CalPERS Appoints Canadian Nicole Musicco as New CIO

Barbara Shecter of the Financial Post reports it's 'a big deal' as Canadian Nicole Musicco lands high-profile job as investment chief at US$480-billion CalPERS:

A Canadian pension executive with a low public profile has landed one of the highest-profile money management jobs in the United States, as chief investment officer at the US$480-billion California Public Employees’ Pension Retirement System, better known as CalPERS.

Nicole Musicco, 47, who worked in public and private equity at the Ontario Teachers’ Pension Plan and the Investment Management Corporation of Ontario before leading the Canadian business of private investment firm RedBird Capital Partners — which she helped fund while at Teachers — will take the investment reins at the high-profile state pension fund on March 28, reporting to CEO Marcie Frost.

“Nicole’s experience, vision and skill as an investor in public and private markets is critical for CalPERS,” Frost said in a statement. “We were determined to take our time to ensure we found the right candidate who could succeed in a high-pressure and demanding environment.”

Musicco’s ascent to lead the 300-person investment team at CalPERS is significant not only because of the size of the state pension fund, but because she is stepping in as the fund embarks on a major shift to step up investments in both private equity and debt, and close a funding shortfall. Compared to the fully funded or surplus positions of large Canadian pension funds such as Teachers in Ontario, CalPERS is just 80 per cent funded. And that’s an increase from 60 per cent five years ago.

Mark Wiseman, chair of the Alberta Investment Management Corporation (AIMCo) and former chief executive of the Canada Pension Plan Investment Board, who worked with Musicco at Teachers early in her career, said landing such a job following a broad global search is an impressive feat.

“She is very smart, has worked in public and private markets, and is highly strategic,” he said, adding that CalPERS is arguably the most important institutional investor in the United States. 

“(This) is a big deal,” said Wiseman, who also previously worked as a senior investment executive at BlackRock Inc. in New York.

As part of its strategy to narrow the funding gap, the CalPERS fund adopted a new asset allocation mix late last year that calls for increasing its private equity investments to 13 per cent from just eight per cent, with a new private debt allocation of five per cent. In addition, the fund added five per cent leverage to its investment portfolio to increase diversification.

Large Canadian pensions started down that road more than three decades ago, with the rationale that they could better meet the long-term obligations to their beneficiaries by diversifying beyond public stock and bond markets and through geographical diversification. 

Notably, Bob Bertram, who is on the board of directors of IMCO, one of Musicco’s former employers, was one of the architects of this active management style, which was dubbed the Canadian Pension Model. Bertram was chief investment officer of the Ontario Teachers Pension Plan when it was created in 1990. During his tenure, the Teachers’ fund grew from $19 billion to $108 billion.

Claude Lamoureux, a veteran of the Canadian pension model and Bertram’s first boss at Teachers, said Musicco is well-armed to succeed at CalPERS with the “energy, knowledge, and the ability to get along with people.”

“I hope the Board will let her do the job,” he said. “A number of pension funds want to implement the ‘Canadian model’, but this starts at the board level and often at the political level in the case of a public fund.”

Lamoureux said success with the strategy relies on little to no political interference, as well as proper evaluation of liabilities and the appropriate compensation of all employees.

A spokesperson for CalPERS said Musicco was not available for an interview. In a statement, she praised what CalPERS has done over the past five years to improve its funded status, strengthen the organization and weather the pandemic.

“My goal is to build on these achievements recognizing that, as long-term investors, CalPERS must maintain focus and discipline to deliver consistent investment returns and retirement security,” Musicco said.

Her arrival comes on the heels of some recent controversy. Her predecessor as chief investment officer, Ben Meng, left CalPERS abruptly in August of 2020 following questions about his personal financial disclosure and the fund’s compliance policies, according to media reports. 

During his two-year tenure, he had faced criticism over the fund’s performance, and accusations from Republican politicians that he had ties to the Chinese government.

According to a report in the Los Angeles Times when he departed, Meng had rejected the claims and had won the backing of some heavy hitters on Wall Street, including Oaktree Capital Group founder Howard Marks and Blackstone Group Inc.’s Stephen Schwarzman.

A former senior pension executive in Canada said the job of CIO is likely to present new challenges for Musicco because of the amount — and type — of attention paid to the high-profile state pension.

