Artificial intelligence is already changing the world, and it will change how investing is done, the board heard from Ashby Monk, executive and research director of the Stanford Research Initiative on Long-Term Investing.

With greater data gathering capabilities, AI has the capacity to help CalSTRS investment staff contextualize that data and use it to make prudent investments that add value to the Teachers’ Retirement Fund.

Monk equated AI in investing to the transition from paper maps to digital GPS directions for drivers. Now that GPS has enabled devices to offer more accurate and updated guidance, people have abandoned maps. In similar fashion, the investment industry will develop AI tools to help guide decisions that will allow CalSTRS to meet its mission of providing a secure future for California's public school educators.

AI technology can lead to change, and CalSTRS needs strong technology skills and data practices to make faster, smarter decisions, Monk said. Monk pointed out that approximately 10 years ago CalSTRS was among the first to develop the Collaborative Model of investing, which manages more assets internally to reduce costs, control risks and increase expected returns. Because of the track record of cost savings (more than $2.6 billion since 2017), other institutional investors are following this model.

In similar fashion, Monk told the board, CalSTRS could develop a new model using AI that could also be industry leading. The board plans to hold more AI education sessions and discussions about how to ensure strong rules that govern how AI is used moving forward.