Craig Husting:

One difference here, if you look at a lot of the public plans, we've been very consistent in terms of our people. So in the last 25 years, we've had two executive directors. I've been here, again, for 23 years. Our fourth most senior investing people have all been here greater than 15 years. So the continuity of staff has been incredible, which I think really increases the trust level between staff and the board. It allows us to continually push the envelope.

So I think that's a big difference. If you look across the country, there's certainly some plans like that. CalSTRS, for example, Chris Ailman's been there a long time. Bob Maynard in Idaho is there a long time. So there's some plans that are really good that I think a big part of it's having continuity of people for a long period of time.

Nancy Lashine:

Hello and thanks for tuning into Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Park Madison is a capital solutions and advisory firm serving the global institutional real estate business. Our job is to build relationships between real estate managers and their capital partners.

Capital is the lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What have been their biggest successes and lessons learned throughout their careers? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision-makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more.

Our guest on this episode is Craig Husting, chief investment officer for the Public School and Education Employee Retirement Systems of Missouri or PSRS. As CIO, he directs the management of the system's $45 billion investment portfolio on behalf of over 230,000 employees and beneficiaries. Craig took over as CIO in 1999 when the plan had a more traditional fixed income and public equity asset allocation and has been instrumental in diversifying the system's investment portfolio to include real estate, private equity, and other alternatives. Our conversation begins with Craig discussing his personal career path and how he became CIO of a large public pension.

Craig, it's such a pleasure to speak with you today and thank you for joining us. We're always thrilled to talk to someone in the chief investment officer role. I think you may have the best job on the planet. I don't know. Do you agree?

Craig Husting:

I agree with you, Nancy. I love my job. I love the industry where I'm in and we're in, and so it's a great place to be every day, every month, every year. It's just always new challenges each and every day.

Nancy Lashine:

And they're really interesting ones and you're doing so much good for so many people. So I envy you a little bit in your role. I think it's fabulous. I look forward to learning more about it and how you think about things.

Craig Husting:

I'm glad you brought it up also. It's kind of mission-based. We talked a lot about that with our staff and the people we hire that yo do have to have a bend towards the mission of what we're trying to accomplish, which is provide great retirement benefits to all the teachers in the state of Missouri.

Nancy Lashine:

Yeah, well, my mom was a teacher in New York City for her whole career and she lived until almost 97 and it served her very well, her retirement package. So I'm very appreciative for what you do for teachers and for what the people in New York City did for her as well.

You currently manage a portfolio of 45 billion in investments for the Public School and Education Employees Retirement System of Missouri. You've been CIO since 1999, which means you've gotten to oversee the growth of the plan and in particular the reallocation to the private alternatives portfolio, including real estate, private equity, and hedge funds. 1999 was also, as I recall, a pretty tumultuous time. So a lot to unpack about your tenure at Missouri. But before we do that, tell us a little bit about how you ended up there. Where'd you start and how'd you end up as CIO of this amazing organization?

Craig Husting:

I think it's quite a ride, Nancy, and I don't think it could happen again today. So I think I was fortunate based on timing as a lot of times you are in life. But actually out of grad school I joined Ernst & Young, a national consulting group, and so we did operational consulting for large corporations and large banks throughout the country. So based in Kansas City, but we traveled pretty much every week. And I did that for about three years. It was a great experience. I learned a lot, but I wanted to get off the road and there was an opportunity actually at Johnson County Kansas Government, which if you're familiar with Johnson County, really covers Overland Park and Olathe, some of the big cities in Kansas.

I was actually hired because I had experience in operational cash flows and they needed that. But an offshoot of that job was managing a $300 million portfolio, fixed income portfolio. At the time, I'd never managed money before, so I was thrown into that. Again, a lot of times I'd throw in people in a public fund probably earlier than they should, but just thrown in and help you succeed. And so I had the opportunity to manage that. I learned on the job and really fell in love with the investment portion of it and started working on the CFA and that led me to move to Jefferson City to manage the portfolio for the state treasurer's office in Missouri. That's about a $3.5 million fixed income portfolio. And from there I was introduced to the pension community and ultimately ended up at the teachers in 1999.

Nancy Lashine:

Yeah. You mentioned trying to get off the road, was that you because just wanted to spend more time at home or what was that about?

