Asset Allocation, Defined Benefit, Governance, Institutional Investors, Pension Funds, Public Funds, Uncategorized

Asset Owner Profile: Chicago Teachers’ Burbridge Driven to Keep a Promise

Charles “Chuck” Burbridge is executive director of the approximately $11 billion Public School Teachers’ Pension and Retirement Fund of Chicago (Chicago Teachers or CTPF). Boasting a 40-year-plus professional career in economics, finance and academia (he was twice an adjunct professor), Burbridge has witnessed myriad changes in pension fund administration and investment, lending him a clear-eyed perspective acquired only by long service. It’s the kind of experience that prompted IA late last year to invite Burbridge to join its Advisory Board. Burbridge last week shared with IA Editor Mark Fortune some insights into his career path and his outlook on public pension fund administration.

IA: What is the mission of Chicago Teachers’ Pension Fund?

Burbridge: CTPF’s mission is articulated on the fund’s website; it is to provide, protect, and enhance the present and future economic wellbeing of members, pensioners and beneficiaries through efficient and effective management of benefit programs, investment practices and customer service, and to commit to earning and keeping the respect and trust of the participants through quality service by protecting retirement benefits, in compliance with applicable laws and standards.

IA: In a sentence, what does that mission mean to you?

Burbridge: Sixty-eight thousand members trust us to ensure that promises made are promises kept.

The Chicago Teachers’ Fund has been providing retirement, survivor, and disability benefits for certain certified teachers and employees of the Chicago Public Schools since 1895. State Representative William C. Eakins of Chicago introduced a bill to the Illinois legislature “for the purpose of establishing a fund to be used to pension school teachers.” The law helped to establish a system that would ensure the financial stability and dignity of teachers in retirement, not just in Chicago, but in the State of Illinois.

In 1907, two bills were passed that set the course for the future: one bill reorganized benefits and granted teachers an elected Board of Trustees, and the second allowed the Board of Education to make contributions to CTPF from interest accumulated on education funds. This represented the first time funding for pensions would come from sources other than teachers. Where once the requests for annuities, refunds and survivor benefits were handled directly by the Trustees and the Clerk of the Board, today CTPF operates as an independent organization, governed by the Board of Trustees and administered by the executive director, to oversee the day-to-day operations and to assure that benefits continue to be paid out on a timely basis.

IA: How did you get to the role of CTPF executive director?

Burbridge: Everything I have done in my career has helped to prepare me for my current role. Each position I have held provided an opportunity to learn lessons that have proven to be valuable. From gaining an understanding of actuarial science, to investment theory, to information technology, to economics, budgeting, customer service and internal controls, I have acquired insights into the issues facing a pension fund.  Most of all, I have had the opportunity to create and lead groups of highly talented people to tackle the challenges present in each situation.

My career started as I completed my M.A. in Economics at Sangamon State University (now University of Illinois, Springfield) in 1980 and was an economics intern for the Illinois Office of Planning with a focus on environmental and energy economics. This experience prepared me for a role at the Illinois Economic and Fiscal Commission (IEFC), a tenure that ran from 1979-1991, where I co-authored a report on the Illinois coal industry and later became the Commission’s econometrician and chief economist, specializing in regional economic and state revenue forecasting from 1983-1991. As chief economist, I was assigned to analyze issues related to Illinois pensions and group insurance, among other public policy and government finance issues.

Following my 12-year career at IEFC, I was recruited to Cook County, Ill. where I further developed my budget and public financing skills over a four-year tenure (1991-1995) and eventually served as deputy CFO, interim revenue director and budget director. The experience prepared me for a 17-year career in K-12 education at three major school districts: the Chicago Public Schools (1995-2000), the Los Angeles Unified School District (LAUSD, 2003-2007), and the Atlanta Public Schools (APS, 2007-2015). I took on various assignments at these districts that included serving as chief financial officer at both LAUSD and APS. During this period, I also took a three-year detour (2000-2003) to serve as director of management assurance services at KPMG for its Chicago public sector internal audit practice.

It is the combination of State of Illinois, pensions, school district, internal audit, technology and business operations that opened the opportunity for me at CTPF, which I joined in March 2015 as executive director.  The greatest skill that I developed during this journey, however, is leadership and team development.

IA: How is your investment team at CTPF structured?

Burbridge: Angela Miller-May is our CIO and leader of our investment team. She supports the Board’s Investment Committee. Her staff consists of four portfolio managers who cover specific asset classes. Each manager has a portfolio analyst. These teams are organized by private equity, domestic equity, international equity and other markets, comprising fixed income, infrastructure and real estate. Her team also includes a portfolio analyst with an accounting background who oversees the fund’s custodian, security lending agent and special projects.

IA: What are CTPF’s total assets? 

