When Connecticut Treasurer Shawn Wooden took office in January, he knew he was confronting a public pension plan funding gap of at least $35 billion. He also had a hole to fill in his organization.
Mr. Wooden needed someone focused on the investment risks embedded in the state employees' and teachers' pension plans that own thousands of holdings in companies, government bonds, real estate and infrastructure worldwide. He turned to Kevin Cullinan, a former senior risk officer at General Electric Co.'s pension plan who oversaw the company's $27 billion of externally managed investments from 2013 to 2016 and was the risk manager for alternative assets including private equity from 2005 through 2012.
"Mission No. 1 is seeing the risk," Mr. Wooden said in an interview. "Having a chief risk officer that is not a portfolio manager creates some distance and some independence. I think that's better governance, better monitoring and better accountability."
Connecticut is joining a growing number of major public pension funds that have appointed chief risk officers since last decade's financial crisis to evaluate volatility, liquidity, leverage, the impact of rock-bottom interest rates and new risks like global warming. Though the $380.7 billion California Public Employees' Retirement System, Sacramento, the largest U.S. pension plan, appointed a CRO in 2010, the $216.2 billion New York State Common Retirement Fund, the third-largest pension plan in the U.S., didn't do so until 2017. Some of the biggest U.S. public pension plans, including the $82.3 billion Virginia Retirement System, Richmond, the $75.6 billion Georgia Teachers Retirement System, Atlanta, and the $74.5 billion Michigan Retirement Systems, East Lansing, don't have a chief risk officer.