Craig Husting:

I'd had a son at the time, and again, I traveled so much, it was a great experience, but we were literally traveling 40 of the 52 weeks out of the year, so it was quite a bit on the road. It was great when you're out of college but eventually when you get married and have children, it changes a little bit.

Nancy Lashine:

Yep, it sure does. The traveling loses its glamour.

Craig Husting:

It does, it does.

Nancy Lashine:

And so when you started at PSRS, what role did you start in?

Craig Husting:

I actually started it as a CIO, which I don't think it could happen today. I think I was only 33 or 34 at the time, so pretty young.

Nancy Lashine:

That's really young. You could not have been the President of the United States.

Craig Husting:

And again, I don't think it happened. I was very fortunate in terms of the timing. The previous CIO had left. I knew some of the people at Teacher's Retirement System. I had a CFA, which they were looking for. I was local, which they wanted. The compensation wasn't great, so they couldn't attract a lot of people from outside Jeff City. But again, I took it because I really wanted the experience. It was great opportunity, and so I jumped into that and it's been a great ride.

Nancy Lashine:

Wow, that's such great advice for young people that if you can get an amazing job, don't worry so much about the comp right upfront because your job is to get great experience and build the right contacts.

Craig Husting:

Nancy, I think that's a great perspective and that's really the benefit of public plans. I think if young people go work for a public plan today, I think you get more experience sooner just because it's a different environment than the buy side, obviously, and you're thrown into the fire a little bit quicker, but great experience.

Nancy Lashine:

Right. So describe what was it like at PSRS when you joined in '99?

Craig Husting:

I think it was probably pretty similar to most public plans at the time, so maybe a little more conservative. So at the time we were 55% stocks, 45% bonds, so relatively conservative. We only had about 12 managers, about $19 billion in assets at the time. So pretty basic though.

Nancy Lashine:

It's unbelievable to think that you had two asset classes at that point in time, and today you have how many asset classes in the portfolio?

Craig Husting:

Depending on how you slice it, at least six or seven. So yeah, the change in diversity of our program is really when you look back at it's pretty incredible because. I know it's happened in a lot of public plans, but to be here from the start to implement those things, it's been a lot of fun. Very rewarding to see the results of it.

Nancy Lashine:

So tell us about how you started thinking about alternative investments. What was the impetus and what were some of the considerations as you moved into that space?

Craig Husting:

I think you mentioned Nancy, that 1999 was a difficult interesting time. So the tech bubble was just about to hit, so we had a lot in fixed income at the time. So that actually helped. We actually had pretty good returns relatively speaking in that timeframe, but it did immediately rise up as to we're so impacted by the public markets, we have to diversify the plan. So we really started talking about that in 2001, and we spent over a year working with the board trying to educate the board on alternative investments.

In fact, I think we have five board meetings a year. We spent every board meeting talking about private equity for a year to make sure the board really understood the fees, the J curve, how long it takes to get invested in the asset classes, all things they'd never dealt with in the past. And so we really wanted to bring them along to make sure they fully understood what they're getting into. So we talked about all alternatives and private equity was our first step in '03. We had real estate in '04 and then after that private credit and hedge funds shortly after, but it's a five-year plan to start getting to each of those alternative asset classes.

Nancy Lashine:

And was the thought process primarily lower correlation to the public markets and diversification of the portfolio? Was there a return driver? What was the impetus?

Craig Husting:

Yeah, I think your first comment was definitely the primary impetus that diversifier. So diversification was probably the biggest factor, but then with private equity, definitely returns. So we did private equity. It was more of a beta play obviously, and so to get higher returns for the system longer term, but the rest of it was again so dependent on stock, public stocks and bonds to diversify the portfolio and still get very good returns.

Nancy Lashine:

And how did you expect real estate to serve in the portfolio?

Craig Husting:

Actually, when we started talking about this podcast, I actually went back and looked at our original education presentation we did in 2003 for our board. And the four things we talked about were a diversifier, stable returns, income generating and low volatility. And I think looking back, it's really delivered on every one of those factors. It's been a great diversifier. It's been very good returns and low volatility relative to a lot of our portfolio.

Nancy Lashine:

Although when I think about 2003 to 2007 were fantastic years for real estate and then it all fell apart in '08 and '09 although you could argue that lots of things fell apart in '08 and '09. Did you change your strategy over time as the markets informed you?

