Jase Auby - Risk, Size, and Talent at Texas Teachers (EP.404)
Sep 9, 2024
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Jase Auby, Chief Investment Officer for the Teacher Retirement System of Texas, manages a $200 billion pension fund supporting over two million educators. He shares insights from his journey from Wall Street to public pensions, emphasizing the significance of risk management in investment strategies. Auby discusses Texas's unique position in energy investments and the importance of blending quantitative and qualitative insights for decision-making. He also highlights challenges like talent retention and the evolving landscape of asset management, showcasing his impact as a thought leader.
Jase Auby's career spans technology and finance, influencing his innovative risk management strategies at the Teacher Retirement System of Texas.
TRS focuses on a diversified investment approach that includes significant allocations to alternative assets, particularly in energy infrastructure.
The organization's collaborative structure enhances investment decision-making through empowered teams and internal committees, fostering cross-communication and accountability.
Deep dives
Overview of TRS Texas Pension Fund
The Teacher Retirement System of Texas (TRS) is one of the largest public pension funds in the United States, overseeing approximately $200 billion in assets. It serves over 2 million public education employees in Texas, making it a crucial entity for retirement security. The organization is known for its innovative approach to investment, especially in engaging with emerging managers and adapting flexible fee structures. In managing its extensive and diversified portfolio, TRS primarily focuses on public equities, private investments, and unique asset classes to ensure a well-rounded investment strategy.
Jace Obbe's Background and Career Progression
Jace Obbe's career in finance began with a focus on technology during his tenure at Goldman Sachs, where he engaged in developing early quantitative tools for trading and risk assessment. His transition from a technologist role to various banking positions at Lehman Brothers allowed him to gain extensive experience in structuring complex deals within new markets like Collateralized Debt Obligations (CDOs). After a decade on Wall Street, he returned to Austin and embraced entrepreneurial ventures before moving to TRS, where he established a risk management group in response to the global financial crisis. His diverse background in tech and finance has shaped his strategic focus as the Chief Investment Officer.
Investment Philosophy and Risk Management
TRS blends traditional investment methods with modern risk management techniques, focusing on an unleveraged structure which allows it to navigate market fluctuations with security. Under Jace's leadership, the organization shifted its emphasis from existential risks to the efficient deployment of risk within the parameters of a long-term investment horizon. A key component of their approach has been developing proxies to better measure and understand risks in private market investments, which often do not provide the timely data available in public markets. By innovating risk assessment methods, TRS ensures that it can maintain a robust portfolio while extracting appropriate compensation for the risks undertaken.
Unique Approach to Alternative Investments
TRS's investment strategy includes a significant allocation to alternative assets, notably in energy, reflecting the state’s resource-rich environment. The fund has maintained a dedicated focus on energy infrastructure while balancing climate change considerations with fiduciary responsibilities, seeking out prudent investments rather than following broader trends. Additionally, the implementation of an emerging manager program has allowed TRS to tap into diverse investment strategies while prioritizing performance and sustainability. This program has proven successful, as a handful of emerging managers have transitioned to become core components of TRS's portfolio.
Organizational Structure and Decision-Making
TRS employs a collaborative organizational structure that empowers individual teams within specific asset classes while fostering cross-communication for optimizing investments. Jace has instituted internal investment committees for each asset class, enabling timely and innovative decision-making that goes beyond traditional hierarchical approaches. This framework not only enhances the quality of investment conclusions but also enriches the organizational culture, making it responsive and accountable. By balancing authority and autonomy, TRS can effectively harness the collective expertise of its investment professionals.
Jase Auby is the Chief Investment Officer of the Teacher Retirement System of Texas, where he oversees the $200 billion pension fund that’s the fifth largest in the U.S. TRS manages assets that support the retirement security of over two million public education employees in Texas, and has long been known as a thought-leading steward of capital in the pension community, including engagement with emerging managers and innovation in fee structures.
Our conversation covers Jase’s background and path to TRS, including early working with computers on Wall Street and entrepreneurship. We discuss TRS’ organizational structure, competitive advantages, and investment approach and close with Jase’s role and accomplishments in his tenure as CIO.
