SACRAMENTO, Calif. - The CalPERS board this week hopes to pick the system's next leader from a list of five finalists.
Selection of a new chief executive is viewed as critical to bringing stability to the $135 billion California Public Employees' Retirement System, which has been plagued by top-level staff departures. What's more, a major changeover on the politically charged board shortly will take place.
Sources confirm the five finalists are:
* Fred Buenrostro, an 11-year board designee on the boards of both CalPERS and its sister fund, the $97 billion California State Teachers' Retirement System, Sacramento, for two state controllers and three state treasurers. Mr. Buenrostro is chief deputy director of the state's Department of Personnel Administration, responsible for day-to-day management of the agency and for the state's negotiations with its workers on salaries and benefits.
* Gerald H. Goldberg, executive officer of the California Franchise Tax Board, the state's tax-collection agency, since 1980.
* Thomas Higgins, president and chief operating officer of Business for Social Responsibility, San Francisco, a 10-year-old group that encourages companies to consider the claims of all stakeholders. Elected to the Iowa General Assembly at age 27, Mr. Higgins later served as a White House aide under President Jimmy Carter, and then pursued careers in journalism, health care and at Edison International, a Rosemead, Calif.-based electricity holding company.
* Clark Kelso, law professor at the University of the Pacific's McGeorge School of Law, Sacramento, and director of its Capital Center for Government Law and Policy. Mr. Kelso served as acting state insurance commissioner in July 2000 after Chuck Quackenbush resigned for letting insurers avoid up to $3.7 billion in fines for mishandling earthquake-related claims.
* Robert Aguallo, assistant executive director of investment operations at CalPERS since February 1995. He oversees internal and external investment operations in all asset classes and advises Chief Investment Officer Mark Anson on strategic investment policies. He also oversees cash management and master custody arrangements.
The inside track
Some observers speculate that Mr. Buenrostro, a CalPERS board insider and a 20-year state government veteran, and Mr. Goldberg, who is credited with ably handling a large state government agency for 22 years, have the inside track.
While Mr. Kelso enjoys strong ties with Gov. Gray Davis and the Legislature, some observers believe organized labor could block his appointment. Mr. Higgins is viewed as a dark horse, although rumor is he has the support of state Treasurer Philip Angelides, who has become a dominant force on the board and has pushed CalPERS into a number of socially responsible investment policies, from tobacco divestment to screening emerging markets for human rights and political stability factors.
Mr. Aguallo, the lone CalPERS staffer up for the job, is well regarded but does not appear to have adequate support to win the top slot.
All the job candidates failed to return phone calls seeking comment, with the exception of Mr. Higgins, who declined to comment.
The board will spend Sept. 18 interviewing the finalists, and is expected to name its selection the following day. CEO James Burton left the fund in late August after eight years as head.
Startup gets $150 million
Separately, CalPERS handed $150 million to Timeless Investment Management and Research LLC, a startup manager and the 10th firm in the pension fund's manager development program.
The pension fund invested an undisclosed sum for a 50% stake in the Chicago-based manager. Timeless was launched by four former employees of Chicago Asset Management Co. Strategic Investment Management, Arlington, Va., a CalPERS strategic partner, assisted CalPERS with the deal.
Officials at Timeless will manage the $150 million portfolio in an active U.S. small-cap approach similar to the one they used at Chicago Asset Management, where they had worked for the previous two years. The firm plans to launch an active U.S. large-cap strategy within a year.
"I think there are a lot of people in this world who have an entrepreneurial spirit. I think that's how I would describe us," said Michael Wolcott, president and chief investment officer of the new firm.
Mr. Wolcott is joined by Gary Kauppila, his co-portfolio manager at Chicago Asset Management; Kevin McGrath, director of marketing at the new firm and a marketer at Chicago Asset; and Patrick Wolcott, his brother and head of operations, who was a trader at the former firm.
Also, CalPERS terminated Goldman Sachs Asset Management, New York, as manager of a $663 million domestic enhanced index large-cap growth equity portfolio.
The quantitative strategy "did not show the ability to outperform the benchmark in any market environment," according to a staff memo to the board.
Since the portfolio's May 31, 1998, inception, it returned a cumulative -27.3% net of fees, compared with -24.3% for its customized benchmark.
Unaffected by the termination is an active domestic concentrated growth stock portfolio Goldman's Tampa, Fla., office was awarded by CalPERS in May. That portfolio is expected to be around $700 million.
Andrea Raphael, Goldman Sachs Asset Management spokeswoman, declined to comment.