Craig Husting:

We did. So I give our board a lot of credit because our real estate portfolio really suffered in the financial crisis. We had a lot of leverage. A lot of our managers, we had used quite a bit of leverage at that time, and so our performance was definitely underwater during that timeframe. And we had a little discussion at the board level, but for the most part, the board is very strong in sticking to it longer term. And so we fought out of that time period, changed a little bit of what we did in terms of really reducing leverage somewhat. I think we did have way too much leverage going into the financial crisis, but moderated that and really it's been a great structure going forward and the board has been really happy they've stuck with it.

Nancy Lashine:

Yeah. We'll talk about boards and governance in a little bit, but just staying with the structure of real estate, I'm curious, did you start as a lot of funds do traditionally with open-end funds and then go to closed end funds and eventually to separate accounts or how did you think about structure along the way?

Craig Husting:

Not separate accounts. We made the decision early on based on our size, we thought we could just get a better diversification and better way to get in at that time in the market with open accounts and funds. We did not do separate accounts. Pretty much like you stated, so we used open in structures to start with to get core exposure, but then over time we continue have added non-core real estate and closed end funds.

Nancy Lashine:

And have you used REITs as a proxy for real estate?

Craig Husting:

We used REITs early on, and that was one change we didn't make. So our overall real estate portfolio, originally we did have REITs, and that was one change after the GFC. We moved REITs to public equity. And so we made the decision we really want to keep our private real estate private. And so since then it's just been private real estate, which I think it's easier for the board to understand. It's easier for us to manage that way. And so I think that's been a good move for us.

Nancy Lashine:

Do you think about private real estate debt in the same bucket or is that different for you?

Craig Husting:

We initially, again, that's another change. So there's been a couple changes. Initially we did have private real estate debt within our private real estate allocation, and that obviously was impacted during the GFC. We also moved at that time after the GFC, we moved private real estate debt to private credit. So now anything we do on the debt side is done within private credit.

Nancy Lashine:

Yeah, I'm jumping a little bit, but are you doing much private credit or thinking about adding to that bucket today as so many investors are thinking that credit returns look more attractive today than equity?

Craig Husting:

Yeah, Nancy, that's really the biggest place of growth in our portfolio. We think there's huge opportunity there on the direct lending side. And so the one opportunity we've really focused in on over the last three years is to lend directly to private equity companies. We're using our private equity partners, they're coming to us now when they're buying private companies and when they put debt on those companies, we're able to partner with them to get a piece of the debt so we can invest directly in the debt at no fees and no carries, great returns very attractive to us in terms of the fee structure.

Nancy Lashine:

And what kind of return levels are you anticipating?

Craig Husting:

Most of the debt is floating rates, so it's libel or SFR plus five to 600. But in this environment today, it's a little over 10%, which is great returns.

Nancy Lashine:

Yeah, that's amazing.

Craig Husting:

It's very labor-intensive, so we've had to build staff. So our staff has increased quite a bit in the last couple of years, but it's been a great asset class to be in.

Nancy Lashine:

This is kind of out of the box, but if some of your real estate managers were having trouble getting debt, do you think they might pursue a similar strategy as your private equity managers?

Craig Husting:

Yes, now we haven't done it yet, but we're actually starting to talk about that and we think that's another great avenue for us to delve into.

Nancy Lashine:

Right. That leads me to think about property types. What was your mix of property types? We think of the core food groups being like office, retail, industrial, and later on multifamily. Has that evolved for you and have you adjusted your mix of property types over time?

Craig Husting:

We definitely have. So again, going back to '04 when we started in real estate, it was pretty much the main food groups, as you stated, it was pretty much plain vanilla. Over time, we've changed quite a bit specifically after the GFC we started changing. And then most recently, I'd say the last six or seven years we've changed even more. So six, seven years ago we really focused more on industrial. And so that's a move we made, which obviously has been a great move. And then we've tried to do more in demographic driven or niche property types in the last several years, properties that can be resilient to the market environment and they're not as highly correlated with GDP or economic growth. So think about residential, whether it's senior housing, student housing, manufactured housing, single family rentals. We've also done self storage, life science data centers. So really the whole gamut we've done really pushed more to those areas because we think they're a little more defensive and can withstand different environments.

Nancy Lashine:

Yeah. And when you do things like that, I'm thinking about life sciences or SFR, will you invest with just very experienced managers? Would you consider newer emerging managers? Do you look at that as compounding risk or maybe creating some opportunity?

