Exclusive Multimedia interview: CalSTRS CIO Chris Ailman on Debt, Climate, and Being an Effective CIO

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Christine Giordano: Hi, my name is Christine Giordano. I'm editor-in-chief at Markets Group. My next guest is Chris Ailman, who has been called one of the most influential chief investment officers in the world. As chief investment officer of the second largest fund in the United States, the $331 billion California State Teachers Retirement System, otherwise known as CalSTRS, Ailman has been a changemaker in the industry since he joined CalSTRS in year 2000.

He's called for changes in climate awareness. Diversity. He's built a staff from 35 people to 230 people with the ability to manage almost half of the fund's money in-house, saving $1.6 billion in fees since 2017.

In January, he announced that he will retire on June 30th, but stay active as an advisor after 37 years in the industry, (if I've done my math right.) During this interview, we'll discuss his career, his challenges that he's overcome, what he's looking at now, and how he was able to bring positive changes to the financial industry. Welcome, Chris.

Chris Ailman: Thank you. Glad to be here. Appreciate that kind introduction.

Giordano: Always fun to have you join. I was wondering if we could get started with how you first got interested in a career in finance.

Ailman: It's funny, Christine. Out here on the West Coast, you don't have a lot of examples of Wall Street. Back when I was growing up, there weren't any movies about it, thank goodness. It actually was from my mother. She inherited some money from her stepfather and had an investment portfolio for the very first time with some utility stocks in it. We went to Dean Witter, a local office, a West Coast broker-dealer back in the day. I was in college and exposed to just at least a little bit about Wall Street. I started watching Wall Street Week with Louis Rukeyser on PBS on Friday night and just became enamored.

I was studying accounting and understood financial statements thoroughly, and didn't really have a lot of interest in auditing them but using them. I was trying to get into the management side of accounting. That blends right into investment banking and asset management. It was an interesting start. Nobody in my family was involved in it. As I said, on the West Coast, there weren't a lot of institutional investors at the time. I wish I had met Howard Marks. Oaktree started about when I started. That would have been nice to catch up.

You think about it, we only had examples like Drexel Burnham and some of the other firms in Beverly Hills that got themselves in trouble and were having a bad rap. It was an interesting journey into the area. I started in the small institution high-retail side of the business, but quickly saw the institutional side. That's where I gravitated to longer term investments, more of a holistic focus than just stock trading. From there, as I've always said, went into government. Didn't expect to stay very long but sure enough I stuck around for a long time.

Giordano: Can you talk about your career arc and what brought you to CalSTRS?

Ailman: I give my wife credit. She found my first job. I was working with a firm called Kidder Peabody, another name that is not around anymore but people have been on the street a long time will remember, up here in Northern California. Wanted a more steady income. Kidder Peabody was going through some real challenges and ethics challenges at the time. Went to government, for a short period, I thought. It was the County of Sacramento.

I got the chance to run the investment portfolio for the retirement fund and asset management for the county and municipal bonds, and just do a lot of different things. From there went to the state of Washington. When we left California, I said I'd only come back for one or two jobs, CalPERS or CalSTRS. Sure enough in the year 2000, they both opened up. My sister was a career teacher in CalSTRS. I knew of the organization and I knew some of the people here from my days in Sacramento. I was eager to come back.

Giordano: Now it's in a strange position. CalPERS and CalSTRS are both looking for a CIO now that you've announced your retirement. That hasn't happened since...

Ailman: The year 2000.

Christine: Looking back in 2014, there was an Economist article that said the CalSTRS pension fund would not last through the 2020s. And it lost another $55 billion during the great financial crisis. So much has changed. The plan is now considered healthy. Can you talk about what was done to transform it.

Ailman: It's interesting. I didn't see that article. I guess I'm glad I didn't.  It would have made sense, because teacher plans around the USA are notoriously underfunded. It just has to do a lot with the government or the school districts not paying the actual required rate. If you go back, it's not the investments as much as it is an uneven contribution pattern. I always say to people, just think about your own IRA if you contribute unevenly. Some years, of course you do zero and then some years you do the max.

