Big Departures From Pension Land?

The California Public Employees' Retirement System (CalPERS) put out a press release yesterday, Réal Desrochers Leaving Private Equity Program:
The California Public Employees' Retirement System (CalPERS) said today that Réal Desrochers, managing investment director of the CalPERS Private Equity program, is leaving the pension fund to take a position with a large overseas bank.

Desrochers' last day at CalPERS is Friday, April 7. Sarah Corr, an investment director in Private Equity, will become the interim head of the program.

Desrochers joined CalPERS in 2011 from the Saudi Arabian Investment Company, where he was chief investment officer. Prior to that, he spent 11 years managing the private equity portfolio at the California State Teachers' Retirement System (CalSTRS).

"Réal's leadership, professionalism, and integrity are unmatched," said Henry Jones, chair of the CalPERS Investment Committee. "Private equity is integral to our long-term success, and Réal has been invaluable in helping ensure the long-term future of the CalPERS Fund. We wish him great success as he embarks on this next chapter in his outstanding career."

Private Equity has been CalPERS' best-performing asset class over the past 10 and 20 years, returning 9.9 percent and 11.2 percent respectively, as of January 31, 2017. Over the past five years it has returned 11.8 percent. Since its inception in 1990 through June 30, 2016, the program has generated $33.4 billion in profits for CalPERS.

"Réal has worked for years to reduce costs and increase transparency throughout the industry, and he leaves a legacy at CalPERS of working tirelessly on behalf of our members," said Ted Eliopoulos, CalPERS chief investment officer. "Because of him, we've been able to streamline the number of managers we work with, while at the same time negotiating much more favorable terms with our business partners. Réal has also been instrumental in moving the private equity industry to become much more open by adopting a standardized approach to reporting fees."

Eliopoulos said the Investment Office will continue to review possible new business models for the CalPERS Private Equity program.

"As I outlined to the CalPERS Board last year, we're going to continue reducing the number of general partners we do business with, and we're going to explore how the program might eventually be adjusted to increase alignment and drive down costs even further," he said.

About 8.5 percent of the CalPERS fund, or about $26 billion, currently is invested in Private Equity.

For more than eight decades, CalPERS has built retirement and health security for state, school, and public agency members who invest their lifework in public service. Our pension fund serves more than 1.8 million members in the CalPERS retirement system and administers benefits for more than 1.4 million members and their families in our health program, making us the largest defined-benefit public pension in the U.S. CalPERS' total fund market value currently stands at approximately $312 billion. For more information, visit
The last time I spoke with Réal Desrochers was after I critically examined the "private equity disaster" at CalPERS which another blog alluded to. This same blog keeps harping on CalPERS's private equity program, suggesting they paid a consultant to whitewash private equity misconduct.

I think some blogs, just like many newspapers, post things for "shock and awe" purposes trying to garner ever more readers as they feed them a lot of garbage.

I'm all for transparency in private equity and other asset classes, but if you read some of the garbage out there, you'd think private equity is all a big fraud, the returns are all hyper-inflated, that pensions should shun this asset class because they can get similar returns with more liquidity investing in the stock market. This is all nonsense and pure fiction.

Don't get me wrong, these are treacherous times for private equity, the influx of money coming into this asset class and lack of opportunities has led to diminished returns and there are legitimate concerns of misalignment of interests.

But there is no denying that private equity is one of the most important asset classes for all pensions and that if done properly, investing in a handful of top funds and getting co-investment and other direct investment opportunities to lower overall fees, then it's a winning strategy. Just ask Canada's mighty PE investors.

[Note: As part of my many links on the right-hand side, you will see links explaining various assets, including private equity in the assets section. I must admit, I don't update these links often but I try to keep them up to date. I recommend you read a bit on the J-Curve and also go over this CalPERS's workshop on private equity which was done in November, 2015.]

Anyway, after my conversation with Réal, I can't say I am too surprised he is calling it quits. I think he told me he's approaching 70 years old, and while he keeps in good shape, the job is grueling and requires a lot of travel, not to mention back-to-back meetings all day.

As I stated in my blog, when Réal arrived at CalPERS, its PE program was one giant PE benchmark because they pretty much invested with everyone. He had a tough job cleaning up that portfolio and getting the benchmark right. Moreover, there remain issues which CalPERS's CIO Ted Eliopoulos alluded to, namely, they need to streamline it even more and ramp up co-investments to lower fees.

I wish Réal all the best in his new life after CalPERS. I think he will take some time to relax with his wife Jo and who knows, he might do some consulting work if he's up to it.

Another big departure which did catch me by surprise yesterday was Roland Lescure, the CIO of the Caisse, who announced on LinkedIn that he is entering French politics (click on image):

I had a chance to meet Roland on a few occasions and he always left a good impression on me. The best way I can describe him is as a classy, smart and very nice French (from France) man.

In fact, he reminds me a lot of a friend and former colleague of mine from PSP, Frederic Lecoq, who is also from France but emigrated to Canada a long time ago (Roland should meet Fred who keeps me very informed on the French political scene).

