She desired innovation, she told the audience at its Sacramento headquarters. She wanted “stadium deals” and identified professional sports as a frontier for more investing.
The abrupt exit has created yet another leadership vacuum at an institution that is notoriously tough to manage, shining a light on the high wire that Calpers CIOs walk. They answer to an often-quarrelsome 13-member board – some of them elected and prone to airing differences in public – while navigating the sometimes-conflicting viewpoints of politicians and career staffers over how to provide for the retirement of the state’s public workers.
After cycling through a series of leaders, strategy shifts and a retreat from private equity in the decade after the financial crisis, the pension system’s portfolio is only 72% funded. Its next CIO will not only face intense pressure to restore the institution’s credibility and clout, but the cold math of hitting a 6.8% return target.
Musicco’s attempt to transform Calpers into a bolder dealmaker meant an adjustment for the roughly 400 employees in her investment shop. “They’re an underfunded pension and they keep doing the same thing; there’s desire for change,” Cole said. But if you allocate money to a team, “you’re hoping there’s a billionaire down the line that will give you a good exit,” he said. “It was one of the most baffling strategies that I’ve heard.”
Calpers did make some headway in doing private equity deals in ways that reduced fees during Musicco’s tenure. Its staff completed $3.9 billion in private equity co-investments, continuing their previous efforts. The pension fund also made a $300 million commitment to the venture capital firm Thrive Capital to help Calpers scale its venture-focused investments.
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