CalPERS' new executive search firm, Dore Partnership, does not expect the fund to have a new CIO in place until March, according to a presentation to the board Wednesday.
CEO Marcie Frost expects to start the search process at the end of July or early August, conduct interviews in late summer and fall, with final selection of a CIO in fall or early next year, she said at Wednesday's virtual offsite meeting of the California Public Employees' Retirement System, Sacramento.
Filling out the target timeline, Crawford Torell, a principal at Dore Partnership, said that Dore Partnership executives expect first round of candidate interviews by a sub-committee in September with a selection in early to mid-December.
"We only put early to mid-March as the candidate joining CalPERS as we know from experience that there are non-competition periods that can range from one to six months," Ms. Torell said.
The timeline means that a new CIO would not be in place until four months after the board is scheduled to select a new asset allocation. While its the board's job to select the asset allocation, a key part of the CIO's job is to advise the board on its asset allocation and manage the pension fund's investments, according to CalPERS last CIO job posting.
Information provided to the boad on the first day of its virtual offsite meeting on Monday, Dan Bienvenue, interim CIO of the $473.4 billion fund, told the board that he expected to complete the asset liability management process with a new asset allocation in November, a month before a new CIO is selected under the target timeline.
Mr. Bienvenue said that the new asset allocation could include an expansion of private equity and real asset allocations, a new private debt allocation and leverage added to the entire portfolio. The approaches are similar to approaches favored by CalPERS' former CIO Yu "Ben" Meng.
During the discussion, Dore Partnership presented the board with five CIO criteria: relevant investment experience, leadership, communication, fitness for public role and a sense of mission.
Dore Partnership executives told the board that their data analysis showed that top performing CIOs at other funds had been internal candidates.
Rich Hutton, a partner at Dore Partnership, who leads the firm's engagement with the global asset management community, noted that 48% of asset owners CIOs whose plans earned a five-year annualized 7% rate of return or more had been promoted, with remainder being external candidates. Dore Partnership's data showed that the average tenure of the organizations with returns of an annualized 7% return was 5.1 years.
"Putting these two data sets together ... it is clear that continuity is one of the key drivers" of investment performance, Mr. Hutton said.
Charles Dore said that the data showed that "48%, or nearly half, of the top-performing CIOs were internally appointed. That by definition means that half of the top-performing asset owner CIOs were not a CIO before their current role."
Ms. Frost and her team — Doug Hoffner, chief operating officer, Michelle Tucker, human resources division chief and Karen Van Amerongen, who heads investment officer human resources — selected Dore Partnership from CalPERS' springfed pool, spokeswoman Megan White said in an email in response to questions.
During the discussion, a number of board members noted that there were very few diverse CIOs. Only 10 of the 100 pension plans, endowments, foundations and sovereign wealth funds' in Dore's dataset are female and just four are from historically underrepresented groups.
California State Controller and board member Betty T. Yee said that there may need to be some "trade-offs."
"I think while the net will be cast wide ... this is a discipline where there is a severe underrepresentation" of historically underrepresented groups.
Ms. Yee said that in order to consider a diverse set of candidates, she said she hoped the board would have the flexibility to look at non-CIO candidates who are "ready to ascend to a CIO position."
Ms. Yee added that the candidate should have direct investment experience.
"We've seen a lot of candidates who have been ... around great investment teams," but they have not had direct investment experience themselves, she said.
Mr. Dore said his team are in general agreement with the board's direction and that he would present Ms. Frost and her team with an updated copy of the CIO criteria to share with the board.
The CIO's job criteria and the recruitment process does not need to come back to the board for a vote, Ms. White said.