NEWS

CIO Jeb Burns on Elections, Opportunities, and What’s Been Working in this Economy


By Christine Giordano

Known as a strategic thinker, Jeb Burns is watching the current Trump vs. Harris U.S. election and studying its associated volatility. “What markets like is certainty,” said Burns, the first and only chief investment officer of the $16.5 billion fund for the Municipal Employees' Retirement System (MERS.)  That uncertainty, in turn, creates volatility and buying opportunities. But whether to grab the opportunities or wait until the “dust settles” is the question. Like many of his strategic investments, it looks as though Burns will be waiting for the right moment.  “You'll have a clear vision after the election,” he said. Divided governments, he says, produce higher returns in equity markets.

The one thing both candidates have in common, he said, is that “both parties seem to not have a lot of fiscal restraint right now. That seems pretty obvious. We know budget deficits will probably go higher. That hasn't had the negative impact that we expected, but it is concerning over the longer run. Eventually, you have to put your fiscal house in order.”



Timing it can be dubious. But let’s just say the dollar gets devalued due to higher debt. What strategy would Burns employ then?

“It's a bit of a two-edged sword. On the one hand, it can hurt the economy. If you think about a dollar that's worth less versus other currencies, that's positive for manufacturing. It's easier for us to sell abroad because it's less expensive for people outside the country,” he said. Located in the state known as the U.S. automobile manufacturing hub, Burns gets a sharp view of the details surrounding positive manufacturing climates. MERS performance was 11.92% in its 2023 annual investment report, with key drivers being the infrastructure strategy and diversifying strategies, as they returned 26.41% and 17.61%, respectively.

 

Agriculture and Diversifying Strategies

But the MERS portfolio also gets a single, sometimes double-digit boost from agricultural crops such as coffee, pistachios, almonds, indoor vegetable and flower propagation. If you buy them at the right time, during distress or greenfield development, you can benefit from “income that keeps up with inflation, but also you can get a little bit of appreciation on the property.” Burns, at the fund since 2002, is a bit of a country boy at heart, likes big farms (in fact, his cousin still owns his family’s 150 year old farm in Michigan) and the CIO considers them one of his favorite niche investments that are less correlated to the markets, and enjoys the associated preciseness of the self-driving tractors, and how each dose of water or fertilization is calculated to increase yields.

His other favorite niches that are less correlated to stock market investments are infrastructure investments such as toll roads, airports and, because people always need energy, utilities. Health royalties have provided some high returns for the fund as well, and move less with the markets and more with the drug’s approval cycles. The strategy there is a mix “understanding the approval process, the regulatory process, and frankly, the patent process, because there's a certain point where the patents roll off and then generics can come in. That's an area where you can also make money as well,” he said.

 

Emerging Markets

He’s had success with emerging market debt, gaining exposure through mainly a broad diversified selection of smaller, hungrier companies, and hires active managers who know the countries very well. (More on manager selection in the video interview associated embedded in this article.) This year, he made his first direct investment into a single country: Japan.

He reflected, “When a market's struggling, once they put reforms in, then it really takes off. We looked at Japan 10 years ago and I just couldn't get comfortable outside of the index exposure going active and direct. Now, we feel that there's some good years ahead of them. That's really what pushed us, we've seen the reforms put in place and then the green shoots of the markets.”

As member of many industry boards, Burns hears consensus among the other state CIOs: the one thing that chafes them most is finding good talent. Burns says he’s only poached twice, but has mined talent through an internship program, and one intern has stayed with the fund 16 years (check out the video interview for more on his approach.) He seeks talented people who are not only sharp and skilled, but also mission-driven.

“I've worked for two decades so that people can retire,” he said. “For some people, it's just the money. Listen, I'm a capitalist, I like to make money, but I like to do good as well. I think that the markets are hard and you're going to have bad days when you're in investment management, you are. When you know you're doing it for the greater good, that really keeps one resilient.”