Burbridge: Assets fluctuate with market conditions; we are trading in a range of $10 billion to $11 billion.  As of December 31, 2018, CTPF’s assets were close to $10 billion after a volatile fourth quarter.

IA: What is the asset allocation breakdown of CTPF?

Burbridge: The asset allocation targets include domestic equity 30.5%; international equity 30.5%; fixed income 23%; infrastructure 2%; real estate 9%; and private equity 5%. As of December 31, 2018, the actual asset allocation stood at domestic equity 29.8%; international equity 29.9%; fixed income 26.9%; infrastructure 2.4%; real estate 7.4%; and private equity 3.6%.  

IA: Which investment consultants does the fund use?

Burbridge: We use Callan for all asset classes except private equity. The private equity class is managed internally, absent a third-party advisor.

To borrow from the “Great One,” [Hall of Fame former professional hockey player Wayne Gretzky] you must skate to where the puck will be, not where it is. Same with economic growth.

IA: How would you characterize your investment philosophy?

Burbridge: Our investment philosophy starts with the basics: Asset class diversification, monthly rebalancing and capital preservation. We overlay the basics with tilts toward defensive classes and active management. We keep a watchful eye on opportunities for women and minority managers (42% of total assets are managed by women and minorities). Due to improvements in the mix of employer revenues, we have cautiously explored more illiquid, alternative asset classes.

My personal philosophy regarding investments is that markets are driven by information, and information is not shared equally across all market participants. Furthermore, there is no substitute for economic growth, so long-term investors must look for long-term growth opportunities. As such, we are patient and seek out active managers whose strategies capitalize on research and specialized knowledge. To borrow from the “Great One,” [Hall of Fame former professional hockey player Wayne Gretzky] you must skate to where the puck will be, not where it is. Same with economic growth.  

IA: What is your view on active versus passive management?

Burbridge: Our view is that both strategies have a place in the tool box.  While all active managers may not persistently out-perform the index, some can. We believe that with appropriate research, we have a good chance of identifying those managers.

IA: How would you describe your management style?

Burbridge: From an investment management perspective, we are disciplined investors. We have processes in place for manager selection, continuing due diligence, and termination, if necessary. We dip our toes in new asset categories only after substantial research. From a leadership perspective, my style is to match talent to task and show appreciation. I try to build collaborative, self-guided teams and help foster an environment that promotes continuous examination of our processes. Where needed, I attempt to clarify and prioritize goals to build a sustainable organization. Essentially, I provide opportunities to talented teams to accomplish goals that may have not been in their imagination, let alone their reach. I believe that every employee wakes up and wants to make a positive contribution to the organization.  It is a leader’s responsibility to help them know what a positive contribution looks like and to remove barriers to their success.

IA: What has been the best experience in your career? 

Burbridge: Being the leader of the Chicago Teachers’ Pension Fund.

IA: What has the worst experience in your career?

Burbridge: Watching the faces of a payroll implementation team when the system crashed during the first payroll following go-live in 2007. To witness the disappointment was tragic. To see the resolve to right the ship was inspiring.  It took some four months to rectify and resolve the situation.  

IA: In what part of the pension industry have you witnessed the most change?

Burbridge: The political environment. There seems to be greater recognition that mistakes were made in the past from which one cannot walk away. There’s a growing recognition that the only thing unsustainable about defined benefit pension plans are employers not making actuarially-based contributions, and that defined contribution plans are not the perfect substitute for DB plans that many had hoped they would be. The goal is to win a race for retirement security, not a race to the bottom. Retirement security is economic security for our nation–there must be retirement security for all, if there is to be retirement security for any one.

IA: Are there any initiatives in which CTPF is currently engaged that you will like to highlight? 

Burbridge: Our recent initiative in private equity in Africa will be of interest both because of the journey that we have taken to get to this place and the results of the effort. [CTPF in Feb. made its first allocation to African PE: $20 million split equally between Advanced Finance and Investments Group (AFIG) and Development Partners International (DPI).]

IA: Do you have a family and what do you like to do in your free time? 

Burbridge: Yes, I have a wonderful family.  My wife, Debbi Gillespie, is exploring opportunities for change as she retires from the Joyce Foundation. Our daughter, Megan, and her husband, Matt, continue to amaze and delight us with their lives, not the least of which are our two grandsons, Ben (4) and Luke (2).  We golf, travel, and have developed a taste for rye whiskey.

IA: What are your hobbies?

Burbridge: Golf and gardening. We landscaped a new home in Saint Joseph, Mich. last year.  The carpet roses and grasses have done well. (See photo below)

IA: What was the last book you read?

BurbridgeThe Hard Thing About Hard Things, by Ben Horowitz.  It was a gift from one of my colleagues.  When I was an econometrician, I read about econometrics.  As a leader, I read about leadership.

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