“The CalPERS role is challenging and has been open for a long time,” he said. “(There are) lots of governance and political challenges…. But it’s a big, high-profile role.”

Josephine Cumbo of the Financial Times also reports Canadian Nicole Musicco appointed as CalPERS new chief investment officer:

Calpers, the largest US public pension plan, has appointed a Canadian fund manager as its new chief investment officer nearly 18 months after the abrupt departure of its former CIO.

The $478bn California Public Employees’ Retirement System said Nicole Musicco, a private markets specialist, would take over the high-profile position. Musicco will succeed Dan Bienvenue, who had assumed the role of interim CIO in August 2020 after Ben Meng resigned from the post.

Musicco’s appointment comes as Calpers, which has 2mn members, embarks on plans to boost exposure to private markets against a backdrop of expected dimming returns from listed stocks. Canada’s pension funds have been among the most proactive in the world in deploying more of their capital offshore, in the hunt for returns.

As part of a new four-year plan, approved before Musicco’s appointment, Calpers will raise its allocation to private equity by 5 percentage points to 13 per cent and shift into private debt with an allocation of 5 per cent. At the same time, global equity exposure will be dialled down from 50 per cent to 42 per cent.

Musicco told the Financial Times there was a “huge opportunity” for Calpers to “lean more” into direct investing over time, meaning the fund’s in-house investment managers will take a greater role in choosing which private assets to allocate funds towards. Typically, pension funds invest with private equity, or other private market managers, which can charge significant fees for their services.

She is the second woman to lead the investment operations at Calpers. “Nicole’s experience, vision and skill as an investor in public and private markets is critical for Calpers,” said Marcie Frost, chief executive.

Musicco is a partner at RedBird Capital, a New York-based investment firm focused on building high-growth companies. She has also held leadership roles at the Ontario Teachers’ Pension Plan, a C$200bn (US$157bn) Canadian pension fund. In 2018, she was recruited to lead the private markets investment programme at Investment Management Corporation of Ontario, a pension asset management firm with more than C$70bn in assets under management.

Musicco was selected from a pool of international and domestic candidates, and will take on a team of more than 300 investment staff when she starts in late March. Calpers had earlier said the pandemic slowed its search for a replacement for Meng.

Meng stepped down after the Naked Capitalism website published allegations that he had failed to fully comply with the California Fair Political Practices Commission in relation to financial disclosure documents. At the time, Meng told the Financial Times he had disclosed all of his financial holdings in the applicable form.

Annie Massa of Bloomberg also reports CalPERS names Nicole Musicco as the new CIO:

The California Public Employees’ Pension Retirement System appointed Nicole Musicco its new chief investment officer, capping an almost 18-month search.

Musicco succeeds Ben Meng, who departed over conflict-of-interest concerns. She will arrive at the fund, which has nearly $500 billion in assets, on March 28, according to a statement Tuesday.

The second woman ever to run investments at the largest U.S. public pension fund, Musicco joins from RedBird Capital Partners, where she led Canadian investments. Her background includes experience in private markets and more than 16 years at the Ontario Teachers’ Pension Plan.

“Nicole’s experience, vision, and skill as an investor in public and private markets is critical for CalPERS,” said Marcie Frost, the chief executive officer of Calpers, in the statement.

Calpers has been on the hunt to fill the CIO role since its former investment chief Ben Meng abruptly departed in August 2020, amid a controversy over his disclosures and personal investments. The pension fund found that Meng approved an investment into a private-equity fund managed by Blackstone Group Inc. at the same time he held Blackstone shares.

Musicco arrives at a moment when Calpers, like other large pension funds, is moving deeper into private equity investments to boost returns. Last year it adopted plans to increase private equity investments to 13% from 8% of its assets, and added an allocation to private debt of 5%.

Musicco will report to Frost and run a team of about 300 people, according to the statement.

CalPERS put out this statement on the appointment:

Completing an international search and extensive recruitment process, the California Public Employees’ Pension Retirement System (CalPERS) announced today the appointment of Nicole Musicco as its new chief investment officer. Musicco is only the second woman to lead the investment operations for the nation’s largest public pension fund with nearly $500 billion in assets.

“Nicole’s experience, vision, and skill as an investor in public and private markets is critical for CalPERS,” said Marcie Frost, CalPERS CEO. “We were determined to take our time to ensure we found the right candidate who could succeed in a high-pressure and demanding environment. Nicole is exactly the leader we want to lead CalPERS’ Investment Office and is an exceptional addition to our team.”

