New Mexico Pension Appoints New CIO | Chief Investment Officer

(December 6, 2013) — The New Mexico Public Employees Retirement Association (PERA) has appointed Jonathan Grabel as its new CIO after three months of a nationwide search.

Grabel currently serves as CIO for the Montgomery County Public Schools’ $2.5 billion pension plan in Maryland. He will begin running New Mexico’s $13.9 billion plan on January 6 of next year.

“We are very excited to have Jon join our fund,” Wayne Propst, PERA’s executive director, told aiCIO. “He has had extensive investment experience in both the private and public sectors and he comes with an excellent academic background. We believe he’ll be a good fit.”

Prior to overseeing the defined benefit and contribution plans for one of the largest and most recognized public school systems in the US, Grabel served as general partner at private equity firm Baker Capital. He also held positions at investment bank SBC Warburg, Japanese financial holding company Nomura, and accounting firm Arthur Andersen.

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“He’s coming into a good situation here in New Mexico,” Propst said. “We chose Grabel because we wanted someone with a strategic vision for PERA going forward,” Propst said. “He’ll be able to provide a solid management for our excellent investment staff and be a great leader to our fund. He’s coming into a good situation here in New Mexico and we’d like him to help us keep growing the fund.”

PERA enjoyed a 13.26% return in fiscal year 2013, putting the fund’s assets at an all-time high of $13.9 billion. Its board of trustees reported last month a decreased in unfunded accrued actuarial liability of more than $1.5 billion from last year—putting PERA’s total liabilities at $4.6 billion and the pension 72.9% funded.

The New Mexico plan owes part of its success to the new legislature addressing pension reform. Effective July 1, 2013, it distinguishes two tiers of benefits , lowers the cost-of-living adjustments from 3% to 2% and delays vesting periods. The effect, Propst said, was immediate.

Grabel holds an MBA degree from the University of Chicago Booth School of Business and an undergraduate degree in economics from the Wharton School of the University of Pennsylvania. He is also a CPA.

He will receive $210,000 in annual salary, Propst said.

(December 6, 2013) — The Governor of Alaska has urged the state to transfer $3 billion from a savings account to help remedy the shortfall in some of its public pension funds.

Sean Parnell announced a plan yesterday that would effectively remove the funds’ deficit and lower the costs paid annually from state coffers.

“State pension contributions represent the single largest cost driver in the state’s operating budget,” Governor Parnell said. “This year’s budget contains an unfunded pension liability contribution of more than $600 million, and the payment plan requires an increase to more than $700 million next year. Soon, the operating budget would be required to contribute more than $1 billion annually to this one line-item.”

The Governor said current projections put Alaska’s Public Employees’ Retirement System and Teachers’ Retirement System with a combined unfunded liability of $11.9 billion.

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“If left unaddressed, the annual state pension contribution will increasingly burden the state and hamper our ability to meet the people’s constitutional priorities,” said Parnell. “Paying down the debt now is this generation’s responsibility that we will not leave to the children of Alaska to deal with in the future.”

The governor will seek legislative approval for a one-time $3 billion appropriation from the Constitutional Budget Reserve into the retirement trust funds. A savings infusion in the fiscal year 2015 budget would enable the annual state pension contribution to drop to $500 million a year, Parnell said, and would increase the funded status of each retirement system by 10% almost immediately.

Elsewhere in the US, last week a group of lawmakers in Illinois’ state legislature called for increased state contributions as part of a proposed pension reform plan. Its five public pension plans are currently underfunded by over $100 billion.