CalPERS aims to hire CIO by September

The new CIO will join at a critical time for the fund, which has been without a private equity head for more than a year.

The California Public Employees’ Retirement System is aiming to have a new chief investment officer in place in September, a spokesman for the California pension scheme told Private Equity International.

The current CIO of the $355 billion fund, Ted Eliopoulos, announced in May that he will leave the fund by the turn of the year. The projected September date is to give Eliopoulos enough time to hand over to his successor, the spokesman said.

“We are looking at September to have the process completed. This will allow time for Ted Eliopoulos to work with the new CIO to ensure a smooth transition.” He stressed the timeline is an estimate and that it won’t necessarily result in a September announcement.

The hire comes at an important time for CalPERS. It is in the process of overhauling its private equity programme and creating a new arms-length entity – CalPERS Direct – to make direct investments in the asset class.

This entity will have its own investment staff and board and is slated to launch in the first half of 2019. In a June board meeting Eliopoulos said CalPERS risked losing out on $15 billion to $20 billion in returns if it stuck with its current private equity investment approach. The fund also needs to hire a new head of private equity to help oversee this newly-structured approach, which will aim to bring the fund’s private equity allocation from 8 to 10 percent.

The pension giant has been without a private equity head for more than a year since the departure of Réal Desrochers in April 2017. A spokeswoman for the fund declined to comment on the timeline for his replacement.

CalPERS’ proposed revamp of its private equity model is not without internal scepticism, with board members Margaret Brown and Theresa Taylor querying the changes. At the June board meeting Brown said the outsourcing of its private equity function was more akin to “renting” rather than “buying” a track record in the asset class.

Earlier this month CalPERS reported that private equity returns had fallen short of the benchmark, underperforming by 2.5 percentage points, which may give added urgency to its restructuring efforts.

The updated investment strategy will also scrap the new CIO’s ability to approve increases in capital commitments to separately managed accounts.