Girard Miller is the chief investment officer of Orange County Employees Retirement System, a defined benefit pension with $12 billion in assets under management. Previously, he was the president of Janus mutual funds and also served as chief operating officer of Janus Capital Group, Inc. Miller earned a B.A. from University of Washington, a Master's in Public Administration from the Maxwell School of Public Affairs at Syracuse University and a Master's in Economics from Wayne State University. He is a Chartered Financial Analyst.
Miller was recently named to Trusted Insight's ranked list of the Top 30 Pension Chief Investment Officers. He graciously spoke with Trusted Insight on January 21, 2016. The following interview has been edited and condensed for clarity.
Trusted Insight: You've seen the industry from many different angles. Can you tell me about those experiences and the unique insights they've offered you that have been beneficial to you?
Girard Miller: I started out in Public Administration in graduate school at Syracuse University's Maxwell School. I went into local government and served a couple of small municipal pension plans in the early days of my career when I was a finance director. Then I went on to the Government Finance Officers Association. At that time I did my CFA work, provided a lot of training for trustees and wrote educational publications for municipal financial people, including those who are responsible for municipal pension funds. Then Fidelity picked me up to help build out their public funds business. I naively thought I was going to someday be a portfolio manager there, then quickly learned that was never going to happen. But in a few years I ended up inheriting the keys to the kingdom in their public funds marketing business.
After five years with the public funds group at Fidelity, I got a phone call from a former colleague who was on the Board of ICMA Retirement Corporation. They needed a new CEO. I took that job in 1993, which taught me a lot about governance and managing investment managers in a multi-asset class environment.
After ten years of that, I moved out to Denver and worked as a COO at the Janus Capital Group for three years, helping to run a $170 billion investment fund complex. I somewhat coincidentally became the president of the mutual fund complex because of a personnel shakeup there. That taught me a great deal about fiduciary oversight, and a lot more about investment law.
After that I thought I was going to retire at an early age when I moved out to Malibu, which had been a long-time dream. That proved to be just a sabbatical that lasted about six months, and I flunked retirement. After a few months of decompression on the beach I needed more in life. So two things happened: I was appointed to the Governmental Accounting Standards Board as a part-time board member. Simultaneously I ran into an outfit that I used to compete with called Public Financial Management, which was opening up a business doing outsourced CIO work for OPEB plans (retiree medical funding). I did a lot of consulting work with PFM for municipalities in several states, some pension benefits design consulting, some money manager selection consulting, some OPEB plan design consulting.
Then my personal life brought me to Orange County where I met my wife. About a year later I got a call from somebody I knew on the board at OCERS who said their CIO had just left and asked if I would be interested in that role. That's what brought me to where I am now. One thing just led to another. Looking back, it all seems to me like a natural evolution, but there certainly was never a grand plan or roadmap that got me here.
Trusted Insight: Most of your career has been focused around pension investing or retirement plans in some regard. Did something draw you to this specific industry? What's kept you around?
Girard Miller: It all started at a seminar I went to in 1977, a National Endowment of Humanities symposium in Santa Barbara. I was working in local government at the time, and they sent a bunch of us out at federal taxpayers’ expense to spend a month thinking big thoughts about the economic historicy of the Great Depression and everything that followed. The instructor was a fellow named Otis Graham, who was a historian on the Great Depression, the Roosevelt era and the Brains Trust, and he walked us through all that. We studied and talked about the separation of ownership from management in the capitalist economy and the massive amount of money in pension plans. I said "By golly, I’m going to write a book about that someday for the public funds profession." That was the beginning of my journey into the realm of public funds management.
From discussions of the work of Peter Drucker and John Maynard Galbraith, I had figured out that there was a profession yet to be borne of people who were public servants, who weren't going to make a million dollars a year performing professional-level work, in the management of pension funds, public funds investments and public funds portfolios.
For the next two decades, I would say 20% of what I did in my executive capacity was what I loved, and the rest was what I had to do to be close to what I loved. And those were all great years, as I proved to be a pretty effective investment executive. I spent a lot of time doing management and executive work. This CIO role at OCERS is the first job where the ratio reversed. I now spend 80% of my time doing investments, which is really my first love and what gets me up in the morning.
Trusted Insight: Pensions are not tasked with perpetuating the wealth of a small handful of high net worth individuals. Instead you are managing a pool of money comprised of many average Americans wagers. For you, is that a burden to bear? Or a righteous cause?
Girard Miller: I guess there's two parts to that. If you are an investment professional, where the money comes from is secondary to managing it efficiently and effectively. This is really not a good business to be in if you are just a social do-gooder or career bureaucrat. People who lack investment skill are probably not going to be that successful. You’ve got to have skills and the markets are constantly challenging - that's an intellectual challenge.