Craig Husting:

I'd say a little bit of both. We're probably biased a little bit towards more experienced managers based on our size, but we have funded some relatively young managers that we've stepped out of the larger groups and they have a niche focus and we have funded those and for the most part they've been very successful.

Nancy Lashine:

So there's a lot of research that shows that first time funds are the best performing funds. What about global and investing in real estate outside the US borders? Have you thought about it? Do you do it? Has it worked out for you?

Craig Husting:

Our original target was 20%. So when we first started, again, we were pretty focused on the targets and I think we got to 20% pretty quickly. Today we're only at 7% of our total real estate allocation is outside the US. And so I think we've over time realized that it takes a lot to meet the hurdle. So if we can get similar returns in the United States, we prefer not to have to deal with some of the currency issues and geopolitical risks internationally. There are some cases obviously we want to be there, but it now has to meet a hurdle for us to be there. So I think we're a little bit less than we expected long term.

Nancy Lashine:

And is part of that just the currency risk and the hedging cost?

Craig Husting:

Both of those, especially if it's similar returns, we'd rather be in the US.

Nancy Lashine:

So with the benefit of over 20 years of hindsight, how has the whole portfolio benefited from being in real estate?

Craig Husting:

I think three big ones. And so the biggest one is the returns. The returns have been tremendous. So in a public plan, we have a discount rate we'd need to meet longer term to meet all of our goals, and that discount rate is 7.3%. And real estate's actually beaten that number since inception back in 2004. So from return standpoint, it's been great. The diversification benefits have been tremendous. So there's really, we wanted to act differently than the rest of our portfolio, and it certainly does. A great example is just this past year, so the fiscal year ended June 30 of '22 when equity markets were down, private equity even struggled a little bit, but our real estate performance was tremendous, as I'm sure most people's real estate was. It really carried the portfolio in our last fiscal year. And so that was great with the very long inflation.

And then last is I think really meaningful GP relationships. I think that's really important as a total fund to have great partners. And I think over 20 years we've developed some excellent partnerships that have helped us uncover different opportunities which have really helped the portfolio.

Nancy Lashine:

You talk about partners, and that makes me think about obviously this whole business is really about relationships and because you're certainly not investing in a transaction, how are investment decisions made at PSRS and who's involved? What's the process? How does the governance work? And then I'd love to talk about how it's evolved over time.

Craig Husting:

Yeah, so from the big picture standpoint, going back in real estate is similar to the other asset classes, but going back 20 years ago, if we wanted to hire a US equity large cap growth manager, we would do the research staff would and we'd bring three managers to the board. The board would interview three managers and the board would select a manager. So that's what traditionally worked 20 years.

Today it's fully changed through governance process and it's now delegated to staff essentially. So we work with a consultant, which is Townsend. We get ideas from them. Our staff generates ideas on the real estate side. Our staff does all the due diligence, talks more with Townsend, interviews managers and makes the decision if we're in or out. Once we're in and want to invest in a real estate partnership, our real estate staff takes it to an IC committee, which is myself and our executive director presents to us. And then that's pretty much it. So three people have to sign off on it myself, the executive director and the consultant. So as long as we have three signatures, we're good to go. We have a lot of transparency to the board. So every time we hire a real estate manager for example, we have a very detailed book that we send to the board. So there's again, full transparency. But again, the board is fully delegated the decision, which has been great to have that flexibility.

Nancy Lashine:

Do you do that with private equity in the other alternative asset classes too?

Craig Husting:

Yeah, every asset class is exactly the same now, Nancy, and that's really allowed us to be more flexible. For example, we couldn't do the direct lending or private equity co-investments without the ability to act quickly. So that's been key in our success.

Nancy Lashine:

How big is your team?

Craig Husting:

We now have 27 people. So again, 20 years ago we had three people, so it's grown quite a bit and mainly on the private side. So as we've done more in private credit, more in co-investments, direct lending, that side of the house has really grown. Operationally also, again, 20 years ago we had no one in investment operations. Today we've got six. So as we've become more complex, we've really back-filled those positions. And again, great governance structure because the board has been very supportive to help us grow that staff over time.

Nancy Lashine:

Is it hard to fill those investment roles in terms of finding qualified people?

