Investing in Things That Don’t Exist

Bill Coaker is not afraid.

Illustration by II

Illustration by II

Bill Coaker, chief investment officer of the San Francisco Employees’ Retirement System, is laser-focused on the future of work.

“I believe that the human experience is fast evolving from the industrial age to now,” Coaker told Institutional Investor in a Monday interview. “I don’t think people have a cognitive thought — but more of a hazy idea — about the speed and scale of change.”

This view, along with others on artificial intelligence and innovation, shapes how Coaker and his team are investing SFERS’ $24.3 billion portfolio. The fund stands out among U.S. public pensions for many reasons, but perhaps the most important is that SFERS has 90 percent of its liabilities covered. And it has a futurist for a CIO.

Many of today’s “mundane” jobs will be replaced by more “interactive, creative, and innovative” work, he believes. Coaker sees “significant inefficiencies” in the transportation, education, and health care markets, which technology, specifically artificial intelligence, could solve. In turn, the jobs available in those sectors would change. “There are whole new sectors that are poised to become large that don’t yet exist, or if they do exist, they’re on more minimal scale,” Coaker said.

So how does one invest in something that doesn’t yet exist?

By being active, for a start. “Investors don’t make great money investing in asset classes,” said Coaker. “They make great money investing in businesses.”

In allocating technology and innovation, Coaker believes it’s important to consider how problems that exist today would be solved. Efforts by Elon Musk’s SpaceX to explore Mars, for example, are less important to his view of the future than more realistic, tangible advances. “There are some things that I think are incredibly pipe dreams and just a mammoth waste of resources,” Coaker said. “Our existing problems, existing significant inefficiencies are what we should be focusing on.”

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The pension plan is “significantly overweight” healthcare, technology, and consumer goods within its private equity portfolio. Representing 21 percent of the total fund, SFERS’ private equity allocation is larger than many peers’, and exceeds it own 18 percent policy target.

Coaker believes in concentrated bets, whether in an asset class, in an attractive security, or on the future.