By Christine D. Giordano
Andrew Palmer, who has been the chief investment officer at the $70b The Maryland State Retirement and Pension System (SRPS) for almost ten years, is planning to retire at the end of the current fiscal year, according to a CIO source.
Update: Palmer publicly announced his plans to retire on January 22 during a SRPS trustees meeting, and the board issued a press release and commended him for his significant service to the fund. It intends to release an RFP for an executive search firm, and begin candidates in April in order to place a CIO in the seat before Palmer leaves in June or July of 2025.
“It has been a privilege to work alongside Andy in advancing our mission to give the more than 420,000 Marylanders we serve the best chance for retirement success,” said SRPS Executive Director, Martin Noven, in the release. “Andy has developed an excellent investment team that will continue to prioritize our members’ best interests and deliver hard-earned retirement benefits to Marylanders.”
“Andy has served the people of Maryland with exceptional financial stewardship,” said State Treasurer Dereck E. Davis, who chairs Maryland’s SRPS Board of Trustees. “His legacy is defined by his unwavering commitment to diversity and his dedication to cultivating a talented, highly skilled workforce. Through his leadership, he has built a well-funded portfolio and paved the way for a more inclusive and prosperous future.”
Please Click Here for More Information
While at the fund since 2015, Palmer has led the way for the state, and helped to codify laws that created an expert Climate team to stay at the forefront of sustainable investing within Maryland. While consistently beating the plan’s benchmarks, he has grown the fund 52% from $46 billion; and grown the staff from 23 to 54, onboarding many new staff members during the pandemic in order to prepare the investment team for high growth, fewer management fees, and more investment accountability.
He has also worked diligently to transform the culture at
the investment office, most notably, changing attitudes from that of state
functionaries to that of owning the outcomes of investment returns and taking
responsibility for managers who are investing for the retirement fund. While
doing so, Palmer also effectively raised salaries of his investment team from
low bottom quartile to median, which aided staff retention.
When Palmer was hired to the CIO seat, he left his deputy
CIO position at Tennessee Consolidated Retirement System (TCRS) where
he had spent nine years, and also gained experience as Director of Fixed
Income, led the construction of a Strategic Lending Portfolio, was on the
committees for Private Equity and Real Estate Committee and shared in the
responsibility for tactical asset allocation and new product development. He
began his career at the advisory firm ASB Capital Management, a Bethesda,
Maryland-based institutional advisory firm, and holds a Masters and Baccalaureate
degree in Economics from the University of Maryland. At the time he joined SRPS, the Maryland
fund had been run by three different CIOs and an interim CIO in the span of 10
years. During that time, governance and asset allocation underwent
substantial changes with investment decisions for managers moving from the board to the CIO. The plan had moved to a lower risk
posture, deemphasizing public stocks to reflect a more mature plan with a
substantial unfunded liability.
Over the nine years and seven months that he been serving as
CIO, Palmer has layered the plan in preparation for it to reach $100b and
fully funded by FY2039, with an annual payout of $3.5b per year. Part of his mission
was to bolster the team, boost its resilience, factor in climate risk, and reduce
costs of management fees by taking investments in-house, such as equities and co-investments. Thomas Kim and
Robert Burd were appointed deputy CIOs, handling both the internal management
and private side investors. Palmer has increased
marketing around hiring efforts, sussing out what daunted candidates from
applying by asking “what in this posting, gave you pause about applying, and do
we really need that?” He also created a career path for all positions, and placed
a member of the Diversity, Equity and Inclusion committee on each hiring
committee, giving the investment team leadership training, and building trust
in the system.
Often times, with a small staff and giant chunks of money,
not much investment strategy can be employed, but the larger team allowed the
plan to improve underwriting, diligence, decision processing, risk management
and governance, Palmer has said in the past.
“In growing the team by 30 people over the past four years, the
division’s budget expanded by $15
million to successfully create cumulative excess return execution value of $2.4 billion,” he told Markets Group during a past
interview. “It seems like a pretty good
investment.”
In 2012, concerned that the portfolio would be impacted by
how markets and prices could change around climate risk, the System signed onto
the UN PRI, and Palmer slowly built
governance around it to evaluate where investments could improve. They worked
with their active managers to explore potentially stranded assets in energy
production and determining which companies were the better actors when it came
to managing the climate impact of their activities., They added increasingly
sophisticated conversations on how managers were addressing climate risks and supply chain risk, other
governance risks. More recently, the plan has been improving the effectiveness
of its proxy voting and engagement
processes, looking into the portfolio for material risks and companies that
represent the largest contributors to those risks.
Said the CIO, “Capitalism is the most efficient way to make
things happen, and right now it’s privatizing profit and socializing the risk,
which is inefficient, and harmful to capitalists. Because the risk of climate
change is being borne by the people whose houses burned down, and the insurance
companies in the state of California and the taxpayers there Florida and across
the country. It’s inefficient. We should want to price these risks properly and
assign the costs to the activity.”
Palmer said we’re still caught up in the finger pointing
game, “But if we turn Climate Risk into a snakehead or a lion fish and put it
on the menu, people will want to hunt it out of existence. And so if we could
find a way to put this on the menu for people to target and make money from,
then we'll go a long way to solve. I believe the overall level of profitability
can go up.”
In the years leading up to 2021, in a desire in part, to protect its more than 3,000 miles of shoreline, the Maryland state legislature grew concerned about climate change and codified in 2022, with the aid of the Retirement System, plans to create a climate-focused advisory panel consisting of three or more experts in the analysis of climate change risk who are experienced in climate science or climate economics, and accessing data and research to further goals for long-term sustainability within the portfolio. It’s an effort to work with the retirement plan and keep it at the forefront.
Please Click Here for More Information
Despite being underweight U.S. stocks, relative returns on each asset class outperformed each year and almost all assets outperformed their benchmarks. In FY 2024, the System returned 6.93% for the year ending June 30, 2024, topping its actuarial rate of return by 13 basis points and beating its policy benchmark by 59 basis points.
“Our strategic mix of public and private market investments
has enabled the System to earn the target return over time, participating in
strong public market environments, such as fiscal year 2024, and providing a
level of protection during difficult times through the more stable private
market valuation practices. I am also pleased with our implementation of the
asset allocation policy, with more than 60% of plan assets exceeding their
respective benchmarks for the past year, and over 90% of System assets
outperforming benchmarks over the last five years,” said Palmer in a press
release in August.
Palmer has been recognized as an Elite 100 CIO and for his
Strategy by this publication and its parent company, Markets Group, and
throughout the industry for his innovation, emerging manager program and DEI.
Adding an additional deputy CIO is part of Palmer’s succession plan. Thomas Kim Robert Burd strengthen the leadership of a larger team. Kim currently handles the public market side and its internal management. Burd currently works more with the private side, with private equity and infrastructure and real estate real assets. They both work on the hedge fund portfolio, absolute return, because it's a mix of both. And they're splitting up the middle and back office including the operations team, accounting team, the risk compliance and governance.
Board member Brooke Lierman told Palmer during the trustee meeting, "I'm excited to see what you wind up doing next."
Palmer replied, "It will be a surprise to me too."
This story was last updated at 2:50 p.m. E.T. on Jan 22, 2025
