Shuffle among large public plans' CIOs

Three high-profile public fund CIOs took new jobs so far this month, highlighting the increasing challenge of leading an investment team at a public pension fund amid economic and political pressures and increased public scrutiny — not to mention the lure of higher pay.

The chief investment officers who moved are:

• Raudline Etienne, who left the $146.5 billion New York State Common Retirement Fund, Albany, on Sept. 15 to become senior director of global business consulting firm Albright Stonebridge Group.

• Ronald Schmitz, who announced his resignation from the Oregon Investment Council, Tigard, effective Oct. 31, to become CIO of the $51 billion Virginia Retirement System, Richmond. The Oregon council oversees the $60 billion Oregon Public Employees' Retirement Fund, Salem.

• Trent May, who resigned Sept. 2 from the $6.5 billion Wyoming Retirement System, Cheyenne, to become CIO of Wichita, Kan.-based Koch Industries' $99 million foundation and $173 million family office. Mr. May was the Wyoming system's first CIO, hired in 2009.

Pay is a major factor for public fund CIOs.

“I think a significant amount (of the turnover) has to do with compensation,” said Thomas Williams, executive director of the Wyoming system. “There are political and economic constraints occurring throughout the nation in the public service arena. It is limiting the ability to attract and retain the highest caliber of staff.”

Mr. May said in a telephone interview that leaving for Koch was a “unique opportunity” and a “one-off deal,” but he also acknowledged a general philosophical change is taking place in public funds.

Outsourcing the CIOs' duties and dwindling resources are creating a different mentality in building an institutional infrastructure, he said. “The resource issue is the No. 1 challenge in that position,” Mr. May said. “I didn't want to be in a situation where I'm recruiting and training new personnel every few months.”

Although Mr. Schmitz said his move involved “some wanderlust,” he acknowledged he had the mindset of moving to the private sector from the Oregon council. Instead, Virginia came along with a “more attractive pay package” and a policy from trustees that allows more investment decisions to be made by staff.

Mr. Schmitz said the decision to stay in the public sector depended on whether he could find a fund he respected. He said the Virginia fund has a stellar reputation. Plus, he is familiar with that part of the country and believes it's a good place for his family to live.

“I knew it was an attractive place to work and a good personality fit,” Mr. Schmitz said.

But Mr. Schmitz agreed there are plenty of reasons for CIOs to leave the public sector, whether it is compensation structure or increasing scrutiny. He said Virginia pays fairly well, but it still doesn't match the salaries seen on Wall Street.

“Speaking at an arm's length, (CIOs) are more and more in the fishbowl than ever since 2008,” Mr. Schmitz said. “They are more and more a target than we used to be,” a result of both anti-government sentiment and the anti-affluent left that hates investment officers that are making more than the average worker, he said.

Ms. Etienne, who was CIO at the New York State Common Fund since early 2008, was not available for comment.

Marjorie Tsang was named interim CIO. Ms. Tsang is assistant comptroller for real estate investments. Mike Riley, senior real estate investment officer, will assume her duties on an interim basis. Spokesman Eric Sumberg did not comment on what the fund is doing to find a replacement for Ms. Etienne.

Also this month, the $36 billion Maryland State Retirement and Pension System, Baltimore, named A. Melissa Moye as CIO. She replaced Mansco Perry III, who left in October 2010 to become CIO of the $587 million endowment fund of Macalester College, St. Paul, Minn. Ms. Moye, deputy treasurer for financial policy, had been acting CIO since Mr. Perry's departure.

Ms. Moye served as a trustee for the retirement fund from 2003 to 2007. She also served as chair of system's corporate governance committee and a member of the system's investment committee.

“Over the last 10 months, (Ms.) Moye has served the retirement system and its beneficiaries with great skill and prudence as the acting CIO,” state Treasurer Nancy K. Kopp, chairwoman of the system's board of trustees, said in a news release. “Under her leadership of the investment division during the interim, the system returned more than 20% on its investments for the fiscal year that just ended June 30.”

Among the public funds left without a CIO, Wyoming's Mr. Williams said fund officials are in the process of “assessing the best structure for the best investment advice,” whether that remains internal, moves to an outsourced structure or becomes some combination of the two. John Johnson, senior investment officer, was named interim CIO.

“It will be an area of extreme study on behalf of management, myself and the board,” Mr. Williams said. “We will take time for reassessment to best provide this type of financial guidance. ... We see this as a great opportunity to find out what is the best model.”

In Oregon, state Treasurer Ted Wheeler will hire an interim CIO with input from the investment council; that process will start with the council's meeting on Sept. 28. “They are going to take the time to do it right,” said spokesman James Sinks.

Messrs. May and Schmitz both lauded their time at their respective retirement systems, but said self-imposed restrictions can make it more difficult to invest at a public fund. Mr. Schmitz said legislatures challenge compensation, push initiatives through and “force feed” different aspects into portfolios.

“Extraneous things take away from the job of investing,” Mr. Schmitz said. Part of the attractiveness of the Virginia system is less governance and more discretion, he said.

“There's no secret public funds have challenges,” Mr. May said. “Ultimately, they have to decide if they are investment organizations and if so, they have to put employees and a structure in place.”