentals as well as buying sub-prime mortgage securities at depressed prices that could be put back to issuers at prices approaching par. He does this because he believes there is more value to be harvested from “complexity premia” than by “cookie-cutter strategies that are verifiable by easily accessible analytical tools.”

He also gets incredible results. For example, the fund’s endowment produced 112% of the return of a passive 65/35 global stock/bond passive portfolio with less than half the risk over the past five years ending March 31. “I always tell our guys to think of it as ‘your Mom’s money.’”

After ending his professional career, Ballard plans on changing his priorities to “focus more on family and keeping this aging body of mine functioning well” by making both physical and mental fitness a part of his regimen.

“My new job description is going to include gym time, more aerobic exercise, yoga, meditation, grandkids, travel, more time with friends, reading, and learning something new every day,” he told CIO. “The pay sucks, but it sounds like fun to me.”

On December 12, join CIO as we raise a glass to him during our CIO Innovation Awards gala as he presents the Sovereign Wealth award on Dec. 12 to this year’s 2019 Innovation Award winner.

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Paul Ballard Innovation Award Profile

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