Friends With Benefits: New CalPERS Guy Gets Tough

We haven't addressed much in our "Friends With Benefits" category since this post in August of 2017 that noted an 11.2% return that year and a 68% funded ratio for benefits.  During the council rotation Monday night, Mike Brownrigg commented that some of the unheralded accomplishments of the council this year was additional funding for pension benefits.  Compared to many cities we are in good shape--emphasis on compared to many other California cities.  This matters because the added funds come out of the funds available for everything else in town.  Last week, the WSJ had a piece on the new investment head at CalPERS that was revealing and encouraging

It didn’t take Yu Ben Meng long to find problems at the nation’s largest pension fund.  Six months after starting as investment chief of the California Public Employees’ Retirement System, he told board members at a Santa Rosa, Calif., gathering in July that some older investments might be valued too richly, said people familiar with the matter. By fall, the fund had shaved the value of a real-estate investment trust and was looking more closely at a five-plus-year-old bet on a solar developer, other people said.

Now as his first year comes to a close, Calpers has cut ties with a longstanding manager on a hometown project, jettisoned under-performing stock pickers, and slowed work on a multi-billion-dollar private-equity experiment.  Calpers’ has struggled to consistently meet its 7% yearly target at a time of high retirement costs and ultra-low interest rates. The pension fund has on hand only about 70% of the assets it will need to fund future retirement checks.  He told board members in January that the world today has many bigger, more nimble asset managers not based in Sacramento.

The fund also jettisoned four of five firms in a program that sought to attract women and minority managers that his predecessor helped grow.  Cuts to such a program “could be a hot potato and have political ramifications,“ said Co-Chairman Howard Marks of Oaktree Capital Management. ”But if your job is to achieve investment performance, you can’t be confused about what’s No. 1.”

Staffers are looking more closely at a developer of solar energy assets that some staffers at the fund believe is worth half or less of what it is valued at, a person familiar with the matter said.

So he won't overtake Judge George Miriam as person-of-the-year, but I'm thinking he makes an excellent runner-up.  Now if Yu can just keep the Legislature and Newsom from burning through the $21.5 billion budget surplus on pet projects and be as disciplined as B'game has been, we might get somewhere.

Comments

[Joe]

I missed this related piece in the Journal, but the California Policy Center caught it:

This week, The Wall Street Journal reported that the National Education Association (NEA) has been recommending retirement products for its members that include high fees and kickbacks to the union. “Teacher David Hamblen said a recommendation by the National Education Association was a key reason he put 403(b) savings in an annuity before his 2010 retirement from the El Dorado Union High School District in Placerville, Calif,” reports The Journal. However, his fees reached 2.99 percent per year, far higher than competing products. Turns out: “NEA-affiliated state unions that referred members to Security Benefit [Corp.] products received $129,263 for the year, according to an SEC filing.” So the union was exploiting its members to benefit its own bottom line. Sound familiar? The kicker: “For its own employees, the NEA hired low-cost Vanguard to oversee a 401(k), resulting in investment fees a fraction of what many NEA union members pay.”

[Joe]

Whoopsy. Keeping you informed here at the Voice:

Calpers Search for CIO Comes Up Empty

The $445 billion public pension has been without a permanent CIO since last August when Ben Meng departed

The search for a new chief investment officer for the nation’s largest public pension system has struck out.

The California Public Employees’ Retirement System, or Calpers, has suspended its search for a CIO to replace Ben Meng, who departed last summer amid questions about his personal investments.

The article in the WSJ notes that Calpers needs to "recalibrate the job description, particularly regarding how much it pays." And they note the new CIO has to handle "a dynamic and public work environment". Yep, for sure!

[MBGA]

Any mention of whether Yu Meng is going to be prosecuted since "we have a country governed by the rule of law"?

[[email protected]]

Is it possible for the contributors of this article to share why they feel so strongly about this subject?
One paragraph each. Thank you.
I think a few of us have no idea what is being presented.

[MBGA]

Holly,
Do you what Calpers is?
Do you know about their financial situation?
Have you heard of the CCP?
Do you know about fiduciary duty and unethical associations to generate personal wealth (graft and corruption) within government and the investment world?

I believes Joe's comments are about the situation that Calpers finds itself in to find a new Chief Investment Officer.
My comment was a cynical response to Joanne's pleasant and sincere comment in the jury duty topic about seeing fellow citizens participating in jury duty as a sign that the country still has a legal system.

Does that help?