You're never going to reach your goal. You have potholes all the way through that. That's the way it was for CalSTRS. It was very underfunded in the '70s and '80s. It got to fully funded in the year 1999, but think about how strong the stock market was in the '80s and the '90s. They had to increase benefits because they had pensioners that were really retiring into poverty. They were spending their gains. When you have that, then you have the 0102 internet bubble burst, and obviously Staten 911, and the plan fell back down. You look at the history of teachers plans, and then typically CalSTRS, it started about 40% to 50% funded back in the 1950s. It would have surprised the economists that it got fully funded at one point, but then once you went back to an average return in the mid 2000s, sure enough we were only about 50% funded or 60% funded again. To answer your questions succinctly, the legislature and Jerry Brown got together, and our board pushed very, very hard to develop a funding plan. They adopted a 30-year horizon to contribute into the plan, both the state, the school districts especially, and the employees. That plan is our full funding plan that is on a glide path to have us be fully funded by 2046.

Thanks, sadly, oddly, to the pandemic, you would think that's a bad thing, but because the Fed dropped rates so much, we had a really good return, so we've gotten a bit ahead of schedule, which is great. I think last year and this year, we're probably going to be slowing down. We're back out on schedule. The key is the pace over that 30-year period of earning around 7% consistently, if we can, averaging that pace. We're on a glide path to be fully funded. I think that's critical. It's important to my staff who want a career. It's important for us from an investment horizon standpoint. I wouldn't say the Economist was wrong, but I would say, thankfully, this is a time where politicians came together and did the right thing.

Giordano: In looking forward to that path of becoming fully funded, what are some of the things that concern you, that you and your staff are watching very closely?

Ailman: We've talked a lot with the board about risk and volatility, because the actuaries draw a nice smooth line all the way up to 2046 or 2044, but life is not a smooth line. A lot of variability along the way. What you realize when you run those is, think about a race, if you stumble at the beginning of a race, yes, you have time to make up for it, but you're already behind. Compounding is even harder. The flip side, if you stumble at the end of the race, it's hard to make up ground. Any kind of a tough period, any kind of a prolonged multi-year flat market, so stagflation is a huge risk to us, seeing flat.

Everybody predicted an environment of lower capital market returns would be tough on the plan. We anticipate that you're going to have a recession. Normally you would have a recession, in my career, you would expect it every four years. We really only had two big recessions. They were huge when we had them, but if you have those, you can recover from them, and we anticipate that. It's the slow, low return or weak-return environment that would be the hardest on the funding plan.

That's what we talk a lot about, is how to take enough risk to earn that seven, but not too much risk that you introduce a lot of volatility. I always point out to people, an arithmetic average of seven is what the goal is, but we live life geometrically, year by year. The old adage is a 6-foot person can drown in an average 3-foot river because it's not equal all the way across. It's the math of geometric versus the average, and we focus a lot about that.

Giordano: You seem to be everywhere at once. I know you're very involved in Milken, you've been at just about every global conference I can think of. You're the chair of the 300 Club, The Robert Toigo Foundation, the SASB, Investor Advisory Group. From your viewpoint, what are you seeing taking shape as far as investment opportunities on a global scale? What in your opinion are some of the more promising investments of the future?

Ailman: Thank you for that. Just so people know, that's over 24 years. I do stay at home regularly. Part of my goal of my job is to network with peers. From all those conferences, I have learned great ideas. I've had very few brilliant ideas that I created. Almost all my good ideas come from somebody else, and I've complimented them, but then used them. That's, I think, the best thing you can say to people, is by honoring them, by using some of their brilliant ideas, and we've done that. When I look forward, there're some huge challenges ahead of us.

I've said it before and I'll say it over and over again, that I think the energy transition, we have to change our energy source, literally in the next seven years. That's very short. Otherwise, mother nature right now is slapping us in the face every year. Every winter, every summer, we get slapped in the face and then the weather then becomes normal and we seem to forget it. I've told people, I think in about two years, mother nature's going to start punching us in the face and then we're going to really pay attention. Just like I said on the funding, we're stumbling out of the block.

