E217: How to Manage $15B: Insights from Sacramento County's Pension Fund
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this comprehensive interview, we dive deep with Brian Miller, Senior Investment Officer at Sacramento County Employees Retirement System (SCERS), which manages $15 billion in assets. Miller shares insights from his 16-year tenure at Tuckman Grossman Capital Management—a value investing firm that counted Stanford and Yale endowments as clients—before transitioning to his current role managing $6 billion in public equity and absolute return strategies. (00:00)
• Main Theme: The conversation explores the evolution from active manager to institutional allocator, covering value investing principles, manager selection processes, portfolio construction strategies, and the changing landscape of public markets over the past two decades.Speakers
Brian Miller
Senior Investment Officer at Sacramento County Employees Retirement System (SCERS), where he manages approximately $6 billion in public equity and absolute return strategies. Miller spent 16 years at Tuckman Grossman Capital Management, a distinguished value investing firm that managed over $12 billion for institutional clients including Yale, Stanford, and numerous state pension plans. (00:44) He has been with SCERS for eight years as part of a lean four-person investment team.
Key Takeaways
Consistency Trumps Market Timing
Miller emphasizes how Tuckman Grossman's success came from maintaining a disciplined, consistent investment approach over decades despite facing numerous market headwinds. (03:21) The firm stayed true to their value investing philosophy through shifts toward international markets, technology growth, and other challenging periods. This consistency allowed them to fill a specific niche for institutional clients and compound returns over time. The lesson: find your edge, stick to your process, and don't chase market fads.
Focus on Long-Term Compounding Over Short-Term Performance
The most successful investors allow their investments to compound over extended periods rather than getting swayed by short-term market movements. (03:55) Miller learned that finding great companies at attractive valuations and holding them long-term creates sustainable alpha. This requires weathering inevitable performance variations and maintaining conviction in your thesis when others are selling.
Quality LP Base Enables Better Decision Making
Having sophisticated, patient capital from institutions like Yale and Stanford allowed Tuckman to make better investment decisions. (06:06) These LPs could provide liquidity during market stress or add capital during drawdowns, creating a virtuous cycle. For professionals, this translates to choosing employers, clients, or partners who understand long-term value creation and won't pressure you into short-term thinking.
Process-Driven Manager Selection Over Performance Chasing
Miller has learned to streamline manager selection by focusing on a targeted list of five quality managers rather than starting with extensive universes. (23:06) The key is understanding a manager's decision-making process through individual stock analysis rather than just listening to their narrative. This approach prevents false positives while accepting that some good managers may be missed—a worthwhile tradeoff given resource constraints.
Root Investment Decisions in Fundamental Thesis
The most underappreciated aspect of investing is being deeply rooted in your original investment thesis. (28:46) When managers inevitably underperform after you hire them, having a clear written rationale prevents emotional decision-making. This applies broadly: whether buying Bitcoin at $100 or hiring a manager, if you're not rooted in your reasoning, you'll likely sell at the wrong time due to short-term noise.
Statistics & Facts
- Sacramento County Employees Retirement System manages $15 billion in total assets, with approximately $6 billion allocated to public equity and absolute return strategies. (00:00)
- Tuckman Grossman Capital Management grew to over $12 billion in assets under management at its peak, serving institutional clients including Yale, Stanford, and numerous state pension plans. (01:50)
- SCERS maintains a 50% passive, 50% active split in their U.S. equity portfolio, with 7% of their total portfolio allocated to absolute return strategies for diversification. (40:03)