Having said that, I came to this particular job at the end of my career as a public service. I could easily have gone off and done some other things. I can always make more money in the private sector. Although I do want to be paid fairly and have an alignment of my economic interests with the plan’s portfolio, that's not my motivation for why I am in Orange County. I came here first and foremost to perform public service. That's compelling in my case. It’s how I started my career, and it's how I intend to end it. This is a career capper and an opportunity to give back and to make a difference, leaving a legacy ultimately. I take it as a solemn responsibility to people whose lives that are affected by the pension plan as retirees, and to my local community that foots most of the bills here.
Trusted Insight: Tell me about your investment team. What is the structure, team dynamic and how might your team differ from peer institutions?
Girard Miller: Everybody is different. We only have five professionals on staff here. We outsource all money management. That's not unusual for a public plan of our size at $12 billion. We have 70 different investment managers. We are managers of managers. Most of the people here came in at a ground zero level as analysts and worked their way up. They are at different skill sets and are learning as they go along. My job is to be the mentor.
Trusted Insight: Would you describe them more as a specialist or a generalist?
Girard Miller: We are not big enough to have real specialists. Most of our meetings with money managers are with the full team so that we can cross-train in case we lose somebody, which is always a business risk in a system like ours. If you talk to the folks at L.A. Fire and Police, which is about 50% larger than our plan, they have some element of specialization. It's only when you get up to the jumbo state plans that you start seeing a lot of staff specialization and in-house money management. I guess L.A. county would be an exception, as the nation’s largest county pension plan, which has specialists. Anybody with a portfolio of $50 billion and larger can specialize, but below that level there's going to be a higher degree of generalization.
Trusted Insight: To what degree are you concerned about the near-term market volatility?
Girard Miller: The asset allocations we set up are not designed for short-term tactical traders. I'm not trying to day-trade this portfolio, although we do make tactical shifts from over-valued to undervalued sectors from time to time. This is an aircraft carrier, not a speedboat.
Trusted Insight: What geographies or sectors interest you in terms of sustained growth in 2016 and beyond?
Girard Miller: If you could tell me where there's going to be sustained growth, I'll go there. The problem is we have low or no growth in many parts of the “New Normal” world today. So I’m prone to seek a superior position in the capital stack, to get first claim on economic returns that are meager, volatile and risky.
Trusted Insight: What trends have you identified in your time with pensions?
Girard Miller: I've been doing this for 30 years. A lot of things have changed. The portfolios have become more complex. Bonds yielding 2% can not possibly provide the foundation for achieving the actuarial assumptions of most public pension plans, so people have to look at alternatives. Those alternatives all cost more. As an industry, we have spent a lot of time worrying about future inflation although we've been in a dis-inflationary and now deflationary environment for the last 20-to-30 years.
Trusted Insight: What would you say the biggest challenge that you have faced as a pension CIO?
Girard Miller: I think the probability of our plans achieving their actuarial rate of return between now and the end of the next recession is virtually zero. That tells us that no matter what we do, no matter how good we are, we're highly likely to contribute to actuarial unfunded liability until we get into the next up cycle—whenever that eventually occurs.
Trusted Insight: That's a big statement. How do you best position yourself in the current market climate?
Girard Miller: It’s not easy, that’s for sure. What many people are doing is setting up broadly balanced portfolios because it’s harder to diversify against equity beta risk when risk-free bonds are yielding so little. I am trying to move us toward more contractual income, which is a defensive approach that says that if we are in a long-term, new normal period of global deleveraging—in a Lost Decade, if not longer—the place I want to be in the capital markets is where I get paid the first dollar on a contractual basis and have the first claim on whatever economic growth occurs, as opposed to being at the bottom of the capital stack. We can’t pay pensions from risk-free or risk-adjusted returns, but we also can’t afford to see these pension funding ratios plummet to levels lower than the global financial crisis either.
Trusted Insight: What is the number one lesson that you've learned in your career?
Girard Miller: There's not a single path. My path involved many and different employers doing many different roles, that worked for me. I've seen other people who rose through the ranks and had one employer most of their life. It all depends on the opportunity set and what your personal disposition is. Find yourself a mentor. It doesn't have to be your boss. Find somebody who's a lot smarter than you and a lot wiser. Learn what you can from them. And for those who’ve climbed the ladder already, master the arts of mentoring and sagacity.
Finally, I’d say that patience is a virtue, especially in the public sector. It’s one that I have not always displayed; so there is a fine line between the healthy impatience that is required to be a change agent when it’s necessary and feasible, and the internal impatience that comes from unrealistic expectations of the working environment. The latter can eat away at your soul, and undermine your effectiveness. Be persistent, be tenacious, but be realistic.