The world is not changing its behavior enough. I think that's going to be a risk, but then also an enormous investment opportunity because shifting away from hydrocarbon as a power source, as an energy source, is going to require a lot of capital, but it has to happen. I think the future's fraught with risk, but then also opportunity. Geopolitical risk is clearly back as a huge issue. Geopolitical risk isn't like most risks where it deviates around a mean and it reverts to a mean over time. Geopolitical risk is binary. It's either 100% on or it's off.

That's even tougher to navigate. Then I think the fact that interest rates are finally off zero, and inflation is, as we saw, even in this environment, inflation's going to be sticky due to climate change, due to weather extremes, due to geopolitical risk, and that's tougher to navigate. Inflation has not been a problem in literally 20 years. I've had the wind at my back with low inflation and declining interest rates. I got lucky. It had nothing to do with me. Just the right environment. I look forward. I think you're going to have higher inflation, stickier challenges, and that's going to be a tougher investment environment, more volatility.

Giordano: What about the US debt and how all of that figures into the higher interest rate environment? What are your thoughts there?

Ailman: I've been very vocal, Christine, that the US is a debtor nation. At some point we're going to figure that out. Right now, everybody, Congress, just loves running bigger and bigger deficits. You're going to start to see it in the next 18 months to 2 years. The interest, now that interest rates are off zero, the interest on the federal deficit is going to be as much as 3%, bigger than what we spend on defense. It's going to chew up the budget. The future, whoever gets elected in this cycle, is going to find that the budget is basically unmanageable, and that's going to be a different scenario.

Yes, there's an insatiable demand for our short-term paper, T-bills and T-notes, but I'm really going to be curious to look at the longer T-bond auction and how the tails go in the auctions, not this year, but next year and the years to come, because we're only AA rated. One still could say AAA, but I think we're going to lose that. Congress hasn't even passed last year's budget and they're already being faced with this year's budget. It's not good fiscal management. Yes, the USA is still-- the dollar reigns supreme, and we're the dominant country, but we got to go recognize we're borrowing on our future.

Giordano: 'We're borrowing on our future.' What are some things that, if you were advising other chief investment officers on this equation, what is some of the advice that you'd give them regarding borrowing on our future and what the landscape is up ahead?

Ailman: With anything, it's interesting. It's a risk, but then it also provides an opportunity because as the US crowds the bond market and the issuing market, it's probably going to mean higher rates and wider spreads than some of the corporates and some of the other names, which makes it an investment opportunity. People are going to have to decide between fixed rate. Now there's a much larger variable rate market with private credit. I think you're going to see, actually, allocations to fixed income go back up, and after it's been shrinking for literally 30 years, this rate came down.

Now you're going to have more opportunity in fixed income in high yield, in private lending and direct lending. It helps us diversify the asset allocation, so you don't have to take as much equity risk. It will create more balanced portfolios. From a US perspective, it's not healthy. From an economic perspective and a global governance perspective, I would advise CIOs, as I've told my board, start watching the tail in auctions. I don't think they're always going to have to be a problem. Sometimes they'll go fine, but you're going to start seeing longer tails in auctions, and that tells you that buyers are stepping away from our issuance.

The treasury issues, by virtue of their structure, most of that money on the short end of the curve, which means when interest rates jump, like they did in this cycle to beat inflation, then the cost of the federal deficit goes significantly higher. That's going to then impact the budget and the borrowing, and the way the country runs itself. Right now, people have felt that we can run any deficit we want.

People will always buy our paper. Like I said, I think you have to watch that trend to see if people start stepping away. They're not going to leave us all at once, but I think it's chipping away already, eroding the dollar strength and the US strength in the world. It doesn't mean there's a lot of easy alternatives, because you're not going to run to Japan or the UK, or Europe. It's going to be interesting to navigate this future, but I'm always looking at long-term trends, not news in the next year or even nine months. I want to look at things that are 5, 10 to 15 years out.

