CalPERS Creates Newest Exec Position With CFO Role

(March 29, 2011) — The California Public Employees’ Retirement System (CalPERS) has appointed Russell Fong as acting Chief Financial Officer (CFO), creating the fund’s newest executive-level position.

Fong will be responsible for managing the financial processes for CalPERS, including budgeting, accounting, cash management, and financial planning and analysis. He will also oversee CalPERS Enterprise Risk Management projects, the largest public pension in the US reported on its website.

“The new position is part of our executive office and board’s values to adhere to our core mission,” CalPERS spokesperson Bill Madison told aiCIO. “Russell is an excellent fit because of his background in accounting, budgeting, and IT management,” he said, noting that the role is purely administrative and not investment-related. “He’ll help us answer questions like ‘What are our budget requirements for the next two, three, and five years?’ and ‘How can we make the best use of those funds to reach our goals?'”

When asked whether issues of bribery and corruption arising from placement agent activity propelled the creation of the CFO role, Madison replied that conflicts of interest undoubtedly emphasized the need for greater transparency. “In the last year, our executives got input from 2,300-plus employees and staff on what their core values are, and we established six of them: openness, quality, respect, accountability, integrity, and balance,” Madison said. “Those are our guiding behaviors,” he explained, noting that the new appointment reflects the fund’s efforts to improve its internal fiscal management and budgeting clearly, openly, and efficiently, with Fong being the single point of coordination for the scheme’s financial risk.

Prior to joining CalPERS, Fong served at the California Health and Human Services Agency Data Center as Chief Consolidation Administrator, Chief Financial Officer, and Deputy Director of the Administrative Services Division. Fong also managed the Information Technology Training Center for the Health and Human Services Agency Data Center. In addition to his State service, Fong worked as Vice President of California Bank & Trust and as a certified Financial Consultant with First Affiliated Securities in Los Angeles.

Besides CalPERS’ new position, the recent corruption scandal in California and elsewhere has had other ramifications. For one, placement agents have said they will likely stop working with state funds affected by new legislation — dubbed AB-1743, which came into effect on January 1 with the goal of preventing corruption. The legislation subjects placement agents working with the nation’s two largest public pensions — CalPERS and the California State Teachers’ Retirement System (CalSTRS) — the California Judges Retirement System, and the University of California Regent’s Retirement Fund, to stringent compensation reporting procedures. While requiring placement agents to attend ethics training, the legislation further prevents them from making campaign contributions and outlaws contingency fees. A survey of placement agents revealed a general sentiment of discontent, and the agents largely said that they felt they were being punished for the wrongdoing of politicians.

“CalPERS sponsored AB1743, and we continue to be strong supporters of the law,” CalPERS Information Officer Wayne Davis told aiCIO. “AB-1743 does not prohibit placement agents from working with CalPERS, but we believe the law brings transparency and accountability to their role when representing external money managers seeking CalPERS business.” He added: “As our Chief Investment Officer Joe Dear has said a number of times, CalPERS believes skilled external money managers don’t need to hire a placement agent to get their investment proposals to CalPERS. Investment proposals can be sent directly to the CalPERS Investment Office using the CalPERS website. The proposals will be evaluated by CalPERS investment professionals or forwarded to one of our external partners for review.”

Meanwhile, CalSTRS disagreed with the claims made in the report, indicating that the scheme’s experience following the legislation differed from the survey’s findings. Fund spokesperson Ricardo Duran told aiCIO: “While we understand it’s still too early to tell how this legislation will ultimately affect our relationship with CalSTRS’ investment partners, we have not seen the kind of reluctance reflected in the report. Several partners have commented on the need to more clearly outline procedures, but when told of the new law, they have been willing to register.”