To learn more about the the Top 30 Pension Fund Chief Investment Officers, click here.
Miller was recently named to Trusted Insight's ranked list of the Top 30 Pension Chief Investment Officers. He graciously spoke with Trusted Insight on January 21, 2016. The following interview has been edited and condensed for clarity.
Trusted Insight: You've seen the industry from many different angles. Can you tell me about those experiences and the unique insights they've offered you that have been beneficial to you?
Girard Miller: I started out in Public Administration in graduate school at Syracuse University's Maxwell School. I went into local government and served a couple of small municipal pension plans in the early days of my career when I was a finance director. Then I went on to the Government Finance Officers Association. At that time I did my CFA work, provided a lot of training for trustees and wrote educational publications for municipal financial people, including those who are responsible for municipal pension funds. Then Fidelity picked me up to help build out their public funds business. I naively thought I was going to someday be a portfolio manager there, then quickly learned that was never going to happen. But in a few years I ended up inheriting the keys to the kingdom in their public funds marketing business.
After five years with the public funds group at Fidelity, I got a phone call from a former colleague who was on the Board of ICMA Retirement Corporation. They needed a new CEO. I took that job in 1993, which taught me a lot about governance and managing investment managers in a multi-asset class environment.
After ten years of that, I moved out to Denver and worked as a COO at the Janus Capital Group for three years, helping to run a $170 billion investment fund complex. I somewhat coincidentally became the president of the mutual fund complex because of a personnel shakeup there. That taught me a great deal about fiduciary oversight, and a lot more about investment law.
After that I thought I was going to retire at an early age when I moved out to Malibu, which had been a long-time dream. That proved to be just a sabbatical that lasted about six months, and I flunked retirement. After a few months of decompression on the beach I needed more in life. So two things happened: I was appointed to the Governmental Accounting Standards Board as a part-time board member. Simultaneously I ran into an outfit that I used to compete with called Public Financial Management, which was opening up a business doing outsourced CIO work for OPEB plans (retiree medical funding). I did a lot of consulting work with PFM for municipalities in several states, some pension benefits design consulting, some money manager selection consulting, some OPEB plan design consulting.
Then my personal life brought me to Orange County where I met my wife. About a year later I got a call from somebody I knew on the board at OCERS who said their CIO had just left and asked if I would be interested in that role. That's what brought me to where I am now. One thing just led to another. Looking back, it all seems to me like a natural evolution, but there certainly was never a grand plan or roadmap that got me here.
Trusted Insight: Most of your career has been focused around pension investing or retirement plans in some regard. Did something draw you to this specific industry? What's kept you around?
Girard Miller: It all started at a seminar I went to in 1977, a National Endowment of Humanities symposium in Santa Barbara. I was working in local government at the time, and they sent a bunch of us out at federal taxpayers’ expense to spend a month thinking big thoughts about the economic historicy of the Great Depression and everything that followed. The instructor was a fellow named Otis Graham, who was a historian on the Great Depression, the Roosevelt era and the Brains Trust, and he walked us through all that. We studied and talked about the separation of ownership from management in the capitalist economy and the massive amount of money in pension plans. I said "By golly, I’m going to write a book about that someday for the public funds profession." That was the beginning of my journey into the realm of public funds management.
From discussions of the work of Peter Drucker and John Maynard Galbraith, I had figured out that there was a profession yet to be borne of people who were public servants, who weren't going to make a million dollars a year performing professional-level work, in the management of pension funds, public funds investments and public funds portfolios.
For the next two decades, I would say 20% of what I did in my executive capacity was what I loved, and the rest was what I had to do to be close to what I loved. And those were all great years, as I proved to be a pretty effective investment executive. I spent a lot of time doing management and executive work. This CIO role at OCERS is the first job where the ratio reversed. I now spend 80% of my time doing investments, which is really my first love and what gets me up in the morning.
Trusted Insight: Pensions are not tasked with perpetuating the wealth of a small handful of high net worth individuals. Instead you are managing a pool of money comprised of many average Americans wagers. For you, is that a burden to bear? Or a righteous cause?
Girard Miller: I guess there's two parts to that. If you are an investment professional, where the money comes from is secondary to managing it efficiently and effectively. This is really not a good business to be in if you are just a social do-gooder or career bureaucrat. People who lack investment skill are probably not going to be that successful. You’ve got to have skills and the markets are constantly challenging - that's an intellectual challenge.