Giordano: In so doing, over the challenges of your 20-plus years at CalSTRS, what are some of the challenges that you've already overcome, and how have you done that? How have you transitioned in order to meet different things of the times?

Ailman: Christine, I get asked a lot about the role of the CIO, and I describe it as the CIO sandwich. There probably are other jobs like that. I've only had this one, so I don't know about other positions. It's unique to me in that above you isn't just a boss. Usually above you is a CEO and a board, and that board could be 5, could be 12 people. Then outside of that, you've got stakeholders, you've got members, you've got the press, all this external above you. You also probably have auditors and compliance, and ethics, and all kinds of things above you, maybe a legislature or a city council, or a county council looking at you.

Then below you, you've got obviously your staff and your asset managers. It's a very complex job, both above you and below you. You've got to be able to manage up and down. What I say to them is the key to a role of a CIO is, and this advice came from the late Joe Dear, bless his soul, he was a very, very wise guy and a good friend, is to decide whether you're basically a heat reflector or a heat deflector. The idea being that when your board or the legislature, or the outside world puts heat on you have to decide, do I want to deflect it and protect the staff from this, or actually do I need to turn around and reflect it and make the staff more aware, and make it shine on them?

That judgment is really hard but absolutely critical to being a success in this role. There are a lot of times in my 20 years where I was the deflector and tried to protect the staff, just let them do their job. I'll deal with the external pressures or politics or the outside influence group and let the staff execute. Then there are other times where the board has-- they're a trust fund, they are trustees, we're just the asset manager, where they have a particular view and a point of view, then I'm going to reflect that to the staff so that they're more attentive to it.

That's it. It sounds maybe simple but it actually is a heck of a challenge to know when to reflect and deflect and then know how to do it. I've had very serious discussions with some of my staff where I had to make it very clear. They said this was their portfolio and I had to correct them and say, no, it's not your portfolio. It's a trust fund. The board are the trustees and you're managing their money so you take instructions from them. I've had staff say, the teachers of California don't want that. I point out, I don't really know what the teachers of California want.

I can't survey all 1 million of them. They can't either. They elect a board of 12, that's our governance. They're the ones that speak to the teachers. If the board says it, then we're going to do it. It's interesting in that environment. I think going forward, that's my biggest advice. The one common thing in both up and down is communication. The ability to communicate up and the ability to communicate down, and then knowing what to do. That takes practice, it takes time. You're going to make mistakes, I certainly did. You learn through your career. Some people enjoy that world of being caught in the middle of the sandwich. Other people, it drives them crazy. I think that's partly why we see so much turnover in chief investment officers. The average tenure is somewhere between four to six years. I think it's just because it's a real hard job being in the middle of that.

Giordano: You grew your investment stuff from 35 people when you joined up to 230 people today. 70% of your staff are women. That's an enormous change. Can you give advice to other CIOs on how you changed your management style, or, as you said, your communication style to effectively lead that larger team?

Ailman: I gasp at that number when you say it, but it's accurate. Let's keep in mind, that's over 24 years. That's a really long time period. The common denominator to me in investment management is assets under management. You find when you look at sovereign wealth funds, pension plan, asset managers, you're going to see a very tight correlation to their personnel count and their assets under management. As AUM grow, and we grew from $100 billion to $330 billion, but as the AUM grow, you're going to see the staff underneath.

The other big driver is the complexity of the fund and then complexity investment management structure. Right next to me is state of Nevada, Steve Edmondson runs that with a staff of two because they have a very clean, very simplistic asset allocation. Obviously at our size, then what you find, as plans get bigger, they tend to get more complex, some getting incredibly complex. I call it the broccoli, think of that as branches and then just explode. We're trying to stay pretty focused, but even then, you got to have staff devoted to all those little parts of the portfolio.

I actually have a 10-year business plan that I've been using for the 20 years. You can actually chart the growth of AUM to the growth staff. Measuring complexity is a little bit tougher. I use the number of accounts that we have open, but you can see a very tight correlation between those two. I look at our peers, and frankly, I try and stay a little bit under where they are, so run our shop a little bit lean, be a little bit tight, and then have a long-term plan. As crazy as that may sound, it was bought out. I remember in the year 2000, they talked about permanent building, and they wanted to know how many people I might have in 2080.

