Former Aramco Alts Head Joins CalPERS as Private Markets DCIO

Daniel Booth will oversee the $442.6 billion pension fund’s private equity, real assets and private debt.

The California Public Employees’ Retirement System has named Daniel Booth to the newly created position of deputy CIO for private markets. Booth, who will report to CalPERS CIO Nicole Musicco, will be responsible for all private market investment strategies, including asset allocation.

CalPERS announced that Booth will work closely with Musicco and the CalPERS investment office’s managing investment directors to lead investment decisionmaking for the $442.6 billion pension giant’s private equity, real assets and private debt asset classes.

Booth, who will join CalPERS in April, is currently a senior adviser for the UK Infrastructure Bank in Leeds, U.K., where he helps set up the investment and equity investment platforms. According to CalPERS, he helped form investment strategies to support the U.K. government’s net-zero goals, with a focus on higher risk transactions in infrastructure sectors, such as clean energy projects.

Before joining the UK Infrastructure Bank, Booth was CIO for the Border to Coast Pensions Partnership, a centralized asset manager for 11 UK local government pension plans, according to CalPERS. Prior to the BCPP, Booth was CIO of portfolio management and head of alternatives for Saudi Aramco in Saudi Arabia. He has also been head of alternative asset research for Prime Capital and alternative investments director for FERI, both in Frankfurt, Germany.

“I’m thrilled to have Daniel further CalPERS’ expansion into the private markets,” Musicco said in a release. “He’s a visionary investor who’s consistently been able to identify key market trends and has delivered top-tier results. His strategic thinking and thought leadership, which have contributed to his global success, is what we need to ensure the long-term sustainability of our fund.”

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CalPERS’ private markets investments, which provide inflation protection, diversification and excess returns, have been a big driver of its portfolio’s performance and has helped offset losses from other assets.

While CalPERS’ investment portfolio overall lost 6.1% for fiscal year 2021-22 that ended June 30, 2022, its private market investments were its top-performing assets, as private equity and real assets returned 21.3% and 24.1%, respectively.

“Despite a challenging year, we were able to outperform our total fund benchmark by 90 basis points and provide strong returns from our private market asset classes,” Musicco said in a release when the results were reported in July 2022. 

Private equity is CalPERS’ top-performing asset class, with five- and 10-year returns of 13% and 12.8%, respectively, and the pension fund’s board increased the allocation to private equity to 13% from 8%, starting with the 2022-23 fiscal year, which brings the total allocation to private assets up to one-third of the portfolio.

“I am honored with the opportunity to work at CalPERS and I look forward to working closely with Nicole and the investment team to help build retirement security for California’s public employees,” Booth said in a release. “Efficient implementation of private assets will be key to achieving the returns needed to grow the fund and improve our long-term funding position.”


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Federal Reserve Expected to Hike Rates Next Week, Despite Shaky Banks

A slight dip in inflation and new Washington safeguards for lenders seem to have reassured investors, for now.



That dreaded occurrence, bank failure, evokes visions of the 2008 financial crisis, which almost torched the global financial system. But the fear of cataclysm seemed to have faded Tuesday—and thus talk has ebbed that the Federal Reserve will go easier on anticipated interest-rate hikes.

When the Fed’s policymaking body meets March 21-22, the futures market is split over whether the Fed will do  a quarter-point rate increase or stand pat, although most analysts side with the quarter-point scenario. Just the week before, the betting strongly (by almost 70%) favored a half-point boost. It’s significant that, even after the government takeover of Silicon Valley Bank and Signature Bank, the Fed is not expected to pause in its tightening campaign.

What propelled projections of a quarter-point March action was a slowing of the Consumer Price Index’s growth, to a 6% annual pace in February from 6.4% the year before. The slight deceleration—face it, the level still is high—was sufficient to keep the continued-increases narrative going, according to Jeffrey Roach, chief economist for LPL Financial.

“Even amid current banking scares, the Fed will still prioritize price stability over growth and likely hike rates by 0.25 [percentage points] at the upcoming meeting,” he noted in a statement. “Investors should expect inflation to improve in the latter half of this year.”

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No doubt, Washington’s “non-bailout” bailout of the two failed banks, plus the Fed’s creation of a lending facility for troubled lenders, has helped soothe worried investors. Although Treasury Secretary Janet Yellen on Sunday told CBS’ “Face the Nation” that there would be no major bank bailout, her department,  the Fed and the Federal Deposit Insurance Corporation announced on the same day that depositors at SVB and Signature would be made whole.

The standard cap per deposit on FDIC coverage is $250,000, but affected depositors will get all their money back, even if it exceeds that threshold. Stock and bond investors in the banks are getting no help at all from the government.

The stock market seemed encouraged Tuesday, as the S&P 500 rose 1.65%, snapping a five-day losing streak driven mainly by the bank woes. Bank stocks eclipsed the larger market: The KBW Nasdaq Bank Index leapt 3.5%. In early trading Wednesday, both the broad market index and the bank index gave up those gains, amid fresh concerns with another troubled bank, Credit Suisse.

No surprise. Few believe that banks are out of the danger zone. On Tuesday, Moody’s Investors Service lowered its view on the entire banking system to negative from stable. Moody’s also has downgraded Signature—withdrawing its credit rating—and put six other regional banks on watch for possible downgrades, including First Republic, Intrust Financial, UMB, Zions Bancorp, Western Alliance and Comerica. For those six, the agency said it was concerned about deposit outflows and reductions in their assets’ market worth.

Much of their plight stems from the Fed’s energetic tightening as it moved, perhaps belatedly, to fight rising inflation. “We got into this mess because a lot of central banks and a lot of economists [and] the Fed started to believe that inflation was largely dead,” Ethan Harris, head of global economics research at Bank of America, said on Bloomberg Television. “Now we’re seeing a massive catch-up.”

That catch-up, the Fed’s quick elevation of rates from near-zero since 2022, led to severe decreases in the price of bonds that SVB held on its books. Because those reductions resulted in a lower capital ratio, the bank had to scramble to plug the hole by selling assets at prices far below their value. “SVB’s liquidity risk management practices were deficient,” wrote Clifford Rossi, a professor at the University of Maryland’s Robert H. Smith School of Business.

Another weakness, he pointed out, was that SVB concentrated on venture capital lending, and this tech-centric segment has been suffering for months—and its companies needed to pull deposits out of SVB to pay their bills. 

Signature had another over-concentration problem: It was a big lender to cryptocurrency businesses. That asset class, of course, has crashed spectacularly of late.

Rossi wrote: “SVB’s stunning collapse is a reminder that despite our best efforts to regulate the banking sector following the 2008 financial crisis, banks can and will fail from time to time.”

Assuming the Fed does not view this disturbance in one corner of the banking industry as indicative of a larger problem, then a quarter-point hike seems reasonable.

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