The abrupt Aug. 5 resignation of CalPERS CIO Yu "Ben" Meng leaves behind an ambitious plan to include embedded leverage in its asset allocation that he had championed to achieve a 7% expected rate of return — and questions about ethics and oversight at the country's largest public pension plan.
The day after Mr. Meng's departure, the $403.8 billion California Public Employees' Retirement System, Sacramento, scheduled an emergency, closed-session board meeting for Aug. 17 to discuss "performance, employment and personnel items."
The meeting comes in the wake of a complaint against Mr. Meng filed on Aug. 4 with the California Fair Political Practices Commission, and Mr. Meng's disclosure in an annual report filed with CalPERS that he personally invested in the stock of two private equity firms — Carlyle Group Inc. and The Blackstone Group Inc. — as well as Ares Management Corp.'s business development company, Ares Capital Corp.
It is unclear when Mr. Meng filed the disclosure report, which shows he held $10,001 to $100,000 in each of the three entities. A commission spokesman said he could not provide information about the complaint. CalPERS has invested with all three firms in the past. Since Mr. Meng became CalPERS CIO in January 2019, CalPERS com- mitted $328 million to Carlyle Europe Partners V and $1 billion to Blackstone Core Equity Partners II, a long-hold buyout fund managed by Blackstone Group.
To guard against conflicts of interest, CalPERS requires the CIO to report all investments and positions in business entities. The CIO also must report income — including gifts, loans and travel payments — from sources that would contract with CalPERS or from sources in which board-administered funds may invest, or from intermediaries such as consultants or placement agents. The CIO also must report all interest in California real estate.
The day after Mr. Meng's resignation was announced, California Controller and CalPERS board member Betty T. Yee called for the emergency board meeting.
"I take my fiduciary duty to safeguard CalPERS investments on behalf of the members very seriously," Ms. Yee said in a written statement. "I am incredibly disappointed to hear about the former CIO's lapse in both judgment and adherence to standard conflict-of-interest policies."
"I have called for an emergency board meeting to discuss this situation, review these policies, the CEO's oversight and implementation of these policies, and any additional safeguards necessary to ensure this does not happen again," Ms. Yee said.
In the meantime, Dan Bienvenue, deputy chief investment officer, total portfolio, was named interim CIO, according to a news release announcing Mr. Meng's resignation.