Obviously I didn't anticipate a recession, but I could look at my plan and tell them. Think of it as a roadmap. It doesn't mean you exactly follow it, you make corrections along the way if the roads close. It's guided our path and really helped us on our budget, on our financial plan, because ultimately, the bottom line is you want to look at your cost, your basis point and cost to that trust fund, and you've got to have that in the right ratio. To answer your question about leadership, hey, things change. A staff after 30 years, is you can gather all-round the table.

I remember we used to. We had a buffet lunch for a staff meeting. Then when we got to about 80, it was a little more crowded, and then I used to joke but I would be out buying a lot of food at Costco. That's when we started the nacho bars, the thing we were famous for.  Boy, then when we crossed 100, I've always said to people, that's a whole new ballgame. You can't fit in one room, and it's hard to reach everybody. Now north of 200, we don't fit in a room. Everybody's on different times. We don't even fit on a Zoom screen at all.

It's a very different nuance. As you get bigger, the only way I think you can maintain the culture is actually to get smaller. I know that sounds like an anomaly, but when you get big, you've got to create more small groups. You've got to find more ways to smash the staff together in small environments where they can interact. Now here on the West Coast, it's a heck of a challenge because the trade systems and the trade desks work New York hours. They work a time zone that's three hours ahead. They're in the office at 5:00 AM, and they're done by 3:00. The rest of the staff works West Coast staff hours.

It literally is people coming and going, and at times they wouldn't even see each other. They're on different floors. In this environment, I think it's even harder to manage it. I didn't understand Zoom. I didn't know how to work in a remote world. Nobody did. I would ask staff, anybody have any experience, tell me what to do. We just thrown out ideas, and again, picked off ideas from other people and tried them and see what works, and made adjustments constantly along the way. The one constant is communication. To me, the difference for CalSTRS is culture.

The culture was there in the 30 people when I started. I just have really tried to cement it in and compound it, and make it tangible. Because I think culture does drive alpha. You can have different cultures in investment management. You can have the staff system, you can have the team system. When that culture changes, that's when the alpha tends to disappear. To me, I'm really intentional about culture, what we do, how we do it. Everybody has different personalities. The asset classes have different personalities, but we really try to break down the silos and keep people interacting together and working and having fun together.

That's playing into the investment strengths. Investment people are highly competitive. Left alone, they'll compete with each other, but if you can point them in an outside entity and compete with it, then they will, and they'll work together as a cohesive team. That's what's been awesome. I think I'm most proud of our culture and the team at CalSTRS. I don't get a chance to invest much. I make a few decisions, maybe a month on investments. What I do is lead, and I lead a really strong team, as you said, a really diverse team that is amazing. They constantly blow me away with what they do and what they think, and how they act.

Giordano: You've won Best Places to Work in the past

Ailman: I am very proud of that. I think we're now at eight years in a row at nine awards overall, and one of the few government entities listed as one of the best places to work in investment management. That's hug because other people can buy lunches and have party. I don't have a budget for any of that stuff. It really is about the team and how we work together.

Giordano: It comes from the top. To that point, you pounded the table for diversity in this industry for years. I think when I first met you, I first heard the terms stale, pale, and male. I was wondering, can you go into detail on why you felt that was important early on and what you've seen develop? Because I've seen some pretty significant changes.

Ailman: I would agree. I am amazed at the changes. I still feel like it's not fast enough. I think my experience comes from the West Coast, growing up in a mixed family. My brother-in-law, Aggie Garcia. I grew up in Southern California. It was diverse right out the get-go. I saw the value of that. Then when I look at something like Lehman Brothers, especially when you go to New York and you see the Ivy League focus and all of that, you realize, hey, it's a diverse world. You need people and you need cognitive diversity. You need people who think differently, come from different background.