Fred referred me to today's article in La Presse which states Roland will be helping centrist Emmanuel Macron who along with far-right leader Marine Le Pen, still hold a firm lead over the pack in France's presidential election (meanwhile, while scandal-hit conservative candidate Francois Fillon was holding on to third place, 65-year-old Jean-Luc Melenchon, a veteran far-left maverick, has moved up fast in the ratings). 

Fred also told me that Roland's older brother is Pierre Lescure, a well-known French journalist and television executive. According to Fred: "Win or lose, Macron (who is just 39 and was virtually unknown a year ago) has a great political future in France and Roland will be instrumental in helping to guide him on economic and financial issues."

The last time I saw Roland was when the prince of Bridgewater was in town and he was the moderator for the event. I covered that event in detail and it was thanks to Roland that I was able to attend for free. I wish him a lot of success with his political aspirations and truth be told, France and Europe needs someone with his experience, temperament and knowledge.

The Caisse put out this press release announcing Roland's decision:
Caisse de dépôt et placement du Québec today announced that Roland Lescure has decided to leave his position as Chief Investment Officer to enter public and political life.

“I have spent the past seven years working in one of the best institutions in Canada. I worked with extraordinary people and helped build a world-class investment organisation whose success benefits all Quebecers. On the eve of the French elections, I have decided to enter public and political life because I want to play a quite active role at a crucial time for France and for Europe. Since la Caisse is apolitical and non-partisan, I will have more to say about the political commitment I am making tomorrow,” said Roland Lescure.

“From the moment Roland joined la Caisse in 2009, he has worked tirelessly to build what la Caisse is today. While building highly talented investment teams, Roland’s intellect and creativity have helped shape so many of the strategies we have pursued at la Caisse. And he has excelled at rallying his teams to deliver these strategies,” said Michael Sabia, president and CEO of la Caisse. “Over the past few months, Roland and I have discussed his involvement in public and political life, and the decision he is announcing today is a testimony to his values and who he is as a person. This kind of commitment is admirable and should inspire all of us. I am convinced that, whatever form it takes, Roland will make an important contribution to French politics and democracy,” added Mr. Sabia.

“On behalf of the Board, I would like to thank Roland for his exceptional work as an executive of la Caisse. Over the past seven years, the Board has benefited from the depth of his economic and financial expertise, the soundness of his judgment and his fundamental understanding of la Caisse’s mandate,” said Robert Tessier, chairman of the Board of la Caisse.

Given that Mr. Lescure is leaving la Caisse to enter public and political life, his departure will be effective on April 6, 2017.

An international recruitment process for the Chief Investment Officer position has been launched. In the interim, Michael Sabia, president and CEO of la Caisse, will take on Mr. Lescure’s responsibilities.
Now, who will replace Roland? That's not a given. I can however think of a great internal candidate, Jean Michel, the Executive Vice-President, Depositors and Total Portfolio, who joined the Caisse last year after performing miracles as the head of Air Canada’s pension plan, bringing it back to fully funded status by implementing the same approach that has led to Ontario Teachers' and HOOPP's long-term success.

But there are great external candidates too, people like Neil Petroff, the former CIO of Teachers', Leo de Bever, the former CEO of AIMCo, or Wayne Kozun, a former senior VP at Teachers'. And I'm sure there are a few other high profile candidates that I'm not aware of.

The problem is the job is in Montreal, you need to speak and write French, and truth be told, there are very few people who have the skill set, leadership, language skills, and political temperament for this coveted but highly demanding position which I believe oversees public and private markets (not sure of the exact responsibilities of the role in terms of private markets). Who knows, maybe Réal Desrochers or François Trahan will express an interest to come back to Montreal.

For now, Michael Sabia will assume the role of CIO, which is actually a good thing because it will allow him to detach from some of the more mundane tasks of his job to focus more on what is happening at various portfolios across public an private markets (maybe Michael can offer me a contract to help him in the interim as he searches for a new CIO).

That is all for today. I wish Réal Desrochers and Roland Lescure all the best in the next chapter of their life. Both of them have worked very hard at their respective organizations and contributed to their success and they should be proud of their accomplishments.

Below, Réal Desrochers on the Private Equity Program at CalPERS (2015). I also embedded some older interviews with Roland Lescure. One when the Caisse won Top Gun Awards (2010) and with Gérald Fillion of CBC Radio-Canada (2011) when he discussed how the Caisse will navigate in an uncertain world (in French).

You can also watch an older (2013) interview in French where Roland Lescure talked about why he left Paris to come live in Montreal and accept the role of CIO at the Caisse. You can watch it here.

I wish them both "bonne chance et mes meilleurs voeux" (good luck and best wishes).

As for me, I need a job, this blog is too much work for peanuts. There is nothing quite like it which is why so many people regularly read it but it's come at a great personal sacrifice to me. I'd like to get back to a full-time job and focus on the next chapter of my life.

So if any of you reading this comment need someone with my experience, skills, contacts and competencies, please feel free to reach out to me at I'm more than ready to move on and do something else in my life (and get paid properly for my work). Thank you and please remember to kindly contribute to this blog on the top right-hand side under my picture.