As Chief Investment Officer for CalSTRS, Christopher Ailman is responsible for safeguarding the nation′s second-largest public pension fund in the face of unprecedented market volatility.
"I tell everyone that I sleep like a baby these days," he said. "I wake up screaming every two hours."
Referring to 2008 as "a year in which there was no place to hide," Ailman stressed as a public investor with an exceptionally long horizon, he must take a steady approach. "You can build a portfolio to withstand a 100-year event, but it will underperform in the other 99."
These are unprecedented market conditions, in which past assumptions about the relationships between various baskets of assets were upended -- everything wound up being correlated.
"Risk has increased exponentially in a global world," he observed. "We've experienced an attack on U.S. soil and a 1929-style financial event in one decade."
Yet Ailman sees opportunities, even in these battered markets. One strategy in this environment may be to move into debt instruments, finding high-quality assets from distressed sellers.
Ailman believes we will see no early indicators signaling that the stock market is about to rebound.
"The news will still be bad, and one day it will turn for no good reason. The cash from the sidelines will come flowing back in."
This event was open only to members of the Milken Institute Associates. To join, please contact Mindy Silverstein, director of Milken Institute Associates, at (310) 570-4634 or email@example.com.