Musicco joins CalPERS from RedBird Capital Partners, where she led the firm’s Canadian investment business. Before that, she managed the private markets investment program at the Investment Management Corporation of Ontario. Musicco’s experience also includes 16 years with the Ontario Teachers’ Pension Plan, leading both the private equity and public equity investment teams. She opened the fund’s Asia Pacific office in Hong Kong and helped build its presence in Asia.

“CalPERS has achieved remarkable success during the last five years, strengthening the organization, navigating the pandemic, and improving its funded status,” Musicco said. “My goal is to build on these achievements recognizing that, as long-term investors, CalPERS must maintain focus and discipline to deliver consistent investment returns and retirement security for dedicated public servants.”

Musicco joins CalPERS at a time when the pension fund has increased its funded status from 60% just five years ago to 80% today and is increasing its investments in private markets to continue closing the gap. The Fund adopted a new asset allocation mix late last year that calls for increasing its private equity investments from 8% to 13% and added a private debt allocation of 5%. CalPERS also added 5% leverage to its investment portfolio to increase diversification. The discount rate remains at 6.8%.

“Nicole’s leadership and experience are well suited for the strategic goals we’ve outlined for our fund,” said Theresa Taylor, President of the CalPERS Board. “We are getting the investor we need to skillfully manage our investment portfolio on behalf of our members, now and in the future.” 

Nicole begins work on March 28. She will report to CEO Frost and lead a team of more than 300 investment professionals.

“I’d like to thank Dan Bienvenue for his leadership of our investment team and for being an excellent partner on our Executive team,” added Frost.

Musicco has a bachelor of science degree in kinesiology from Western University in London, Ontario, and a bachelor of arts in honors business administration and MBA, both from Western’s Ivey School of Business. She is a longtime board member of Youth Employment Services in Toronto, an employment, counseling and training organization for young people, and a member of the investment committee of Toronto General & Western Hospital Foundation.

Dore Partnership, a recruitment firm led by Charles Dore, assisted in the search for the position.

About CalPERS

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 2 million members in the CalPERS retirement system and administers benefits for more than 1.5 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 $500 billion. For more information, visit

Earlier today, I had a Webex meeting with Marcie Frost, CEO of CalPERS, and Nicole Musicco, their new CIO.

Let me begin by thanking both of them for taking some time to talk to me and also thank Brad Pacheco, Megan White and Joe DeAndra who helped set up the call and listened in. 

Marcie Frost reached out to me over the long weekend to tell me there would be an announcement today and she wanted to talk to me but even I was surprised when I saw it.

I was also genuinely happy for Nicole, Marcie and CalPERS because it's been a long search (18 months) and I really believe they picked an awesome candidate in every respect.

Just before Nicole got on the call, I told Marcie I remember emailing her a few names including Nicole's so I was happy to see she forwarded them to Dore Partnership, the recruitment firm that assisted them in the search for the position.

Marcie told me the pandemic also delayed the process and that they had seven candidates in the first round which dwindled to three in the second round.

She told me they were looking for five key criteria for this coveted position:

  1. Investment experience: Marcie called this the big "I" and it's critical for someone to understand public and private markets.
  2. Organizational values: The candidate would continue the focus on diversity, inclusion, sustainable investments and attracting and retaining top talent.
  3. Working with CalPERS' stakeholders: CalPERS is the largest US public pension and it has multiple stakeholders. The new CIO has to communicate effectively with them and with Board members.
  4. Being comfortable with the public profile of the job: This is a high pressure job where you need to perform to deliver and make the 6.8% bogey over the long run. The new CIO needs to feel comfortable with the public pressure that comes along with the job and addressing the Board in quarterly investment committee meetings which are typically recorded and publicly available.
  5. Long-term commitment: The candidate would be moving to Sacramento for at least five years and help shape the talent management practices necessary to recruit and retain their diverse talent.

Clearly, Nicole filled the criteria perfectly and I also highlighted she's a woman and that CalPERS is now being run by two very competent women.

I told them I take diversity & inclusion very seriously and there's a lot of talk on this front but actions mean a lot more to me than talk. 