It was said at a conference, we did a Beyond Talk. That's where you and I met, at Beyond Talk, one of our gender diversity workshop. We just held our 13th this week. I'm so proud of that group. What people talked about is hiring somebody who doesn't necessarily look like you and doesn't think like you. While that's tough, it's nice to have everybody around the room agree with you and make you feel good. You actually make better decisions when somebody sees it differently, and you listen to them and they listen to you. Investments is all about making really hard decisions.

Ultimately, it's about decisions about the future. Yogi Berra said it best that predictions are hard, especially ones about the future. I've learned anything, it's that sure enough, you can't predict the future. You're always surprised. Getting the most people around and really hashing it out leads to better decisions. Better decisions are going to lead to better risk-adjusted returns, which is what we're all about. Breaking up that room, getting people to think and act differently. I learned very early in my career. I had some mortgage-backed traders.

Just seeing the way people thought differently and analyzed risks, people that thought analytically, I always say they thought like an Excel spreadsheet. Everything was relative to this cell and up and down, A, B, C, or one, two, three. Then other people who thought more like an access database, where everything was circular, they could grab data from anywhere and bring it together. I realized I needed both in the room. You can't tell that as to how people look. Yes, I'm the one that used that phrase. Again, I stole it from somebody else, but I thought, yes, I'm it.

I'm pale, male, and stale. When you look at pictures of Lehman Brothers, oh my gosh, is that pale, male, and stale. Maybe it was somebody else in that room that would have challenged them when they were going to 40 to 1 leverage to say, wow, for 200 years, we've been at 8 to 1 leverage, are we sure this is the right thing to do? Nobody did. Their attitude was, Lehman or Smith Barney went there, or Goldman Sachs went there, so we should follow. They blew up a famous institution. We've seen that so often. Especially in this world, as I described, it's going to be more challenging, more difficult.

Artificial intelligence, we don't even understand the power and how that's going to change things. It will help us make better decisions, but you know what? I don't think AI's going to be any better at predicting the future than we are. It will give us maybe a little more accuracy, but come on, you can't predict the future. You still can't anticipate it well. I think that that's what the key to investment management is, and I'll just constantly go back to, when it comes to diversity, it's cognitive diversity of people who think and act differently, which is, frankly, more than skin deep.

It's really hard to understand and look at. I always point out, the best money manager in the world does not live in Manhattan. They live in Omaha, Nebraska. Sadly, now they're, what, 98 years old? Name number two, maybe Charlie Munger, he passed away. Maybe Sir John Templeton, but it's not like you can name off 20 people and say, oh, they're the best. I really think that it's important to have people and tap into talent. Investment talent comes in a lot of different shapes and sizes. I can't emphasize that enough.

Giordano:  You've been able to walk that fine line as a capitalist. I've seen students gather at your investment committee meetings and clamor at you and beg you to divest from big oil and fossil fuels. You're a person who's cognizant of the dangers of big coal. You've hired ESG equity managers. You've also been instrumental on supporting Engine No. 1, that hedge fund that helped the board at Exxon to have more sensitivity to climate disruptions. You're on a net zero path. Recently, you've been outspoken in the past on how you've been feeling that banning ESG investments could actually hurt the future of the energy transition to something better for the climate. Can you go into some detail on that?

Ailman: Taking money and uninvesting in an area or restricting an area: you basically are turning your back to it. Social change comes from engagement, not from ignoring something. That's why we try to be so vocal, is that getting these companies to shift how they operate, to change how they think, is more important. Because otherwise, there's a lot of fossil fuels still around in the earth. People are going to dig them up, and people are going to keep trying to use them.

Trying to get people to use them responsibly is better than people that are irresponsible. If we all left all the public companies, you're going to really leave-- 70% of the world's oil belongs to the sovereign nations, who really don't care about everybody else. They only care about themselves. It's about trying to find a collaborative and a cooperative solution, and we think that's through engagement. Yes, our fund has made decisions to not invest in certain areas, to restrict certain areas. Every single one of those was an investment decision, not a social decision.

