Thursday, July 19, 2018

Meet PSP's New CIO?

Sameer Van Alfen of Investments & Pensions Europe reports, Former APG CEO leaves University of California after one year:
Eduard van Gelderen, former APG chief executive, is to leave his position as senior managing director at the $107bn (€91.4bn) investment fund of the University of California after less than a year in the role.

Jagdeep Bachher, the fund’s chief investment officer, confirmed to IPE’s Dutch sister publication Pensioen Pro that Van Gelderen was to leave the university’s investment office, which runs endowment, pension and cash assets.

According to Bachher, Van Gelderen has accepted a new position as chief investment officer of the Public Sector Pension Investment Board, a CAD153bn (€99bn) investment manager based in Montréal, Canada. This has not been confirmed by the Canadian company.

When contacted, the former APG CEO indicated he could not comment, citing his current employer’s rules that forbid him to talk to the media.

Van Gelderen left APG in August after seven years at the Dutch asset manager. He joined initially as CIO, before succeeding Angelien Kemna as CEO in 2014.

When APG announced his departure in May 2017, its spokesman told Pensioen Pro that he had always wanted to work in the US. He added that Silicon Valley close by would make Van Gelderen’s new role “even more attractive”.

US publication Institutional Investor first reported Van Gelderen’s departure last week. It highlighted two other resignations from the university investment team in a three-week period.

In Bachher’s opinion, the job changes proved that the talent at his investment fund was being noticed by other large institutional investors.

However, he also made clear that Van Gelderen’s position would not be filled in and that other members of the executive team would take over his tasks.
Leanna Orr of Institutional Investor was the first to report on van Gelderen's departure last week in her article, Exodus at the University of California as van Gelderen Quits:
Eduard van Gelderen — the former CEO of APG Asset Management — has put in his notice to resign from the University of California’s investment office, according to a source familiar with the situation.

Van Gelderen joined the team one year ago almost to the day, relocating from Amsterdam to Oakland, California, for the senior managing director position.

This is the second resignation of the week for UC’s investment office and the third in three weeks.

On Monday, investment officer Tom Fischer told UC leadership he would be stepping down, and correctly predicted more of his colleagues would follow.

“Yes, there has been a high number of departures, and I expect there will be more,” he told Institutional Investor by phone Wednesday. “I think the proof is in the pudding, and the factual aspect is that there are a lot of people who are leaving.”

Fischer’s last day is Friday. Next week he will return to the world of commercial real estate operations and acquisitions as senior vice president and director of investments at JB Matteson, a private property firm based in San Mateo, California.

His departure follows the resignation of public equities chief Scott Chan last month. Chan is leaving the university system to become deputy chief investment officer of the California State Teachers’ Retirement System in August, the pension fund announced June 21.

Van Gelderen, reached by II late Thursday evening, declined to comment.
As of now, PSP Investments has not made a public announcement on its website in regards to Mr. van Gelderen taking over as the new CIO, but an announcement is imminent as Jagdeep Bachher confirmed it to I&PE.

Bachher is the former CIO of AIMCo, worked with Leo de Bever there before moving over to head the University of California’s investment office. He's highly regarded as a tour de force in the investment world and I covered him last year in my comment on University of California's pension scandal.

I don't know what led to this "exodus" of talented individuals from the University of California’s investment office but I suspect it's a mixture of opportunities elsewhere and disagreements with Bachher who undoubtedly has a strong character and strong views.

Anyway, I don't want to speculate and neither do I really care about why these people left. It's a free market, they might have been courted to leave by recruiters and they might not have been happy with developments at U of C.

All I know is Eduard van Gelderen was the former CEO of APG Asset Management, one of Europe's largest and best pension funds. The Dutch are world leaders when it comes to pensions and both APG and ATP are highly regarded all over the world.

In fact, early this year, I wrote a popular comment on how APG is pushing the limits on factor investing, where Gerben De Zwart, Head of Quantitative Equity and his team are focusing on innovating and improving quantitative investing in the developed equities portfolio.

Van Gelderen joined APG Asset Management in 2010 as CIO for capital markets investments. He previously held positions as deputy-CIO at ING Investment Management and head of investments at Swiss private bank Lombard Odier Darier Hentsch.

In other words, he has top-notch investment experience, really knows his stuff which is why Bachher courted him to Oakland to be part of his team at the University of California’s investment office.

But I think van Gelderen will enjoy living in Montreal over Oakland, it has more of a European flavor, and he will enjoy his new role as CIO of PSP which is a huge job which will pay him very well over the long run if he manages to deliver the long-term target returns.

Right now, I don't have details. I don't know if van Gelderen will be in charge of public and private markets or only public markets like PSP's former CIO, Daniel Garant.

In my humble opinion, a good CIO like him should be in charge of both public and private markets in the tradition of a Bob Bertram, Neil Petroff and Ziad Hindo who was recently named Ontario Teachers' new CIO. There are other great CIOs at Canada's large pensions, some in charge of public and private markets.

But PSP has always kept public and private markets apart and it already has a head of private markets, Guthrie Stewart who is the Senior Vice President and Global Head of Private Investment.

Van Gelderen will have his work cut out for him understanding PSP's extensive operations in all asset classes, public and private but he will also have a great team of hard-working dedicated employees to help him in his new role.

He will also have his work cut out for him because the yield curve is flattening and I foresee very tough markets ahead in all asset classes.

