Calling All Rocket Scientists: CERN is Recruiting

The Swiss-based CERN Pension Fund is officially on the hunt for new CEO to replace Theodore Economou, who will leave at the end of his term next year.

An advertisement posted online says the CEO will “lead a management team that will include a chief investment officer and a head of benefits”. Economou took on the role of CIO in 2012 following the departure of Gregoire Haenni, but the CHF4 billion ($4.4 billion) pension is set to split the CEO and CIO roles again.

The successful candidate will require a master’s degree in finance, economics, or “equivalent fields”, and will serve an initial term of three years. The appointment and subsequent reappointments will be decided by CERN’s council.

The new CEO can expect a salary of between roughly £127,000 and £150,000 a year, according to the job advert. The closing date for applications is September 20, and candidates should apply directly to CERN.

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During his six-year spell at the helm of the CERN pension, Economou and his team have restructured the fund, replacing its return-based approach with a risk-based one. Following his departure he will seek to distribute this “CERN Model” to institutional investors more widely.

The CERN pension won CIO’s Industry Innovation Award in 2012 for the “Best Public Pension Plan – Below $15 Billion”.

Investors in municipal bonds need to factor in political risks that may trump even legal agreements, according to Columbia Management.

Twelve months on from the bankruptcy filing by the city of Detroit, Michigan, the US-based manager warned that the write-down of bonds issued by the city showed “political pressures continue to influence the bankruptcy process”. This had resulted in “politically-connected stakeholders [being] more equal than others”.

“A city’s desire to pay employees to continue providing essential services to residents and taxpayers will come before bondholders, regardless of legal language.”—Ty Schoback, senior municipal analyst at ColumbiaThis may come as a shock to Detroit’s pensioners, who last month agreed to a cut in benefits in order to reduce the city’s huge pension bill—a move which directly contradicts the wording of Michigan’s state constitution.

Ty Schoback, senior municipal analyst at Columbia, said: “While the direct implications of Detroit may be largely limited to other fiscally distressed Michigan local governments, the bankruptcy has yielded significant insights for municipal market participants.”

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He pointed to Detroit’s limited-tax general obligation bonds (LTGO bonds). When issued, the city pledged to service this debt first when collecting taxes. However, following the Chapter 9 bankruptcy filing in July last year, holders of these bonds were eventually paid just 34% of par. Holders of unlimited-tax general obligation bonds settled for 74%, despite the city’s pledge to raise taxes specifically to pay off this debt if necessary. The remaining 26% is to go to pension funds, Schoback said.

“This is a clear demonstration that, despite what legal protections bondholders are afforded per their indentures, a city’s desire to pay employees to continue providing essential services to residents and taxpayers will come before bondholders, regardless of legal language,” Schoback said.

He added that the situation in Detroit “demonstrated how the intensity of political influence multiplies in a situation of fiscal distress and is likely to result in more beneficial terms to politically-favored classes of creditors at the expense of the less well-connected”.

Earlier this year the California Public Employees’ Retirement System (CalPERS) voiced opposition to the plans to cut benefits, arguing that the decision threatened the security of the entire US pension system.