Craig Husting:

It's definitely hard to fill those roles. And then in talking to other people in my role across the country, I think it's tough every place for a lot of people, not just public plans, but we've found success if someone has a tie to this area. And we've been able to track people that way. But most recently we actually opened up a new office. So as we've grown, we've tried to hire people. It's difficult. We are in Jefferson City, which is in the middle of Missouri, but it's a relatively small town. So literally in December, the board approved a new office for us in St. Louis, so we now have a satellite office in St. Louis. We've actually already hired four people for that office. And having that office has really helped getting people because it's just a bigger market. There's more investment professionals in St. Louis, and so it's really opened up a whole new avenue for us to get really good people.

Nancy Lashine:

Oh, that's great. How common is it for the staff to have the level of discretion that you have amongst the state pension plans?

Craig Husting:

It's more common. Again, 20 years ago, no one had it. 10 years ago, maybe 30% of the public plans had it. Today, I think it's most, like 70% or 80% of the plans now have it. So I think the bigger plans that are pretty well run, they all have pretty much full discretion now because you really have to to compete.

Nancy Lashine:

Are there other things that make the governance at PSRS particularly good?

Craig Husting:

I think so, one difference here, if you look at a lot of public, we've been very consistent in terms of our people. So in the last 25 years, we've had two executive directors. I've been here again for 23 years. Our fourth most senior investing people have all been here greater than 15 years. So the continuity of staff has been incredible, which I think really increases the trust level between staff and the board. It allows us to continually kind of push the envelope. So I think that's a big difference. If you look across the country, there's certainly some plans like that. CalSTRS for example, Chris Ailman's been there a long time. Bob Maynard and Idaho is there a long time. So there's some plans that are really good that I think a big part of is having continuity of people for a long period of time.

Nancy Lashine:

Yeah, those are great plans too. If you could give your peers advice on governance quietly, what would you suggest?

Craig Husting:

I think number one, it starts with your institution. Everybody's a little bit different. CalSTRS is obviously is much different than being in Missouri, and that's different from them being in Idaho where Bob was at. But I think it depends on your institution, number one, because everybody's different. But then I think you've got to be intentional on a couple key things. And that's really the playbook we've tried to use, which is educating the board, bringing the board along with you in terms of where you want to go from an investment standpoint because they are looking and they're looking for a roadmap from staff. I think it's important to set expectations. And then the thing I talked about earlier is transparency, I think is key. We're willing to show the board anything we do both good and bad to make sure they see that no, we're not trying to hide anything. We develops a level of trust. I think all that feeds on itself, so if you perform well, just increases the trust level and that allows you to continue to expand.

Nancy Lashine:

Yeah, that's great advice. ESG pretty hot topic these days. Does PSRS take ESG considerations into account when you make investments?

Craig Husting:

We believe we have one fiduciary duty, and that's to our members first and foremost. So we don't formally take ESG into consideration when making investments. It is obviously real estate is a big component of what a lot of real estate partisan do. It's certainly not first and foremost of what we consider. Our first and foremost, we're looking for the best opportunity, best return for our members.

Nancy Lashine:

And are you thinking at all about climate risk or are there areas that you prefer not to invest in because they're too close to sea level or any of those considerations?

Craig Husting:

Number one, we're focused on making the best investments for our members. So we've got investments and certainly are continuing to make investments in energy related strategies like oil and gas, but we're also investing in transition technologies like renewables. We know energy transition is imperative, but we're still trying to invest across a wide range of energy investments because we don't know exactly how the transition will evolve and play out over time. Again, pretty focused on the bottom line in terms of where we can get returns.

Nancy Lashine:

Right. Do you want to share your thoughts about the current anti ESG push among certain state plans?

Craig Husting:

I really think Nancy, there's an anti ESG push as well as a pro ESG push depending on what state you're in. So I think unfortunately, it's really in some ways threatening the long-term financial security of our plans. So public plans especially we benefit when we have a wide array of assets to consider. I think anytime there's restrictions, good or bad, it's negative for public plan investors. So I think it's unfortunate. I hope it's settles down both the pro and the negative in the future.

Nancy Lashine:

Take the politics out of investing, capital has no flag.

Craig Husting:

Right. Right.

Nancy Lashine:

So let's shift gear a little bit and talk about you. Do you have a personal investment philosophy and can you describe what it might be for us?

