CalPERS Selects Executive Search Firm to Identify New CIO

Dore Partnership, an executive search firm, has been hired by the California Public Employees’ Retirement System to lead the search for a new CIO after Nicole Musicco departed suddenly in September. Deputy CIO Dan Bienvenue is currently serving as interim CIO.

“CalPERS is looking for a strong investor with broad experience who is committed to our public service mission of ensuring the retirement benefits of 2 million people,” said Marcie Frost, CalPERS’ CEO, in a press release. “Dore Partnership is a proven partner with a successful track record of putting the right people in the right spots all over the world.”

Musicco announced in mid-September she would leave CalPERS on September 29 to focus on her family. A successor to Musicco would be the system’s fourth CIO in the last five years, joining Musicco, Ben Meng, who was accused of profiting personally from CalPERS investments, and Ted Eliopoulos, who left in 2018.

Some industry observers have said the fishbowl environment of managing the investments for the largest U.S. state pension fund makes it a hard job to fill. Eliopoulos was the last internal candidate to fill the CIO role.

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When CalPERS hired Musicco—who had previously managed private and public equity investments for the Ontario Teachers’ Pension Plan—the fund was increasing its allocation to private markets in an effort to improve returns. Interest rates and other macro trends have made it a tough environment for returns on private-market investments.

At the time of his departure, Eliopoulos cautioned that the private-equity investments would shrink without a restructuring to allow direct investments in private equity and venture capital.

CalPERS serves more than 1.5 million current and retired California public employees. The new CIO would be in charge of managing the fund’s $462.8 billion portfolio.

CalPERS has also posted the job opening on its website. “The ideal candidate is an exceptional investor who is goal-oriented, organized, and can carry out a complicated, highly visible, fast-paced, and multi-faceted role with poise, integrity, and grace.” the posting states.

“The competition for top talent has never been fiercer, especially when it comes to implementing and delivering on the investment returns needed to support our members,” said Theresa Taylor, president of the CalPERS Board of Administration in a statement.

Dore Partnership is a New York-based firm that has made more than 900 placements across 20 countries and 60 cities since its founding in 1997.

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Tags: Ben Meng, California Public Employees’ Retirement System, CalPERS, Marcie Frost, Nicole Musicco, Ted Eliopoulos, Theresa Taylor

The State Teachers Retirement System of Ohio, a pension fund serving 500,000 current and retired educators, announced it returned 7.55% for the 2023 fiscal year, which ended June 30. The return came despite alternatives within the fund returning negative 1.41%, a stark reversal from recent performances. The system had $87.5 billion in assets under management as of September.

In the Ohio STRS portfolio, alternative investments had in recent years outperformed the rest of the fund’s holdings. In the past three, five, 10 and 20 years, the Ohio STRS returned 10.18%, 8.07%, 8.60% and 8.28%, respectively. Alternative investments during these periods returned 19.16%, 12.64%, 11.39% and 11.75%, respectively.

While alternatives’ performance has typically been stronger than the rest of the portfolio, officials refrained from increasing allocation to alternatives, citing high risks involved, and that decision paid off in fiscal 2023. The fund also announced net returns of negative 2.29% for September and negative 1.72% for fiscal 2024 to date.

Ohio STRS also announced some changes to its asset allocation at an October 19 meeting of its investment department: The fund allocated $550 million to domestic equities, while reducing its allocation to fixed income by $500 million.

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Ohio STRS also increased its expected 10-year policy and total returns for every single asset class, in some cases by more than 100 basis points. The pension fund now expects a total return of 7.57%, up from 6.43%. Ohio STRS expects 10-year returns to come in at 7.17%. Consultant Callan LLC recommended the changes based on Callan’s capital market assumptions and a 10-year forecast of asset returns that “increased meaningfully from 2022 forecasts,” following a 2022 study.

The board also discussed ways to save on fees and other costs. One option was adopting a “Canada model,” in which the fund makes direct alternative and private equity investments, like leveraged buyouts, instead of investing in a private equity fund that makes those investments. However, some board members pushed back on this idea, citing high investment-banking fees.

The pension fund is currently 81% funded and is projected to be 100% funded by 2035. STRS Ohio expects the fund to be 127% funded by 2043.

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Tags: Ohio, Ohio State Teachers Retirement System (OSTRS), Pension, STRS