Anyway, there has been no official announcement from PSP yet but when it comes, it will be on its news hub here.

Canada's large pensions are beefing up their investment teams, hiring outstanding CIOs, and Mr. van Gelderen will fit in perfectly with his peer group.

I don't know the man, never met him, but if Neil Cunningham hired him, it tells me a lot about his knowledge, experience and character. Neil wouldn't put someone in the CIO chair unless he had the utmost confidence in this person to take on the huge responsibilities of this all-important position.

In related CIO news, CalPERS is looking for a new CIO to replace Ted Eliopoulos who I think did a great job during his tenure. It's worth noting CalPERS next CIO can reach $1.77 million in total compensation which is a step in the right direction in order to attract top talent to Sacramento.

I say this because I'm appalled at what's going on in Texas where they're scrutinizing"high" salaries for executives at their public pension funds.

One passage in the article says it all:
The investment executives’ salaries range far beyond what even the governor and executives of Texas’ largest agencies make.

Charles Tull, director of investments for the Employees Retirement System, is on schedule to earn more than $783,000 in salary and bonuses in 2018, the most for any state investment executive. Jerry Albright, chief investment officer for the Teacher Retirement System, came in second at $760,398, according to the data provided to The Texas Monitor. Eric Lang, an investment fund director for Teacher Retirement, was third at $699,498.

By contrast, James Bass, head of the Texas Department of Transportation, overseeing more than 11,000 employees, will receive a little less than $300,000 this year. In fact, 20 investment executives for public pension funds in the state make more than Bass — and three times or more than the $153,750 salary of Gov. Greg Abbott.

Sixteen of those top 20 earners work for the state’s two biggest pension plans, the Teacher Retirement System and the Employees Retirement System. The Teacher Retirement System carries more than half of the total unfunded liabilities — $35.5 billion — for all of the 92 public pensions in the state.

The steady increase in such salaries comes as political attention has turned to the growing debt of public pension systems throughout the state. At the end of 2016, Moody’s Investors Service ranked Dallas second only to Chicago among major American cities in the amount of pension debt it was carrying. Houston ranked fourth, Austin was ninth and San Antonio came in at 12th among the top 15 cities.
In other words, blame the chronic deficits on high salaries of pension execs instead of lousy governance, no shared-risk model and the politicization of state pension plans.

I'm here to tell you those salaries are very reasonable and not the problem but it's a circus show in Texas where cowboy politicians shoot first and ask questions later.

If you want to pay public pension fund execs like politicians and senior civil servants, don't be surprised if you can't attract top talent to your public pension and long-term results will end up being much worse.

Luckily, Mr. van Gelderen and the rest of Canada's top CIOs and other senior execs at our large pension plans don't have to deal with this nonsense, they get paid very well for delivering great long-term results.

Below, an older clip where Eduard van Gelderen, then chief investment officer of APG, talked to AAM about the Dutch pension manager’s strategy for Asia Pacific. You can watch this clip here if it doesn't load below.

Notice how he focuses on asset-liability investing and how to properly measure the risk of illiquid investments and how to properly ascribe valuations on them after the credit crisis. He also talks about the importance of developing solid relationships with partners all over the world.

He's obviously a very sharp man, wish him luck at PSP and will update this comment once PSP makes a public announcement on his appointment.

Update (July 30th, 2018): It's official,  PSP Investments Appoints Eduard van Gelderen as Chief Investment Officer:
The Public Sector Pension Investment Board (PSP Investments) today announced the appointment of Eduard van Gelderen to the position of Senior Vice President and Chief Investment Officer.

Mr. van Gelderen will lead PSP’s Total Fund Strategy Group, overseeing multi-asset class investment strategies and total fund allocations and exposures in terms of asset classes, geographies and sectors. The responsible investment, government relations and public policy functions will also report to him. Mr. van Gelderen will report to the President and CEO and his appointment is effective immediately.

“Eduard has the precise combination of strong global expertise and leadership skills we were seeking for the Chief Investment Officer position,” said Neil Cunningham, President and CEO of PSP Investments. “He is an accomplished, multi-asset class investment leader with highly relevant C-level investment expertise in large scale, pension investment managers. With his proven ability to think both as an investor and as a strategist, I’m confident he has the edge required to take our Total Fund operations to the next level.”

“The Canadian model is a leader amongst global pension markets,” added Mr. Van Gelderen. “PSP Investments has earned its place as one of Canada’s top four pension investment managers, with a clear and focused strategy backed by a strong Board. I am excited to join PSP Investments at a time of accelerated evolution for the organization.”

About Eduard van Gelderen

Prior to joining PSP Investments, Eduard van Gelderen was Senior Managing Director at the Office of the Chief Investment Officer of the University of California. As a member of the executive team, his primary responsibilities included overseeing the University’s retirement plan, heading up equity and real assets activities, and handling strategic partnerships in Europe. He also served as CEO of the Dutch financial service provider APG Asset Management and Deputy CIO of ING Investment Management.

He holds a master’s degree in Quantitative Finance from Erasmus University Rotterdam and a post-graduate degree in Asset Liability Management from Maastricht University in Limburg. He is currently a PhD candidate at the International School of Management in Paris. Eduard is a certified Financial Risk Manager and a Chartered Financial Analyst and has served on several investment advisory boards.
This is a great move for PSP and for Mr. van Gelderen.

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