The new chief investment officer for the $361.1 billion California Public Employees’ Retirement System (CalPERS) won’t be starting until sometime in January, leaving open the question of whether a vote by the system’s investment committee on a new $20 billion direct private equity investment organization will be delayed until after he takes office.
CalPERS officials announced in September that they had selected Yu Ben Meng, a US citizen who was the deputy chief investment officer at China’s State Administration of Foreign Exchange, to replace Chief Investment Officer Ted Eliopoulos, who is scheduled to leave by the end of the year.
The idea was that the new CIO would get a chance to work alongside Eliopoulos, particularly in a critical time for the largest US public pension plan. CalPERS officials are hoping to launch “CalPERS Direct,” a private equity organization that would invest in later-stage companies in the venture capital cycle as well as buy and hold stakes in established companies, similar to Warren Buffett’s strategy.
It would be the first such investment organization by a public pension plan in the US.
Meng can’t start sooner because he has a non-compete agreement with the Chinese government that required him to wait several months before taking a new job, J.J. Jelincic, a former CalPERS board member and investment officer, told CIO. Jelincic has had phone calls with Meng.
In addition, several CalPERS officials, who asked not to be named because they are not authorized to speak to the press, confirmed Jelincic’s account.
In a measure of just how serious the Chinese government takes the non-compete agreement, Jelincic said Meng has not been allowed to leave China until the non-compete is over, even though he is a US citizen. Meng was born in China.
“China treats people born in China as if they were Chinese citizens, even if they have acquired citizenship elsewhere,” Nicholas Yardy, a senior fellow at the Peterson Institute for International
Economics and an expert on the Chinese economy, told CIO in an email.
Not only is Meng subject to a non-compete, he is also forbidden to discuss his work at the secretive State Administration of Foreign Exchange, the sources say.
They say Meng had played a key role in investing China’s foreign currency reserves, which are around $3 trillion, although not all of it is available for long-term investments because China has foreign debt obligations that are near $2 trillion. The investments have included US Treasuries and US equities, although the agency has never issued a breakdown of its assets.
For example, Chinese companies exporting to the US are paid in dollars but then must turn over the currency to the People’s Bank of China, which coverts it to the Chinese currency known as the Renminbi. The original US dollars go to the State Administration of Foreign Exchange, which then invests the assets.
It is expected at the CalPERS Investment Committee meeting today that CalPERS officials will give an update on Meng’s start date.
CalPERS spokesman Wayne Davis said in an email to CIO on Monday that, “Ben’s start date has yet to be determined.” Davis also said that no date has been set for the board to decide on the private equity proposals. “The Investment Office continues to develop the plan and update the board,” he said.
CalPERS investment officials had originally hoped the investment committee could vote on the plan at its meeting today, but an agenda item has not been prepared.
CalPERS has one more investment committee meeting this year scheduled for Dec. 17, which is the last meeting for Priva Mathur, the president of the CalPERS board and a proponent of the direct private equity investment organization. Mathur was defeated in a bid for reelection.
It’s unclear if the investment committee, which is made up of all 13 CalPERS board members, would attempt to vote on the plan at the December meeting, even though Meng has not yet started. The sources say Mathur has been pushing for such a vote.
Tags: Ben Meng, CalPERS, CalPERS Direct, China, Private Equity