Craig Husting:

Yeah, I really think about it in two perspectives. One is the bigger picture, which we've talked a lot about, which is getting governance right, removing constraints. So a lot of plans, institutions have constraints. If you can remove the constraints, that's helpful. And then education in a long-term path. So I think that's the big picture.

The investment philosophy is two parts for us. We've really developed over time, and one obviously we're a public plan. Diversification is a big part of what we do and that's what we have done over the last 20 years. We also want to limit losses. So the best way for us to really continue to build wealth for our system is to limit big losses. And so we're very focused on the downside protection. And then develop great partners. We talked about that. I think it's very important to have great partners that can help you and come along with you longer term. And then the last one is take risks. A lot of people think you've got to stay away from risk, but really we're in the business of managing risk. We've got to take risks to make money. And so I think you've got to embrace it and be willing to take on risk to compound your wealth.

Nancy Lashine:

One of the things that's certainly changed in the 23 years that you've been CIO is just the speed at which things around us change and markets react to things. And I think we all saw it recently with SVB where it took two weeks for Washington Mutual to fail, and it took a few hours for SVB. In terms of things like, I'm thinking about your 7.3% actuarial hurdle rate and debt that couldn't meet that return a while ago and now probably can, how do you change your allocation policy and adjust? Is that staff discretion? Do you have to go back to the board? The very big decisions? How do you do that?

Craig Husting:

Actually, that's a great question, Nancy, and I think something that a lot of plans are now dealing with because capital markets have changed so much just in the last couple of months. Big decisions like that, we do take it back to the board, so that'd be an asset allocation decision. That's something we'd take to the board with a recommendation on where we think we should go.

Our plan right now is we're not really going to change a lot. So again, we're focused on the 7.3, but again, longer term, if we can get the 7.3 or above the 7.3, it actually helps our members. So unlike a lot of plans, the contribution rates for our system are shared equally between our members or the teachers and the employers of the school district. So if we fall below the 7.3 return, contribution rates have to go up for our members. If we can achieve a return better than 7.3, it does help our members in terms of lower contribution rates. So we've got a lot of privacy in the portfolio. We've got a path really set on what we're trying to accomplish longer term, so we won't change a lot of that. If we're fortunate enough to get returns better than 7.3, it's going to help our fund status and help our contribution rate levels.

Nancy Lashine:

Is that unusual that your members actually have a direct contribution to the plan?

Craig Husting:

It is unusual. There are some plans out there that are similar to us that are teacher plans, but most public state plans get most of their contribution from their state. And so it is unusual, which puts really more risk on the members, which another reason we are focused on the downside because if we wanted to lower volatility portfolios, if we have high volatility it could cause contribution rates to fluctuate more. We need to.

Nancy Lashine:

I'm thinking it also probably makes you a more visible figure because you have a very direct impact on people's take home paycheck.

Craig Husting:

Unfortunately, you're correct. So that's another thing we're concerned about because we know we impact teachers directly.

Nancy Lashine:

I'm thinking about the movie or the Netflix series, Friday Night Lights where everybody in the town had something to say to the football coach. If you go to the diner on Friday night, I bet the teachers know who you are.

Craig Husting:

It is a small town, I will say that.

Nancy Lashine:

Yeah, no, that's interesting. And I think you described that the state contributes 7%, the teachers contribute 7%, is that right?

Craig Husting:

It's actually much higher. So it's the teachers contribute 14.5% and the school district another 14.5%, so it's a total of 29%, which seems high, but teachers also in Missouri don't pay into social security. So if you offset that with social security, it's a little more reasonable.

Nancy Lashine:

Right. And does that mean that they don't get to collect social security?

Craig Husting:

That's correct. So really their primary or only retirement vehicle, for a lot of people, it's their only retirement vehicle is the defined benefit plan that we provide.

Nancy Lashine:

Do you have a defined contribution plan also?

Craig Husting:

In Missouri, there is no consolidated defined contribution plan for teachers. Every school district may have a little supplemental plan that teachers can invest in, but it's relatively small. So again, the DB plan is a really big piece of their retirement.

Nancy Lashine:

Wow. There's an interesting model there as social security gets in trouble for localizing retirement, which is pretty interesting.

Craig Husting:

Agreed.

