How I Invest with David Weisburd
E137: Lessons from Managing $300 Billion Dollars w/ John Skjervem (CIO of URS)
11 Feb 2025
In this episode of How I Invest, I dive deep into a discussion with John Skjervem, Chief Investment Officer at Utah Retirement Systems (URS), to uncover the unique governance and investment strategies behind one of the most innovative public pension funds in the United States. John shares his insights on governance structures, private equity allocations, the benefits of a "fishbowl-free" decision-making process, and his approach to alternative energy investments. Whether you're curious about pension fund management or the future of disruptive energy investments like nuclear fusion, this episode is a masterclass in strategic thinking and long-term investing.
Full Episode
When we were last chatting that transparency with a T, capital T, was actually negatively correlated with returns. Why is transparency a bad thing?
Most public plans, red or blue state, have what I call fishbowl governance structures, where the board conducts its business in a public meeting. These things turn into spectacles. Big auditorium, 150 people in the room, front row is media, second row is lobbyists. third rows activists, fourth rows gadflies, fifth rows crackpots. There was never a John Q. Public responsible taxpayer.
That guy never showed up. Double click on your asset allocation strategy. So what are the buckets and how do you allocate today? Last time when we chatted, you mentioned that Utah Retirement Systems has the best governance of any pension fund in America. Double click that.
Yeah, that was a bold and brash statement. There's three components to that claim. The first is rare, but not totally unique. The second two are totally unique. So the first would be staff has full investment discretion. below asset allocation. So the board sets asset allocation, strategic targets for the asset classes, and all implementation execution is delegated to staff.
It's rare, but not totally unique. So as I mentioned, David, I'm an advisor to Alaska Permanent Fund Corporation, the CIO there, Marcus, and the staff, they have investment discretion, investment authority. There are a handful of programs throughout the country where staff enjoys investment discretion. Contrast that to my time at Oregon, my discretion, a hundred billion dollar program.
My authority as CIO was limited to $50 million. I'm not that great at math, but $50 million divided by a hundred billion dollars is a decimal point with several zeros. My authority there on a discretionary basis was quite constrained relative to the size of the program. What that means is in a program in which staff does not enjoy
authority and discretion, it means all the, all the recommendations have to come before in front of the board. Are there any benefits to that, uh, for the board? So obviously the trade-off is that you kind of have your hands tied. You can't move as quickly, but are there any governance benefits to forcing people to go to the board with investments?
No benefits and, uh, only, uh, disadvantages to that structure, disadvantages to the program, disadvantages to the beneficiaries, potential benefits to the board members. But I would characterize it as a highly suboptimal approach because as staff, you can work for weeks, months, quarters, potentially years on a transaction, on a recommendation.
The gestation period on these things can really be measured in years in some cases. And so it's a very asymmetric dynamic for a board member when you have staff who are, if not expert, much more expert than their counterparts on the board. having spent, again, weeks, months, quarters, years of their life on this transaction.
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