CalPERS CIO Leaves Friday, but Replacement Delayed

California Public Employees’ Retirement System (CalPERS) Chief Investment Officer Ted Eliopoulos is ending his 17-year tenure at the largest US public pension plan on Friday, but his replacement, Yu Ben Meng, remains stuck in China and will be unable to take over the investment reins of the $361.1 billion  retirement plan until sometime in January.

Both Eliopoulos’ impending departure and the fact that Meng’s start date won’t be until sometime in January were announced at the pension plan’s investment committee meeting on November 13. CIO had reported before the meeting that Meng could not start sooner because he has a non-compete agreement with the Chinese government following his three-year tenure as deputy CIO at China’s State Administration of Foreign Exchange.

The agreement has prevented Meng, who was named CalPERS CIO in September, from joining the pension plan. Meng is also being prevented by the Chinese government from leaving the country until the non-compete expires, said former CalPERS board member and investment officer J.J. Jelincic. Jelincic has said he has had phone conversations with Meng from China. Several CalPERS sources confirmed Jelincic’s account to CIO.

Eliopoulos, in brief comment at the investment committee meeting, said that Eric Baggesen, a managing investment director who directs the pension plan’s asset allocation efforts, would take over as interim CIO until Meng starts in January. Meng had previously worked at CalPERS and had been one of the investment leaders of asset allocation efforts.

It is unclear exactly when Meng’s non-compete expires and CalPERS officials on Tuesday weren’t specific as to what date in January Meng would start at the pension plan.

Meng had a senior leadership role in investing more than $1 trillion in China’s foreign currency reserves, including US dollars that were invested in Treasuries and US-listed equities. He is a US citizen, but was born in China

That may be part of his problem in terms of leaving the country.

“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.

In a surprise announcement in May, Eliopoulos said he would be stepping aside by the end of the year because of health considerations of one of his daughters who is attending college in New York City. Eliopoulos said it is important that he is within “reasonable distance” of his daughter.

Eliopoulos joined CalPERS in January 2007, and served as senior investment officer for the pension plan’s real estate asset class. He oversaw the portfolio during the great financial crisis when it lost more than 48% of its value. He was tasked with rebuilding the portfolio, reducing speculative office and land deals in place of a new emphasis on core real estate assets. In 2014, he assumed the role of  CIO following the death of Joseph Dear from prostate cancer.

CalPERS officials and board members had originally hoped that the new CIO could work aside Eliopoulos for several months before he left CalPERS.

It is a particularly 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.

Eliopoulos in his remarks on Tuesday thanked CalPERS staff for their support during his tenure but did not address the fact that he would not be working side-by-side with Meng.

It is unclear if the investment committee will vote on the $20 billion direct investment organization at its December meeting or wait until after Meng takes over as CIO.

If CalPERS Direct becomes a reality, Eliopoulos won’t be around to see his biggest idea implemented. Eliopoulos had formally proposed the private equity direct investment organization, the first of its kind for a public pension plan in the US, in July 2017.

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. The investment committee is made up of all 13 CalPERS board members.

Sources say that Mathur has told fellow board members that she would like CalPERS Direct approved before she leaves her post in early January.