Nancy Lashine:

Yeah. Wow. There's a second career there for you, Craig. No, it's actually really interesting. For other people who are listening who are also stewards of capital, what advice might you provide about how to develop an investment philosophy? Things to read, people to listen to, podcasts, or how would you advise people?

Craig Husting:

The reading now, there's so much to read out there, so I think there's a lot of ways to do that. I think there's some great podcasts. Yours, for example, Real Estate Capital is a great podcast, Nancy.

Nancy Lashine:

That wasn't meant to be a plug, but thank you.

Craig Husting:

There's a podcast called Capital Allocators with Ted Seides. I don't know if you've listened to that?

Nancy Lashine:

Yeah, that's great. Terrific.

Craig Husting:

It's really good. I listen to a lot of those. There's some really interesting people out there that are really good. And everybody in investments, I think you steal from somebody else. It's like coaching where coaches still plays from other people. I think every good investor takes something from somebody else, and so I've learned a lot. There's Scott Malpas who was at Notre Dame for a long time. I graduated from there, and so I got to know Scott a little bit, so I actually had a couple meetings with him. So I've taken a lot from Scott and things he's built at Notre Dame, which he's really built an incredible portfolio staff at Notre Dame.

Nancy Lashine:

He sure has. Yeah, I've known Scott well before he was running that, and they just had a board in Chicago, I think-

Craig Husting:

That's right.

Nancy Lashine:

That ran the Notre Dame portfolio. So yeah, he's done an amazing job there.

Craig Husting:

Amazing job. So I've learned a lot from him, taken a lot from him. There's a lot of public fund CEOs. I mentioned a couple, Chris Ailman, obviously, Bob Maynard, Matt Clark, who's in South Dakota. All really good people have done great jobs in their particular states. And so I think just being around other people like that, listening to other people, paying attention, all helps quite a bit.

Nancy Lashine:

Any recent books that you've read that you want to share, you recommend?

Craig Husting:

I do like to read, and I read both investment books, unfortunately, but also sports books. The most recent investment book I read was Bond King by Mary Child, so it's a book on PIMCO and what happened the last couple of years. So most of us in this space have invested with PIMCO a long time. So it's very interesting book what happened with the Bill Grove situation. So that's pretty interesting. And then one I just reread on the sports side, it's called Miracle at St. Anthony. It's actually about the Hurley brothers and their dad who coached high school basketball, and they're on the news recently because UCOnn's in the Final Four. But if anybody likes basketball or even coaching or even investments, I think there's a lot of great culture things you can take away. It's called Miracle at St. Anthony.

Nancy Lashine:

Miracle at St. Anthony. Okay. Well, interesting. So if you knew then what you know now, what would you have done differently?

Craig Husting:

Two things, and I mentioned this earlier, I think one would be just taking more risk in the investment portfolio. I think a lot of times you base everything on models and that sort of thing, but I think ultimately in your personal investments and even in institutional investing, I think a lot of times you probably under risk a portfolio. But I think we can all take a little more risk if we're long-term investors. That's number one. And number two, I remember doing this when I was in college, we had a speaker talked about writing down your top 100 goals, and I think I'd tell younger people to set higher goals. I think you can achieve a lot of great things in your life, and you don't need to be restricted by what you think that the ceiling is. I think it's much greater for everybody.

Nancy Lashine:

Oh, I love that advice every so often in my life when something's really come together that I thought, "Wow, I can't believe we pulled that off." And I think, "Well, yeah, why didn't you expect that?" Put the goalpost out there. So that's great advice. Well, thank you so much for joining us. If there's anything else you want to turn around and ask me, you can feel free, but we really appreciate your time. Got such great perspective, and oh my gosh, you've lived through, I don't know, I've lost count, is it three cycles? Three economic cycles?

Craig Husting:

Yeah, three bad economic cycles. Yeah, I would say that. Plus COVID.

Nancy Lashine:

Yeah, sometimes I think about what's happened in the last 20 or so years that we've really had a period of generally low rates and low inflation, and it's been fantastic for us at values. So in many ways it's been the Camelot years for investing. Hopefully they continue for a few more.

Craig Husting:

I agree. I could use a few more of it myself, Nancy.

Nancy Lashine:

Yeah, absolutely. Great. Well, thanks very much. We really appreciate your time, Craig.

Craig Husting:

Thanks, Nancy. I really enjoyed it.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media. So if you're enjoying this show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.