Connecticut CIO To Resign After a Decade | Chief Investment Officer

LA Palladino Lee Ann Palladino, CIO of the CT Retirement Plan & Trust FundsThe $29.6 billion Connecticut Retirement Plan and Trust Funds will be short a CIO as of July 1.

Lee Ann Palladino, who has served as chief of the public fund for more than a decade, announced her upcoming retirement Monday.

“Under her leadership, the fund has produced very strong results that ensure benefits for retirees as well as reduced costs for taxpayers,” said the interim chair of the state’s investment advisory council.

State Treasurer—and principal fiduciary for Connecticut’s pension and trust funds—Denise Nappier expressed similar sentiments and credited Palladino for “strengthening the management of a demanding and complex investment program.”

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Palladino spearheaded “many successful investment initiatives that build upon a track record of solid performance—especially during severe market turmoil—with total assets now at an all-time high of $30 billion,” Nappier said.

She tapped Deputy CIO Deborah Spalding as interim CIO once Palladino retires.

Spalding became Palladino’s right-hand woman in 2013 after an 18-month national search, according to the treasury.

“She is a seasoned professional with a deep appreciation for our investments and operations, and she is ready to step up to lead the pension funds management division,” Nappier said.

A 20-year veteran of investment management, Spalding previously served as managing partner of Working Lands Investment Partners focusing on investing sustainably managed property.

She also spent time as a partner at Chaplin global, head of international investments at Schroders, and head of international institutional investments at Zurich Scudder Investments.

Spalding holds a bachelor’s degree from Tufts University and master’s degrees from Harvard, the University of California at Berkeley, and Yale University.

The Connecticut treasurer’s office told CIO it was in the process of considering how to approach finding a permanent CIO for the pension funds.

A former manager for the California Public Employees’ Retirement System (CalPERS) has won its appeal of a breach of contract claim, arguing that the fund promised but didn’t honor a $100 million mandate.

Overturning a prior dismissal, an appeals judge concluded that US equities shop Centinela Capital Partners had sufficient evidence to suggest it entered into an enforceable oral agreement with CalPERS.

“Be careful what you say when discussing investment opportunities with managers.”

The decision has legal ramifications for asset owners beyond just CalPERS, according to two attorneys specializing in pension litigation.

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The case “provides an important warning to plan fiduciaries and their investment staff,” wrote Harvey Leiderman and Maytak Chin of law firm Reed Smith in a note to clients. “Be careful what you say when discussing investment opportunities with managers, especially those incumbents with whom you already have a contractual relationship. Make it clear in your communications—whether by phone, in person, by email or letter—that nothing will be binding on your plan unless and until a complete set of documents has been approved and inked by both sides.”

Between 2006 and 2008, CalPERS officially (and in writing) awarded minority-owned Centinela two mandates totaling $1 billion as part of the pension fund’s emerging manager program.

Centinela’s complaint claimed it reached a verbal agreement with senior CalPERS staff in May 2011 for a $100 million allocation into its next fund, but with a condition. Late former CIO Joe Dear, among other top fund officials, allegedly insisted that the firm cut ties with its Principal Cesar Baez, who had links to placement agents implicated in CalPERS’ massive pay-to-play scandal.

“CalPERS’ personnel, including defendant Dear, proposed and offered… that if Centinela arranged for Mr. Baez’s departure, CalPERS would at a minimum award Centinela the Link III contract for an additional $100 million,” the asset manager’s updated 2013 complaint stated. The firm then split with Baez.

Two months after the alleged agreement, CalPERS reportedly told Centinela it would not invest in the new fund. Centinela filed a breach of contract suit in late 2013, demanding a jury trial and $35 million in damages.

CalPERS did not respond to a request for comment by press time.