Home > News > Corporate Moves > Penn SERS CIO Seth Kelly Resigns
Corporate Moves

Penn SERS CIO Seth Kelly Resigns

He leaves the pension fund after less than a year on the job; Deputy CIO James Nolan will take over as acting CIO.
By Michael Katz

Seth Kelly

Seth Kelly, CIO of the $35 billion Pennsylvania State Employees’ Retirement System (Penn SERS), has resigned from his post after less than a year on the job.

The announcement of his departure was buried at the bottom of a press release, beneath the fund’s first quarter returns and news of the board of trustee’s approval of a private equity investment.

The fund said the board appointed Deputy CIO James Nolan as acting CIO effective June 11, and that Kelly resigned “to pursue another career opportunity.” No further details were disclosed. 

The pension fund’s board also directed the Board Governance and Personnel Committee to conduct a search for candidates to succeed Executive Director Terrill Sanchez when she retires at the end of the year.

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Kelly joined Penn SERS last July from the Missouri State Employees’ Retirement System (MOSERS), where he worked for nearly 16 years and was CIO for nearly four years. At the time of Kelly’s hiring, David Fillman, chairman of Pennsylvania SERS’ board, said that “this was one of the most intense and most thorough executive search efforts that I have seen during my tenure as chairman,” adding that the board and staff spent many months reviewing candidates and conducting interviews.

Although Kelly took the CIO position at an economically difficult time, the portfolio performed well during his brief stint, with healthy returns of 11% for full-year 2020 that continued into the first quarter of this year.

A Penn SERS spokesperson did not immediately return a request for more information on Kelly’s departure.

Meanwhile, the pension fund reported that its investment portfolio returned 3.52% net-of-fees during the first quarter.

Private equity was the top performing asset class for the portfolio, returning 12.34% for the quarter, followed by US equity and private credit, which returned 6.83% and 5.71%, respectively. International developed markets equity and emerging markets equity returned 4.10% and 2.96%, respectively, while real estate and cash returned 2.56% and 0.03%, respectively.

At the opposite end, fixed income was the worst performing asset class, losing 3.59% during the quarter, while Treasury inflation-protection securities (TIPS) lost 1.75%.

The portfolio’s asset allocation is 26.2% in fixed income, 25% in US equity, 14.4% in private equity, 12.9% in international developed markets equity, 7.3% in real estate, 4.9% in private credit, 4% in inflation protection, 3.8% in emerging markets equity, 1.5% in cash, and 0.1% in legacy hedge funds.

The Penn SERS board also approved a follow-on commitment of up to $50 million within the private equity asset class to Insight Partners XII L.P. The fund investments in software, software-enabled services, and internet businesses, with a focus on the US and select global opportunities concentrated in Western Europe and Israel.

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Home > News > Asset Management Culture > Six Pennsylvania PSERS Trustees Seek Termination of Executive Director, CIO
Asset Management Culture

Six Pennsylvania PSERS Trustees Seek Termination of Executive Director, CIO

The board members are asking that a vote of no confidence be called at Friday’s pension board meeting.
By Sarah Min


Six members of the board of trustees at the Pennsylvania Public School Employees’ Retirement System (PSERS) are calling for the removal of the pension plan’s executive director and chief investment officer, as the fund continues to manage the fallout from a financial reporting error that is currently the subject of a federal probe. 

Executive Director Glen R. Grell and CIO James H. Grossman Jr. could be dismissed as early as Friday by the trustees, who are asking that a vote of no confidence and termination be called at the June 11 pension board meeting. They’re seeking to select an interim executive director, as well as outsource CIO services temporarily to Verus Investments. 

“As fiduciaries possessing a duty of loyalty to the beneficiaries of the retirement fund, it is our intention to request the immediate termination and replacement of the executive director and chief investment officer,” read a letter released Thursday from six trustees to Board Chairman Christopher SantaMaria. The board has 15 total members.

Pennsylvania PSERS did not immediately respond to a request for comment. 

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Two law firms have already been hired by the pension fund to investigate a financial reporting error included in the pension fund’s investment performance statements in December. The mistake in the fund’s annual investment return would have prevented an increase in school employees’ pension fund contributions, but would have passed the cost on to the state’s taxpayers. 

The error was disclosed by PSERS management in March. This forced the board to recertify the member contribution rate, which means thousands of teachers will have to pay more in employee contributions this year. An outside consultant has admitted to the error, though pension fund leaders have not named the consultant. 

The call for termination follows the filing of a lawsuit Tuesday by board member Katie Muth, a state senator who has called for access to financial records at PSERS. Two other board members have supported her lawsuit. 

“Withholding important documents from a trustee is outrageous. Much of what Senator Muth has requested are either past documents already provided to the board, internal investment memoranda prepared to support recommendations to the board, or documents that are public records,” Pennsylvania State Treasurer Stacy Garrity said in a statement. 

“It is clear that PSERS management has not done enough to ensure that she has access to the documents and records necessary to fulfill her obligation to be fully informed as to the investment activities of PSERS,” Garrity continued. 

In response, the pension fund said it has developed a methodology to ensure that “each board member has complete access to all of the information necessary for the execution of his or her fiduciary duties.” 

“We are aware of and disappointed by Senator Muth’s unnecessary action in filing her meritless lawsuit, and we look forward to promptly responding in convincing and dispositive fashion in order that we may continue our cooperation with the Department of Justice, and also ensure the completion of the current independent internal investigation,” PSERS said in a statement. 

The reporting scandal has resulted in a “loss of trust and confidence” in the pension fund leaders, according to the six trustees. The trustees also cited a decade of underperformance at the pension fund, resulting in higher payroll deductions for about 100,000 school employees, as contributing to the need for a management change. 

The letter was signed by Garrity, Muth, Secretary of Banking and Securities Richard Vague, Acting Secretary of Education Noe Ortega, former State Treasurer Joseph Torsella, and Pennsylvania School Board Association CEO Nathan Mains.  

Related Stories: 

FBI Said to Seek Evidence of Kickbacks, Bribery at Pennsylvania PSERS

Pennsylvania PSERS Hires Law Firms to Probe Reporting Error

PBGC to Shoulder Defunct Law Firm’s Pensions

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