New CIO for $50B Pennsylvania Pension | Chief Investment Officer

(March 17, 2014) — The Pennsylvania Public School Employees’ Retirement System (PSERS) has hired James Grossman Jr. as its new CIO.

Grossman, 47, had been serving as acting CIO of the $50 billion fund since June 2013 when its former CIO Alan Van Noord announced his retirement.

“I am truly honored to serve as CIO for PSERS,” Grossman said. “We will work hard every day to prudently manage the retirement assets of the hundreds of thousands of active and retired members who rely on those assets for a secure retirement.”

According to the Harrisburg-based retirement system, Grossman was chosen after an “extensive national search” launched in February of last year.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“He submitted his qualifications and took part in the interview process just as the other candidates did,” Evelyn Tatkovski, PSERS press secretary, told aiCIO.

The board Chairman Melva Vogler said the decision to promote from in-house talent was largely based on Grossman’s commendable performance as acting CIO, particularly as the system was facing funding difficulties.

“We are very confident in Jim’s knowledge of PSERS investments and his ability to head PSERS’ investment operations,” said the chairman. “He performed admirably in the role of acting CIO over the past year. The system is facing funding challenges, which puts increased pressure on PSERS investment operations. The system will benefit greatly from Jim’s history with PSERS and extensive knowledge of the system’s investment operations. We look forward to working with him.”

According to the fund’s reports, PSERS was 66.4% funded as of June 30, 2012. It posted returns of 7.96% for fiscal year 2013 and added $4 billion in net investment income to its assets. It also saw returns of 10.36% for the 3-year, 2.5% for the 5-year, and 7.72% for the 10-year period.

“Significant cash outflows from PSERS continued in 2013 as total pension benefit payments exceeded incoming employee and employer contributions by $3.6 billion,” said Grossman in September 2013. “The impact of the systematic underfunding and significant cash outflows on PSERS’ ability to earn increased investment income is becoming more evident over time. Not only does PSERS have fewer dollars to invest, it has also led to a more conservative investment risk profile, including reduced exposure to public equities which were a top performing asset class during the past fiscal year.”

Grossman said he looks forward to amending these problems as CIO serving almost half a billion employees and retirees.

“I look forward to working with the board as the system continues to face cash flow and funding challenges,” he said. “It will be a priority of mine to continue the collaborative partnership with the board fostered by my predecessor and mentor Alan Van Noord.”

Grossman joined PSERS in 1997 as the compliance and risk officer and was promoted to managing director in 2003 and deputy CIO in 2011. Prior to his role at the pension fund, he worked at KPMG after graduating from Elizabethtown College.

PSERS revealed Grossman will be paid $293,537 in annual salary with no bonuses or incentive compensation.

Related Content: Pennsylvania Pension Fund Chairman Resigns

(March 17, 2014) — Danish pension giant PFA has announced it will take a more activist investor stance, following greater levels of scrutiny on its investments by pension fund members.

The DKK400 billion (€54 billion) fund’s director of asset management Jesper Langmack said in a statement that PFA had decided to seek more influence over the companies it owned shares in, but would do so in private, rather than through the medium of the press.

Over the last few years, PFA’s investment strategy has seen it invest in fewer companies, but with larger direct investments. It currently invests in 25 Danish listed companies, including Denmark’s largest energy provider DONG Energy.

“In the past, the PFA has primarily been a passive investor. But we will increasingly be a more active investor, seeking to influence the companies we directly invest our pension money in,” said Langmack. “However, we will not ask for the seat on the board.”

For more stories like this, sign up for the CIO Alert newsletter. 

He went on to stress that as an investor, it was not in PFA’s interest to publicly criticise companies it owned shares in through the press. Instead, it would contact the company directly to express any concerns.

Langmack said there were two main aims of PFA’s shift towards a more activist stance: to ensure a good return for the benefit of PFA’S members, but also to ensure the focus of those returns were made in accordance with the recommendations of good corporate governance.

“We want more than ever to take this opportunity to share praise and criticism, and we will—together with the other shareholders—from time to time take the opportunity from the podium demanding and critical questions to the managements of the companies,” Langmack said.

“We want to be seen as both a professional and responsible asset manager, so pension customers can trust us and other institutional investors will want to work with us.”

In December 2013, PFA was among a large number of Danish funds which abandoned the UN’s sustainable investment body Principles of Responsible Investment (PRI) over fears that it was suffering from governance problems of its own.

Denmark’s national fund ATP, Industriens Pension, PensionDanmark, PFA Pension, PKA, and Sampension, released a joint statement saying they would continue to invest using the principles, but would “remain outside the organisation until it again lives up to basic requirements for good corporate governance—including restoring membership democracy in the organisation”.

The statement continued: “We have… over a sustained period of time observed with concern that the governance of the PRI organisation does not live up to the basic standards we as investors would expect of the companies in which we invest. Despite numerous attempts to improve the conditions within PRI, we must, unfortunately, acknowledge that these attempts have not been successful.”

PRI Managing Director Fiona Reynolds responded at the time, saying she was deeply disappointed with the decision, and that a review of the organisation’s governance was already underway.

The PRI was established to embed six basic environmental, social, and governance principles in investment decisions. Some of the world’s largest investors have signed up to the principles, including pension and sovereign wealth funds, along with large asset managers and insurance companies.