Tollette exits the CalPERS spotlight

Wylie Tollette’s tenure as COIO at the $340bn California pension fund has not been without controversy.

The California Public Employees’ Retirement System is looking to fill another senior role after chief operating investment officer Wylie Tollette announced his departure last week.

Tollette, who has been in the position since 31 March 2014, is returning to mutual fund giant Franklin Templeton Investments, where he spent 19 years before joining CalPERS. His last day will be 5 January.

The pension fund has begun the search for Tollette’s replacement, and Matt Flynn, an investment director, becomes interim COIO.

Tollette has, in the words of CalPERS chief executive officer Marcie Frost, helped save the fund  “millions of dollars” through improvements in structure, reporting accuracy and operational efficiency. However, his tenure has not been without controversy.

At a board meeting in May he came under fire for presenting a slide claiming that CalPERS had reduced external management fees by $250 million from the 2014-15 fiscal year to the 2015-16 fiscal year. A footnote – which Tollette pointed to during his presentation – explains that partnership expenses of $75 million and management fees paid by underlying funds of funds of $46 million were excluded from the latest numbers, meaning the actual reduction was $129 million.

Board candidate Margaret Brown and former board member Michael Flaherman raised questions as to why the information was presented in this way.

“I learned that a number of CalPERS employees receive annual bonuses that are based in part on achieving expense control targets,” Brown said at the meeting. “I wonder, are these the same people who are deciding to not count certain expenses? Does this boost their bonuses?”

Some critics also questioned whether Tollette was correct to attribute the fall in costs to CalPERS bringing investment activities in-house.

During his tenure, Tollette played a lead role in launching the Private Equity Accounting and Reporting Solution system that allows CalPERS to report carried interest and other fee information from private equity investments.

Reducing cost is a key element of CalPERS’ 2020 strategic plan, which Tollette helped develop and implement. The “INVO 2020 Vision”, first introduced in 2014, also seeks to address risk and complexity. In private equity, this means a reduced number of partnerships.

Tollette is the third significant departure from CalPERS this year. In February chief financial officer Cheryl Eason left the fund to return to Canada to become vice-president and CFO of her alma mater Royal Roads University.

In April Réal Desrochers, managing investment director for private equity, left after six years at the pension. At a November board meeting, chief investment officers Ted Eliopoulos said he had been “holding off on recruiting until we conclude our business model discussions”, referring to ongoing discussions around integrating private equity into the pension plan’s global equity programme.

Sarah Corr, an investment director in private equity at CalPERS, is serving as interim head of the programme.

In September, CalPERS named Charles Asubonten as its new CFO. He joined from an unnamed private equity firm, where he was managing director.

It took the pension more than eight months to fill the COIO role after Janine Guillot left in July 2013.