Penn State Gets a New CIO | Chief Investment Officer

Joe Cullen

After a six-month search, Penn State’s $4 billion endowment has found a new chief investment officer, and he’ll be flying in from Montana just in time for the fourth quarter.

Joe Cullen will replace John Pomeroy on September 16, leaving his CIO role at the Montana Board of Investments. He has held that title at the $18 billion fund since 2015.

Pomeroy, Penn State’s chief of 17 years, retired last December. His successor will be the institution’s second CIO. Deputy CIO Sonali Dalal had been the acting head during the interim.

“Replacing a chief investment officer of John Pomeroy’s caliber has been a real challenge, as John will be a very tough act to follow,” Cullen’s new boss, Executive Director David Branigan, said. “Joe Cullen brings to Penn State’s Office of Investment Management a high degree of experience, expertise, and professionalism.”

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Cullen’s former boss, Executive Director Dan Villa, will double as acting CIO for now, he confirmed. Although he did not comment on Cullen’s departure, Villa said the board will discuss “recruitment options” at its August 20-21 meeting.

At his new post, Cullen will coordinate the university’s investment strategies and portfolio construction in conjunction with mitigating risks as well as managing investment performance.

“Education has been an important part of my life, and I’m excited to join a leading institution like Penn State and support its mission to impact the world through teaching, research and service,” Cullen said.

Cullen was earning about $250,000 at the Montana Board of Investments, according to the Skorina Letter, the newsletter of CIO and institutional executive career recruiting firm Charles Skorina and Co. The business expects him to make at least double that at his new gig.

Penn State’s asset mix was 24% US equity, 22% international equity, 20% private equity and venture capital, 14% diversifying and private credit, 12% fixed income, and 8% real assets as of December 31, 2018.

Penn State Needs a New CIO

Tags: CIO, Endowments, Joe Cullen, Penn State, Ron Pomeroy, The Skorina Letter

The Maryland State Retirement and Pension System (SRPS) returned 6.46% in the fiscal year ended June 30, growing the fund’s assets to $54.2 billion, but it missed both its 7.11% benchmark and 7.45% assumed rate of return.

The standout performer was again private equity, returning 13.7% over the period. It was also the only space to reap double digits, although rate-sensitive assets came close at 9.3%.

“The System’s returns reflect strong performance of private equity assets and nominal fixed income assets along with positive but more modest returns in the remainder of the asset classes,” said Andrew C. Palmer, the fund’s chief investment officer.

Credit and real assets returned 6.5% and 5.3%, respectively. The biggest laggards, however, came from multi-asset strategies, public equities—its largest allocation—and absolute return, which returned 4.4%, 3.9%, and 3%, respectively.

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The fund returned 8.06% the year prior. It’s three-, five-, and 10-year returns have been 8.17%, 5.62%, and 8.61%.

In other news, the fund’s trustees voted to reduce the rate of return by five basis points at its July board meeting, to 7.40%. Reductions come as mortality rates have declined over the past four years.

The decision came after a study of different hypothetical scenarios by the pension’s consultant, Gabriel Roeder Smith, testing different rates of return and assumed price inflation.

And the winning assumptions: 7.40% investment return, 3.10% wage inflation, and 2.60% inflation—pegged against an alternative assumption of 7.30% return, 3.00% wage inflation, and 2.50% inflation.

“Aggregated results…indicate that the overall MSRPS-state funded ratio increases and the contribution amounts decrease…due to assumption changes only,” the consultant noted in its report.

The total findings for each alternative assumption are summarized below.

Source: MSRPS

“The Board’s prudent action today is in recognition of ongoing changes in the financial markets, while continuing to achieve the investment returns required for the System over the long term,” said State Treasurer and MSRPS Board Chair Nancy K. Kopp.

The news was announced several days ahead of returns.

Maryland SRPS’s asset allocation is 36% public equity, 18.1% rate-sensitive assets, 14.1% private equity, 13.3% real assets, 8.9% credit, 7.4% absolute return, 1.3% multi asset strategies, and 0.5% cash.

Maryland State Retirement System Returns 8% for Fiscal 2018

Tags: assumed rate, Maryland, Maryland State Retirement System, Pension, Private Equity, Returns