CalPERS Hunts New Chief Risk Officer | Chief Investment Officer

The US’ biggest pension is searching for a new risk chief, Sweden’s AP3 has appointed one, and a Power 100 member has added an advisory role to his CV.

The California Public Employees’ Retirement System (CalPERS) has begun its search for a new chief risk officer (CRO), following the exit of Larry Jensen last year.

Based in the $286 billion pension’s Sacramento, California headquarters, the successful applicant will work closely with Chief Financial Officer Cheryl Eason, and have oversight for CalPERS’ risk policies, procedures, and systems.

“As the key facilitator to achieving the organization’s risk-focused business objectives, the CRO is responsible for assessing the organization’s capabilities and awareness to more successfully manage and improve its ability to monitor, manage, and report on identified risk initiatives,” the job advert states.

The new CRO will be in charge of a “large team” managing all aspects of risk, in its investment strategy and other areas of the business. The position is “critical to CalPERS’ strategic objective to become a risk-intelligent organization”, the advert says, with the aim of enabling the pension to “make well-informed decisions at all organizational levels”.

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The advert states a wage bracket equivalent to between $107,820 and $128,436 a year.

Previous CRO Jensen moved to the California State Teachers’ Retirement System in July last year to lead its audit services after 19 years with CalPERS.

Meanwhile, Sweden’s AP3 has appointed Lars Sundberg as chief portfolio risk manager. He joins from DNB, where he worked for 13 years as an investment manager. He reports to the CIO, currently Kerim Kaskal until the end of this month.

AP3’s Chief Risk Officer Mattias Bylund featured in CIO’s Forty Under Forty list earlier this year.

Elsewhere in Europe, Mark Fawcett, CIO of the UK’s National Employment Savings Trust (NEST), has joined the investment committee of the Universities Superannuation Scheme (USS) to help boost the £49 billion ($75 billion) fund’s defined contribution (DC) offering.

Fawcett, ranked #99 on CIO’s latest Power 100 list of the most influential asset owners, will take up his new role from November 1. He has been CIO at NEST since 2010 and has overseen the construction and expansion of the UK’s leading auto-enrolment pension.

USS CIO Roger Gray ranked #64 on the Power 100.

“USS has the size and scale to set up a really strong DC offering for its members and I am looking forward to working with my new colleagues helping to advise the USS trustees on this and other matters,” Fawcett said.

The new budget deal reached between the US congressional leaders and the White House on Monday proposes a 22% jump in Pension Benefit Guaranty Corporation (PBGC) premiums over the next four years.

The 144-page bill, which must be approved by the House and the Senate, would raise premiums for single-employer corporate pension plans to $68 per person for 2017, $73 for 2018, and $78 for 2019, and then re-indexed for inflation.

The PBGC also announced Monday it had increased the flat-rate premium to $64 per person for 2016.

“The new bill’s new round of premium rate increases sends a signal to defined benefit (DB) plan sponsors,” Bob Collie, Russell Investments’ chief research strategist, told CIO. “It’s becoming more difficult and more expensive for plan sponsors to keep a DB plan.”

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“The new bill’s new round of premium rate increases sends a signal to DB plan sponsors. It’s becoming more difficult and more expensive for plan sponsors to keep a DB plan.”The latest proposal—largely an effort to balance and squeeze revenue into the budget—is also likely to affect plan sponsors’ decision making in a variety of ways.

According to Charles Millard, formerly director of the PBGC and currently head of pension relations at Citi, higher PBGC premiums could push plan sponsors towards pension-risk transfers (PRT).

“PBGC premiums are increasingly important to corporate plan sponsors and they’re a crucial element in the equation when a plan sponsor considers whether to transfer a pension plan to an insurance company,” Millard said.

And pension-risk transfers have been popular over the last eight years, according to Prudential’s latest research.

More than $260 billion in pension liabilities have been transferred since 2007, the firm found. At least 40 pension funds in the UK, US, and Canada have also executed transactions of over $1 billion in the last eight and a half years.

Furthermore, the new bill’s proposed increases in variable-rate premiums would incentivize plan sponsors to fund the plan at lower rates, Collie added. Other plan sponsors unable to keep up with premium hikes will accelerate freezing their DB plans.

However, Collie also warned continued increases in premiums could put PBGC in a worse economic position.

As more and more plan sponsors turn to PRT and freezing their plans, there would be fewer plans actually paying the PBGC premiums.

“It’s a vicious cycle,” Collie said. “It could do more harm to the PBGC revenue base than good.”