Sure enough, none of them has brought about a single bit of social change. we've been out of some industries for 22, 23 years. You haven't seen that industry even acknowledge that we're not invested. It hasn't even changed. The industry's thrived. I think that we've tried to have that dialogue, tried to educate people that it is really social engagement and talking to people. If you want to change somebody's mind, ignoring them doesn't make it better. You've got to actually talk to them and interact with them, and that's the tough thing.

It's been hard. I think there's no question that that's really difficult. I agree that many of these social problems are huge. I care passionately about them, but I don't think you can solve them through an investment vehicle. I think you need to solve them another way. Capital markets could play a role, but it's really going to be regulation, government, and society that plays the role. it's sad, but I'll point out, the students do drive over in their cars to come and tell us not to invest in fossil fuels. We've tried to say, it's not just you, it's not just us, it's everybody.

Starving these companies of capital sounds really easy. There's too much capital in the whole world now. You look at sovereign wealth funds that are eight times our size, we're very small. We're not even the largest owner of US companies. Norway's pension sovereign wealth fund, the Japanese GPIF, holds more US stock than we do. We and CalPERS combined. Let's recognize the realities of the market, and let's try and bring about change. I'm all for that. Let's do it by dialogue and educating people, not trying to ignore them.

Giordano: Some say that geothermal solutions, just transition solutions, should perhaps become an asset class unto their own. Do you have thoughts on that?

Ailman: There are so many sub-industries. I think the important industry is just energy. When you look at the world, electricity is first and foremost the biggest demand. Then you have mobility, and in that I'll include aircraft, automobiles, trucks, trains, even ships. That's got to change. Next is agriculture, which is huge and very regional, and very local. Then hard-to-obey industries. To me, I break it up that way rather than subset within the industry market. If you're just an industry or an energy investor, you probably can. What's clear to me from studying this is the world is going to need more and more energy into the future.

As India and China, and sub-Saharan Africa start to industrialize, there's going to be higher and higher demand to the point that we need energy of all types, but we really got to change the bulk of it away from carbon emissions into something that doesn't pollute the atmosphere, because we're going to cook this planet. Like I said, mother nature right now is just sort of slapping us in the face. I think within literally two years, she's going to start punching us in the face.

Christine, it's sad, but America, we didn't put enough life or grass on cruise ships until you had the Titanic. I hope we don't have to wait for something like that for us to finally wake up. Europe has woken up. Asia, Australia, they've woken up. It's sad, but the mid part of the United States, I'll use the phrase, I'll say it, needs to wake up. Needs to look up and recognize something's different. We got to change.

Giordano: Thank you. Years ago, just to change things up a little bit, and last question of course, you came up with the idea of the CIO hall of fame, and you named some of the great people who have helped shape the role and the industry. At Markets Group, we're having a national retreat in July, and you will finally accept the hall of fame for yourself, having been nominated, actually, by more CIOs than I've ever seen, more than any other inductee. What would you like for people to remember as your legacy?

Ailman: Number one, I have a hard time picturing myself in that group. I really do. I recognize I've been in this business a heck of a long time, and it's that longevity that stands out so much to people. I remember being a young investment officer and seeing Roland Mackle and different people at different funds that I just held in awe. Jack Myers and obviously David Swanson at Yale, we were all in awe. He wrote the book. I really felt that these people were really stars and deserve that longer-term recognition.

I've always valued the past and the people who came before us. That's who we're stepping on the steps they built. I think that's what motivated me to start that, was to recognize those people and the legacy they left us. I'm very honored to even be considered within that group. I really am, because like I said, I was always in awe of those people. The legacy I want to leave is one of consistency, commitment, sticking through the long-term.

I've seen lots of very bright CIOs come in, and they're almost like a flare. They burn really, really bright, but then they burn out within a couple of years. I valued people who do it for a career and really stick through it. That's what the hall of fame is all about. I'm honored to be part of that group. There's some amazing people that have done phenomenal work for decades, and they deserve that recognition, first and foremost.

Giordano: Thank you, and thanks for being one of them.