Having said that, I came to this particular job at the end of my career as a public service. I could easily have gone off and done some other things. I can always make more money in the private sector. Although I do want to be paid fairly and have an alignment of my economic interests with the plan’s portfolio, that's not my motivation for why I am in Orange County. I came here first and foremost to perform public service. That's compelling in my case. It’s how I started my career, and it's how I intend to end it. This is a career capper and an opportunity to give back and to make a difference, leaving a legacy ultimately. I take it as a solemn responsibility to people whose lives that are affected by the pension plan as retirees, and to my local community that foots most of the bills here.
Trusted Insight: Tell me about your investment team. What is the structure, team dynamic and how might your team differ from peer institutions?
Girard Miller: Everybody is different. We only have five professionals on staff here. We outsource all money management. That's not unusual for a public plan of our size at $12 billion. We have 70 different investment managers. We are managers of managers. Most of the people here came in at a ground zero level as analysts and worked their way up. They are at different skill sets and are learning as they go along. My job is to be the mentor.
Trusted Insight: Would you describe them more as a specialist or a generalist?
Girard Miller: We are not big enough to have real specialists. Most of our meetings with money managers are with the full team so that we can cross-train in case we lose somebody, which is always a business risk in a system like ours. If you talk to the folks at L.A. Fire and Police, which is about 50% larger than our plan, they have some element of specialization. It's only when you get up to the jumbo state plans that you start seeing a lot of staff specialization and in-house money management. I guess L.A. county would be an exception, as the nation’s largest county pension plan, which has specialists. Anybody with a portfolio of $50 billion and larger can specialize, but below that level there's going to be a higher degree of generalization.
Trusted Insight: To what degree are you concerned about the near-term market volatility?
Girard Miller: The asset allocations we set up are not designed for short-term tactical traders. I'm not trying to day-trade this portfolio, although we do make tactical shifts from over-valued to undervalued sectors from time to time. This is an aircraft carrier, not a speedboat.
Trusted Insight: What geographies or sectors interest you in terms of sustained growth in 2016 and beyond?
Girard Miller: If you could tell me where there's going to be sustained growth, I'll go there. The problem is we have low or no growth in many parts of the “New Normal” world today. So I’m prone to seek a superior position in the capital stack, to get first claim on economic returns that are meager, volatile and risky.
Trusted Insight: What trends have you identified in your time with pensions?
Girard Miller: I've been doing this for 30 years. A lot of things have changed. The portfolios have become more complex. Bonds yielding 2% can not possibly provide the foundation for achieving the actuarial assumptions of most public pension plans, so people have to look at alternatives. Those alternatives all cost more. As an industry, we have spent a lot of time worrying about future inflation although we've been in a dis-inflationary and now deflationary environment for the last 20-to-30 years.
Trusted Insight: What would you say the biggest challenge that you have faced as a pension CIO?
Girard Miller: I think the probability of our plans achieving their actuarial rate of return between now and the end of the next recession is virtually zero. That tells us that no matter what we do, no matter how good we are, we're highly likely to contribute to actuarial unfunded liability until we get into the next up cycle—whenever that eventually occurs.
Trusted Insight: That's a big statement. How do you best position yourself in the current market climate?
Girard Miller: It’s not easy, that’s for sure. What many people are doing is setting up broadly balanced portfolios because it’s harder to diversify against equity beta risk when risk-free bonds are yielding so little. I am trying to move us toward more contractual income, which is a defensive approach that says that if we are in a long-term, new normal period of global deleveraging—in a Lost Decade, if not longer—the place I want to be in the capital markets is where I get paid the first dollar on a contractual basis and have the first claim on whatever economic growth occurs, as opposed to being at the bottom of the capital stack. We can’t pay pensions from risk-free or risk-adjusted returns, but we also can’t afford to see these pension funding ratios plummet to levels lower than the global financial crisis either.
Trusted Insight: What is the number one lesson that you've learned in your career?
Girard Miller: There's not a single path. My path involved many and different employers doing many different roles, that worked for me. I've seen other people who rose through the ranks and had one employer most of their life. It all depends on the opportunity set and what your personal disposition is. Find yourself a mentor. It doesn't have to be your boss. Find somebody who's a lot smarter than you and a lot wiser. Learn what you can from them. And for those who’ve climbed the ladder already, master the arts of mentoring and sagacity.
Finally, I’d say that patience is a virtue, especially in the public sector. It’s one that I have not always displayed; so there is a fine line between the healthy impatience that is required to be a change agent when it’s necessary and feasible, and the internal impatience that comes from unrealistic expectations of the working environment. The latter can eat away at your soul, and undermine your effectiveness. Be persistent, be tenacious, but be realistic.
To learn more about the the Top 30 Pension Fund Chief Investment Officers, click here.