Vijoy Chattergy Keeps Hawaii’s Pension Plans Open to Options

Since becoming CIO of the Hawaii Employees’ Retirement System, the Hawaii native has bolstered allocations to nontraditional asset classes.


The Hawaiian Islands have always been at the top of many vacationers’ must-see lists and are a traditional destination for honeymooners. But when it comes to a career in finance, the 50th state to join the union is not usually considered a top location. It took the 2008–’09 global financial crisis to bring Vijoy Chattergy back to his home state and shortly thereafter into a new role as a public pension fund officer.

Chattergy, who had been working in Hong Kong at SPARX International, a hedge fund firm based in Tokyo, was thrust into transition when the fund of hedge funds where he was working folded. He headed to Hawaii to regroup, then in August 2009 enrolled in the Asia Pacific Leadership Program for midcareer professionals at the East-West Center in Honolulu, by which he did field study in China. In 2011 Chattergy met Rodney June, then the CIO of the State of Hawaii Employees’ Retirement System (ERS). “He was trying to manage $10 billion by himself,” explains Chattergy.

“At that point,” he says, “I knew I could stay in Hawaii.”

Chattergy was hired as an investment specialist in 2011, enough time for the new recruit to learn the ropes before June left the following year for the CIO position at the Los Angeles City Employees’ Retirement System. After a brief stint as interim CIO, Chattergy was given a permanent role in November 2012.

The Honolulu native — who graduated from Oahu’s prestigious Punahou School in 1986, seven years after President Barack Obama — was determined to change the formerly one-person pension office into an investment-and-analyst culture with common values, vision and objectives. “To do that, the Investment Division needs to approach their role the way any investment group approaches their portfolio of assets,” explains Chattergy, who today has five investment staffers overseeing $14 billion in defined benefit assets. A member of the charter group of Teach for America from 1990 to 1992, he taught English as a second language in Los Angeles during the South Central riots. Chattergy now oversees assets for plan participants that include his retiree parents and brother — all teachers.

Aside from developing an investment mind-set at HIERS, Chattergy has to reach for an 8 percent pension discount rate that is being lowered in steps to 7.5 percent over the next two to three years. “It’s a challenge,” says the CIO, who has an M.Sc. from the London School of Economics and an MBA from Cornell University. “You don’t have fixed income providing a reasonable coupon to help meet return requirements.”

Chattergy is also facing a severely underfunded pension: The retirement system’s assets cover just 61.4 percent of its future liabilities. The solution? “You’re forced to find opportunities that have a higher risk profile but generate higher returns,” he says.

With the board’s approval, Chattergy is gradually increasing the fund’s exposure to nontraditional asset classes — real estate, private equity and options-based strategies in private markets — from 9.5 percent to 18 percent. The board has always resisted hedge funds because of their fee structure and possible headline risk.

Chattergy is building a functional risk framework populated by options strategies, trend-following and factor-based strategies. “We won’t pay the traditional 2-and-20 fee structure, but we get exposure to underlying strategies and factors utilized by hedge fund managers,” he explains. Factor-based strategies attempt to identify drivers of return based on elements not explicitly described in the classic capital asset pricing model (CAPM). Examples of factors might include risk premiums derived from a security’s size and value, momentum and emerging markets.

“It’s more than just CAPM, where everything you need to know is in the price,” says Chattergy, who is also targeting a wide cluster of risks spanning everything from economic growth and principal protection to real return and crisis mitigation.

Long before he ever imagined returning home to manage retirement assets, Chattergy’s career began when, straight out of Compton with Teach for America, he moved to New York in 1993 to work at the Federal Reserve Bank’s markets group. The CIO is happy to be back in the Aloha State. “I’m helping my parents’ and my brother’s generations with their retirement,” he explains. “I can see how having that pension check means having dignity and independence,” he says about his parents. “They don’t live an extravagant life,” he adds, “but they aren’t wanting for anything.”

Follow Frances Denmark on Twitter at @francesdenmark.

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This article is the third of a three-part series of profiles of heads of state retirement system investment offices. See also “Sam Masoudi Gets Wyoming Pension Plans on Balanced Footing” and “Michael Walden-Newman Grows a Diversified Pension Crop.”