CalPERS CIO Stephen Gilmore has been on the job for two months, but he is already making a few adjustments.
One tweak could be his emphasis regarding private markets co-investments.
At the Sept. 16 investment committee meeting, Gilmore said the $519.9 billion California Public Employees’ Retirement System, Sacramento, has been focusing on fee-saving structures.
CalPERS invested $11 billion in private markets co-investments in fiscal year 2024, the pension fund reported. This is up from $6.3 billion in co-investments and direct investments as of Dec. 31, 2023. His predecessor, Nicole Musicco had cited boosting co-investments as an accomplishment during her 18-month tenure.
“The key here is to make sure we have the right alignment,” Gilmore said. “What often happens is people focus on, you know, let's say zero fees, zero carry and they end up getting worse investments because there is a lack of alignment.”
So CalPERS officials are focusing on making sure CalPERS is aligned with its managers, he said.
During the same meeting, Gilmore said he has made some changes to the investment office and how it functions, including veering from a system set up by Musicco.
He said he asked Michael Cohen, chief operating investment officer, to also take on responsibility for the investment team’s operations, technology and strategy from Dan Bienvenue, deputy chief investment officer, capital markets and operations. Bienvenue had served as interim CIO when Musicco resigned as well as when Musicco’s predecessor former CIO Yu “Ben” Meng departed in August 2020.
“That frees Dan up a little to focus more on the investing activities,” Gilmore said.
Gilmore also cut down the number of internal staff meetings because he said there are too many team meetings.
“When Nicole was here, she set up some internal governance teams, three committees that would meet weekly. We're now meeting every four,” Gilmore said at the investment committee meeting. “I don't think we'll lose anything. I think it will help us focus on what's important.”
CalPERS has also trimmed the investment office’s strategic initiatives for fiscal year 2025 to four initiatives, down from the nine strategic initiatives it had under Musicco’s leadership. Those changes consist of cutting down the three portfolio-related initiatives to one — total fund optimization. The three process-related initiatives are also down to one — an investment data and technology strategy. Pension fund officials are also continuing a people strategy and cut the two performance-related initiatives to one — active risk innovation. The remaining initiatives have been combined with core workload.
“One of the key things that we learned was that this was a little bit overwhelming at the time,” Cohen said during the meeting.
Musicco acknowledged in her final appearance before CalPERS’ investment committee as CIO on Sept. 18, 2023, that she had gotten some staff pushback on the initiatives. Musicco noted that when she took on the CIO role in 2022, “the team accepted an ambitious challenge of nine initiatives.”
But she added that “not everyone is going to be open to change, which oftentimes can result in some grumbling.” she said.
“The vast majority accepted the challenge to be change agents and lay the groundwork to be a best-in-class investment office,” she said.
Gilmore said talent development is a core part of what the investment office is focusing on this fiscal year. Another key for him is technology, which will empower staff to be more innovative and do “things more efficiently and reducing risk,” he said.
Indeed, Gilmore with CalPERS CEO Marcie Frost is co-sponsoring a major technology modernization project started under Musicco’s leadership.
The ambition project outlined during the Sept. 17 finance and administration committee meeting would revamp CalPERS' technological abilities so officials can take advantage of generative artificial intelligence.
Speaking at the finance and administration committee meeting, Gilmore said the technology initiative is “central to what we want to do in the investment space.”
It relates to better understanding CalPERS’ portfolio, increasing efficiency and reducing risk, he said.
The fact that he and Frost are heading the effort highlights its importance, Gilmore said.
