Scott Chan
speaker
125 appearances
1 recordings
1 series
first heard Mar 2025
last heard Mar 2025
Scott Chan’s voice in public audio — every appearance, attributed to the second.
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Appearances
how can we best benefit from the convergence of of ai and power when i've got data centers that are being built in real estate they're being built and held in the infrastructure division in power we have an infrastructure division but it's it's also on the higher end of the risk curve in private equity it's somewhere in the middle in our sustainable investing group and so coordinating
All of that across CalSTRS would be really beneficial if we could connect the divisions together, but that takes time and we need to react more dynamically. So these are some of the challenges we're taking them head on. And I hope that, like I said, we'll develop them eventually into better advantages going forward.
I think you're right. We have to look for sizable imbalances that we think are going to last a long period of time so that CalSTRS can benefit. Let me just offer up three areas that over my experience, one I would say is crises provide a lot of supply-demand gaps in financing for long periods of time. Number two, and some of this we've alluded to, is new and emerging areas.
I think are at times you can see a supply demand gap that for a very long time for these changes, particularly around technology and innovation. And the third is complexity. Let me just kind of go through each one just briefly. But, you know, if I think about the crises like today, we're interested in the asset back part of private credit. I mentioned that to you.
Because banks and levered financial institutions have begun in earnest to move that segment off their balance sheet, right? They started with the direct lending and now they're moving to the asset back portion. But this goes all the way back to the global credit crisis of 08, 09, right? And even you saw this with Silicon Valley Bank.
you have this fundamental mismatch between the asset and liabilities of the bank. Essentially, the deposits could be short-term. How short-term? Well, they could evaporate within days. That's how short-term it is in seeing Silicon Valley Bank. And yet, some of their investments are going long-term. So there's this fundamental mismatch.
And that would be difficult enough to manage alone, but they're highly levered institutions on top of that. And so you're levering up this fundamental mismatch. If you think about that system, it's bound to go wrong. It's bound for something to go wrong. And in fact, every crisis in the U.S., you see 500 to 1,000 banks go under.
We have this generational shift of assets that most likely never belonged on banks' balance sheets, shifting to balance sheets where they do belong. So if you think about a CalSTRS, on the other hand, we don't have leverage or we have a very small amount of leverage. Our horizon is super long-term.
So we never have a run on the bank, and we can match that asset with the appropriate long-term horizon and duration. So I think we'll see this generational shift of assets that are moving, and there can be cycles where there's more or less of it providing better or worse pricing opportunities, but this is something that it's going to take years. It's a generational shift.
of assets that are going to be moving to different hands, right? Insurance companies and pension funds, for example. Those crises that could be born. Number two, there are new areas, right? So if you think about technology, what's different today? A tech CEO might be spending half their time in power and in data centers three years ago.
It probably was delegated to somebody where the CEO or president ever got involved, right? This year, if you looked at some of the public companies, it's like over 300 billion in capital expenditure that they want to start to deploy. And so there's such a big demand in a new area.
And because they're trying to move it off the balance sheet, a lot of it's going to go into the private markets, whether it be private credit, or the development and building of the real estate. So they're new areas. And then I think there's also a complexity premium, right? So if something is complex that takes, for example, mature technology, but you're trying to scale it in a new area.
It's hard for us to think of something not... at least in a five-year set or more to think about taking advantage of a structural shift. If you think about CalSTRS, if we're successful with $350 billion today, 10, 12, 13 years from now, we will have created a whole new CalSTRS. We will have doubled our asset base. So this idea of how we find
How we invest with scale is a compounding idea because as our returns compound, we become larger and larger as an organization.
It 100% does. One of the things as I've gotten older that's very important to me is being well rested. Sleep. I need to be mentally sharp. But here's the catch. If Cal State doesn't do well, I might be sleeping on the couch because Heather is a teacher, has been a teacher for over 30 years. And so you talk about alignment of interest. Not only is my wife a teacher, but
A lot of her friends are teachers and her sister is a teacher as well. So I've got a tremendous alignment of interest around the mission here at CalSTRS.
I think it's a blessing and a curse that... So I live in the Bay Area, but I work in West Sacramento. And the blessing is that I have a lot of time in the car. And so I spend a lot of time listening to podcasts and just picking up things. Or I spend the time talking with folks. It gives me time because I'm in the car and driving.
to really focus on on relevant issues and casting a wide net being well read and in my case now i'm listening to a lot of a lot of that on podcasts where i'm listening to it on uh books that uh that i have through audiobooks the seat that i'm in gives me a wide purview of meeting with a lot of our partners.
And so I would be remiss if I didn't meet with them at least quarterly and understand some of the brightest minds in the world. Where's capital going? I do that with my team as well. I'm lucky I wake up every day and it's like I love the markets and here it is, I'm in the center of a lot of that surrounded by great minds.
Absolutely. I mean, doing it for a long period of time, I think you recognize where there can be some alignment, misalignment, in terms of what you might be hearing or talking to with partners. But I think over time, too, you develop real relationships, trusted partnerships, where you're removing the incentive just to
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