Kristin Varela becomes first woman chief investment officer for State Investment Council

The State Investment Council on Tuesday named Kristin Varela as its chief investment officer, making the Pecos High School graduate among the highest paid public employees in New Mexico and the first woman to occupy the position.

Varela appeared at the council’s meeting via video from Hawaii, where she serves as the chief investment officer of the Employees Retirement System of the State of Hawaii. She starts her new role in New Mexico June 8.

“I am a local New Mexican, through and through,” Varela told the council.

Before moving to Hawaii, Varela worked at the Public Employees Retirement Association of New Mexico as well as First National Bank of Santa Fe. She earned her Bachelor of Business Administration in finance from New Mexico Highlands University. “I come from a family of multigenerational northern New Mexican ranchers in Pecos,” she said.

With an annual salary of $455,000, Varela is now responsible for shepherding New Mexico’s $71 billion sovereign wealth fund through an era of geopolitical uncertainty.

New Mexico established its sovereign wealth fund in 1958 to manage excess revenues from oil and gas production. Jon Clark, the state investment officer, in an interview said the fund is projected to send the state $42 billion over the next ten years, money that funds state services such as K-12 education, higher education and early childhood programs.

“But that all is reliant on us hitting our investment targets,” Clark said. “So I needed to make sure I had a CIO who would be capable of having us hit those targets but also capable of working with me to help grow the organization.”

The SIC currently has 34 staffers, Clark said. The agency is looking to nearly double that number over the next several years as it manages more inflows. The SIC has also issued salary increases for staff. “We are going to be the largest sovereign wealth fund in the country that is already starting to draw international attention,” Clark said.

‘Whipsaw’ markets

SIC directors briefed the council on global economic uncertainty during Tuesday’s meeting at the governor’s cabinet room in the Roundhouse. They said business fundamentals remain strong. But the U.S.-Israel war against Iran could bring lasting harm to the global economy if the region’s energy infrastructure remains under siege for an extended period of time.

Varela told the Journal she is prepared for the geopolitical turmoil.

“In the last three years I’ve now seen more geopolitical conflicts, more government shutdowns,” she said. “We’re all very aware that traditional values-based investing is not going to be as easy given the whipsaw markets that we’re in.”

Greg Dunn, the SIC’s director of public equity, told the council that the way warfare has evolved — with the use of cheap drones — Iran “could potentially be very disruptive in the Persian Gulf for a long time.”

If that happens, Dunn said, a price of $150 per barrel of oil “is probably to be expected so hopefully cooler heads prevail” in resolving the war. But, at the moment, public equity markets as well as oil and gas operators are “pricing in a short conflict,” Dunn said.

New Mexico’s sovereign wealth fund would gain mightily from prices of $150 per barrel. But high energy prices could elevate inflationary pressures. President Donald Trump, in his presidential campaign, argued that he would bring down inflation by bringing down energy prices.

Dunn said that while Trump’s One Big Beautiful Bill Act, passed July 4, will deliver higher tax refunds to most households, an oil price of $83 per barrel or above would wipe out those gains.

Asked about what happens if the oilfields dry up in the future, Varela said, “The goal over the next decade for me and the team will be to continue to diversify our risks (and) to not stake our return streams fully reliant on one source of risk, whether that be conventional energy or equity exposure.”

She said she will set out to “balance that portfolio to be able to weather whatever ups and downs happen in the commodities market, which we're experiencing right now.”

Justin Horwath covers tech and energy for the Journal. You can reach him at jhorwath@abqjournal.com.