Wisconsin State Pension Fund Returns 16.89% in 2021

The State of Wisconsin Investment Board reported that its $136 billion core fund, the larger of the two fully funded Wisconsin Retirement System trust funds, finished 2021 with a preliminary net return of 16.89%.

The core fund also reported preliminary five- and 10-year returns of 12.47% and 10.10%, respectively, net of fees, and it outperformed its benchmarks for the periods, easily surpassing its 6.8% annual rate of return target.

SWIB said that over the past 20 years, its active management and diversified holdings generated for the core fund $34.3 billion more than what it would have earned if it had been invested in a low-cost passive portfolio consisting of 60% global equities and 40% domestic bonds. The investment board also said its investment management has added more than $2.2 billion in value to the WRS trust funds above benchmark returns over the past five years on a preliminary basis.

“In 2021, SWIB generated strong investment returns in a market environment dominated by the ongoing effects of the coronavirus pandemic, continued substantial fiscal stimulus, and the response of the Federal Reserve while interest rates, inflation, and supply chain backlogs grabbed headlines and influenced investor sentiment,” Edwin Denson, SWIB’s executive director and CIO, said in a statement. “We have implemented a robust and diversified asset allocation that can help us navigate changes in market conditions.”

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The core fund’s target asset allocation is set at 52% in public equity, 25% in public fixed income, 19% in inflation-sensitive investments, and 7% in real estate. SWIB said the figures exceed 100% due to the overall leverage of the core fund’s assets, and that the actual asset allocation may vary up to plus or minus 6% from the targets.

Meanwhile, SWIB’s $10.9 billion variable fund, an optional stock-only fund, performed even better and closed out the year with a preliminary net return of 19.95%, along with preliminary five- and 10-year returns net of external manager fees of 15.52% and 13.75%, respectively.

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Tags: annual return, core fund, Edwin Denson, State of Wisconsin Investment Board, SWIB, variable fund, Wisconsin Retirement System, WRS

The California Public Employees’ Retirement System has finally appointed a chief investment officer after more than a year and half. The fund’s previous CIO, Ben Meng, resigned in August 2020 following accusations of conflicts of interest.

The new CIO, Nicole Musicco, is currently working as a partner at RedBird Capital Partners LLC, a private investment firm which focuses on helping scale founder-led companies, according to her LinkedIn profile. Musicco has been at RedBird for just over two years, where she was the only female partner at the firm. Before that, she served as the senior managing director and head of private markets at the Investment Management Corporation of Ontario.

While her recent experience has been primarily in the private sector, she also spent 16 years investing on behalf of the Ontario Teachers’ Pension Plan, working her way up from director of private equity and direct investments to senior managing director and head of public equities.

CalPERS’ appointment of a private market specialist could be indicative of the fund’s further interest in private equity and private debt. Last year, the pension adopted a new asset allocation strategy that raised private equity investments from 8% of the portfolio to 13%.

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Former CIO Meng allegedly had issues with his required state financial disclosure form. Officials said the filings did not disclose personal stock sales and that he had a potential conflict of interest by holding shares in three private equity firms that did business with the pension system. The allegation led to an investigation by the California Fair Political Practices Commission.

Musicco will be the second woman to serve as chief investment officer for CalPERS and will take over on March 28. CalPERS is the largest pension fund in the country, with nearly half a trillion dollars in assets under management.

“Nicole’s leadership and experience are well suited for the strategic goals we’ve outlined for our fund,” stated Theresa Taylor, CalPERS’ board president, in a press release. “We are getting the investor we need to skillfully manage our investment portfolio on behalf of our members, now and in the future.”

Musicco also brings with her a background in international investing. During her time at the Ontario Teachers’ Pension, she opened an Asia Pacific office in Hong Kong for the pension fund and stayed in the city for over a year.

“Nicole’s experience, vision, and skill as an investor in public and private markets is critical for CalPERS,” Marcie Frost, CalPERS CEO, said in the press release. “We were determined to take our time to ensure we found the right candidate who could succeed in a high-pressure and demanding environment. Nicole is exactly the leader we want to lead CalPERS’ Investment Office and is an exceptional addition to our team.”