The vast majority of public funds should have no problem attracting fresh CIO blood even if it could be harder for the biggest players to attract veteran investors or keep them in the fold amid growing pressures and frustrations, observers said.
There should be no shortage of candidates whose next logical career move is public fund CIO, but retaining veterans in those roles could become increasingly challenging, said Mansco Perry, who retired as executive director and CIO of the $127.9 billion Minnesota State Board of Investment in 2022.
With issues such as ESG, rapid growth of assets demanding ever more resources to safely manage portfolios and low compensation a persistent issue, Perry said it's not unusual to reach a point where the question becomes: If it's "not gonna be any fun, why would you do it?"
Such issues became more acute in recent years, Perry said, a factor in his decision to leave the industry two or three years ahead of the 2026 target he set at the time of securing his first job out of business school in 1976.
Angela Miller-May, CIO of the $49 billion Illinois Municipal Retirement Fund, likewise cited politics as a factor leaving the public fund CIO universe tending to disorder now.
"The job has gotten harder … the markets are more complicated, the stakeholders are very different, the line has blurred between my role and all of the different entities around me," Miller-May noted.
Against the backdrop of such distractions and frustrations, a love of investing — doing the job and accomplishing great things — is the ultimate escape, Miller-May said. But "when you can't do the job because of a board, or legislation or anti-ESG, or political divisiveness," turnover and burnout result, she said.
Steven Meier, the $255 billion New York City Retirement Systems' CIO, said that as a fellow CIO, he sympathizes with the person running CalPERS. It is "an impossible job. The fund is just so big."
He too feels a sense of mission running the pension system for five different sets of city employees — including police and firefighters, teachers and municipal workers.
"I love this job. I love seeing people stretch and grow. I've tried to incorporate that with teammates. And we promote from within."
But he recognizes that the staff pay has not kept pace with the market. His prior job at the $49.3 billion Connecticut Retirement Plans & Trust Funds paid more and had a fifth of the assets of New York City.
"We want to make this organization a career destination because it's a great training ground," he said.
However, retaining a CIO can be tricky.
"It starts with the person who will fill the role of CIO and knowing what the organization wants from the relationship," said Molly Murphy, CIO of the $21.5 billion Orange County Employees Retirement System, Santa Ana, Calif. "It's like a marriage. You can't go into it thinking you can change the organization. You have to go into the relationship thinking that if things don't change, I'm OK with it."
Before the board hires the CIO, board members should ask whether the person is aligned with their goals, she said.
"If I'm a CIO candidate, I want to know if the CEO and board measures me with (a) long-termism or short-termism lens," Murphy said." It often takes three years to move assets sometimes in a way that is meaningful."
Portfolio returns do not reflect the results of the CIOs efforts until between the three- and five-year marks, she said.
"If the organization has a short-termism view of success, you will be set up to fail," Murphy said.
In organizations in which the CEO and CIO are separate positions, the job of the CEO is partly to be a partner with the CIO to help the investment team produce investment returns, Mosaic's McDuffee said.
It's important that CEOs do not see themselves as investment experts because that is the CIO's job, McDuffee said.
The CEO needs to respect the lane of the CIO and share the leadership stage with the CIO to help the board do its job, she said. That's where the relationship can break down, McDuffee added. Another area where relationships can break down is when there are board members who delve into management and try to do the CIO role, McDuffee said.
Indeed, CalSTRS' Ailman attributes his longevity in the role, in part, to the consistency of the board.
There have been more than 100 different trustees on the board since Ailman became CIO but only five or six investment committee chairs, he said. What's more, when the 12-member board changes, the personality of the pension fund doesn't change, Ailman said. At CalSTRS, both the CIO and the CEO report to the board.
CIO jobs are tough, especially at larger plans, because "you're generally working in a fish bowl," he said.
"I'm clear. I'm not a politician. I'm a money manager," he said. With his team, he said he repeats their mission is to hit the fund's 7% expected rate of return on average.
CalPERS has had so many changes, Ailman said. In any kind of group activity, if there is that much turnover of the head coach, it's hard for the team to perform because there's a new direction and a new playbook, Ailman said.
If one looks back at prior CalPERS CIOs like Yu "Ben" Meng, Mark Anson and Russell Read, all of them had different strategies and themes. They all created units to do it and the next CIO dismantled them, Ailman said.
"Nicole said she had nine different things she wanted to work on ... but she didn't have the time," he said.
Erin Arvedlund and Rob Kozlowski contributed to this story.