The Most Coveted Job in the Land—Maybe | Chief Investment Officer

In size alone, the dean of the American public pension investing space is inevitably the CIO of the California Public Employees’ Retirement System (CalPERS). In early May, the fund announced it had hired Korn/Ferry to lead the search for the late Joe Dear’s successor, and set off a minor feeding frenzy of rumor-mongering and gossip across the industry.

“Who do you think will be the next CIO? We need to find out before October—that’s when the Power 100 ranking comes out,” one Chief Investment Officer (CIO) reporter recently asked.

“No idea. California—odd place,” said another.

“Let’s just do an entirely unscientific poll,” a third commented. “At the very least, we’ll see who is lobbying for themselves.”

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So we did just that. Due to our lack of vision, the survey options were limited: The leaders of other large American public pensions, an endowment chief or two, and, in the lone instance of ingenuity, “combining it with California State Teachers’ Retirement System under CIO Chris Ailman.” The big winners soon emerged, with the obvious candidates leading the way. Jay Willoughby—the affable chief of the Alaska Permanent Fund—tallied a significant number of votes, as did Texas Teachers’ Britt Harris and Ailman himself. Outgoing Alberta Investment Management Corporation CEO Leo de Bever and Florida’s Ash Williams followed close behind. “Someone from the corporate world”—a truly un-inspirational option provided by the aforementioned editorial team—garnered solid support as well. Wake Forest University’s endowment—errr, Verger Capital Management now, following the early-May spinout—leader Jim Dunn also made an appearance, as did the University of Chicago’s Mark Schmid.

As with any local political campaign, the write-in candidates were the most telling.

“Let’s just do an entirely unscientific poll. At the very least, we’ll see who is lobbying for themselves.”

Australian Future Fund’s David Neal received a number of citations, as did current CalPERS consultant Michael Schlachter of Wilshire Associates, K.C. Howell of the Virginia Retirement System, and Greg Williamson of the BP pension system. The prize for the least interesting—although, for the betting types, the most likely—candidate was current CalPERS interim-CIO Ted Eliopoulos. “Jiohn Skjervcem”—we assume they meant CIO of the Oregon State Treasury John Skjervem—also received exactly one write-in mention.

Of course, the CIO editorial team’s muck-racking missed a more salient issue: Would any of these gentlemen (and yes, all gentlemen, a continued stain on this industry’s tablecloth, which we address in "The Missing Women of Asset Management") actually want the job? American public pension teams struggle valiantly under the governance structures that are imposed upon them (see page 44 for the counter-example, the Canada Pension Plan Investment Board), but the pay hardly compensates for the headaches. As one respondent opined in what was surely the most insightful write-in answer of all: “Nobody deserves that kind of torture.”

—Kip McDaniel

The world’s largest sovereign wealth fund is serious about its diversification plans, with changes ahead for its equities, fixed income and real estate holdings by 2016.

Norway’s $888 billion sovereign wealth fund plans to bring more of its real estate portfolio under in-house management as part of a move to broaden its portfolio.

Laying out its plan for 2014-16 in a strategy report published this morning, Norges Bank Investment Management (NBIM)—the group responsible for the management of the Government Pension Fund Global—said it would add “new frontier markets” to its equity portfolio, as well as include more currencies in its fixed income allocation and take larger stakes in companies.

NBIM said it planned to invest 1% of the fund a year—roughly equal to $9 billion according to the fund’s current size—into private real estate markets between 2014 and 2016. The group also stated its intention to take on full ownership of more property investments.

“Our real estate investments to date have primarily been implemented through joint venture agreements,” NBIM said. “We will prepare the organisation for management of fully owned properties and a more active role in the development of our properties. Larger ownership stakes in listed real estate companies and public-to-private transactions will be considered.”

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The move is part of plans to “build a global, but concentrated, real estate portfolio” with investments focused on major cities in the US and Europe, NBIM said.

“We will continue to capture globalisation through investments in global distribution networks,” the group added, implying that the fund could replicate the deal struck late last year with US developer Prologis to invest jointly in a portfolio of logistics properties.

Elsewhere, NBIM said it planned to take larger ownership stakes in “selected companies”, with the number of stakes of 5% or more rising to 100 by 2016. Due to its size, the fund already owns an average of 1.3% of every listed company in the world.

“With more than 8,000 companies in the fund, we are mindful that we cannot cover all companies in depth,” NBIM said. Instead, external managers are to be used for exposure to emerging and frontier markets, with the number of external mandates across equities and fixed income expected to hit 100 by 2016.

The world’s largest sovereign wealth fund appears serious about its diversification plans. As well as the expansion of its real estate capabilities, Petter Johnsen, CIO for equities, has already spoken this year of a recruitment drive to double the Government Pension Fund Global’s equity team to roughly 200 people. It has also advertised for economists to aid its asset allocation team and has lobbied the Norwegian government for permission to invest in private equity and infrastructure.