When you see two women leading the largest public pension in the United States, it sends a strong message that this organization takes diversity & inclusion very seriously.

Nicole Musicco weighed in on this stating: "I'm a big believer in diversity & inclusion and here we have the perfect trifecta with a woman also leading our Board" (Theresa Talor was elected president of the CalPERS board earlier this year).

I asked Nicole what attracted her to this position and she said three things:

  1. She believes in defined-benefit pensions and wanted to rejoin an organization with the mission and purpose of securing retirement benefits for contributors over the long run . She called this "purpose driven investing" and told me flat out "she missed it".
  2. CalPERS Global nature: Nicole noted CalPERS is a large pension which will increase its focus on illiquids and global investing and this attracted her to this position.
  3. The long-term focus: She rightly noted that CalPERS has a long-term focus and she will be focusing on people, processes, total fund management, increasing collaboration among and between investment groups, tightening up risk management and more, all to improve long-term returns.

She spoke very highly about her peers at Ontario Teachers' which "mentored her" and where she got great experience which will help her with this new position.

Interestingly, she didn't talk much about her short stint at IMCO heading up Private Markets there and I didn't ask because it’s not really pertinent. I believe Nicole will be much happier at CalPERS where she can exercise a more senior leadership role.

She will hit the ground running when she starts work in late March, evaluating who does what there and seeing how she can improve collaboration among groups and more.

At one point, I asked Marcie about what CalPERS is doing in infrastructure and real estate since I covered its private equity activities through my discussion with Yup Kim late last year. 

She told me they are focusing on core real estate with strong income generating properties to cover their long dated liabilities.

In infrastructure, she said it's mostly through funds for now but with Nicole coming on board, they hope to do more direct deals in the future and grow this asset class nicely over the next decade.

Marcie noted that CalPERS was 65.8% funded in 2016 and is now 81.8% funded and she credits that to better funding and investment policies.

I noted that no matter what Nicole and she do on the investment side, investments alone cannot bring CalPERS to fully funded status.

Marcie agreed and she noted unlike in Canada, benefits are "constitutionally guaranteed" in California so they cannot adopt conditional inflation protection (an important lever which helps many large Canadian DB plans remain fully funded when a storm hits).

I also told Marcie that even though CalPERS doesn't have the same governance as Canada's large pensions, I see some convergence going on and noted my recent comment where CPP Investments' CIO Ed Cass discussed leverage with CalPERS Board

I asked Nicole what experience she has in Public Markets and she told me she started off working in public markets and worked with the asset mix and risk management committees at Ontario Teachers' and that gave her "tremendous experience"

Lastly, I asked both of them about the challenges that lie ahead.

Nicole told me she is looking forward to moving to Sacramento and meeting her "world class team" and really understanding the people and processes before making any recommendations.

On markets, she noted "heightened geopolitical risks" and the potential for huge secular shifts coming out of the pandemic. 

Marcie told me one challenge she sees is welcoming back all the employees to the office "after two years of working from home". She added: "Flexibility is the key especially for some but this will be challenging, at least initially".

She's not alone, every CEO is going through the same challenges and we are all hoping for the best but it's nerve wracking and challenging as the pandemic isn't over, we just have to learn to live with it.

I noted that what bugs me is "increasing central bank intervention" in the United States and across the world and how they are going to cut the proverbial central bank umbilical cord, if ever.

But we all agreed "it is what it is" and we have to learn to live with that too!

Let me once again thank Marcie Frost and Nicole Musicco for taking the time to talk to me earlier.

They are both incredibly nice, intelligent and very capable women and I really enjoyed our discussion. 

I wish them both a lot of success and look forward to talking to them again in the future.

Below, an older FCLT Global clip (2018) featuring Nicole Musicco talking about the importance of long-term investing at Ontario Teachers' Pension Plan.

And Marcie Frost, CEO, CalPERS, shares her thoughts on climate reporting, COP26 outcomes, and more at the Bloomberg Sustainable Business Summit: Focus on Finance with Bloomberg TV's Sonali Basak (December 2021).

Update: Bloomberg reports Calpers CIO maps future with more control and fewer private equity fees:

Nicole Musicco had a bold pitch: Cut out the giants of private equity and do the job yourself.

Musicco, 47, this week clinched one of the biggest jobs in investing, becoming chief investment officer of the $500 billion California Public Employees’ Retirement System.

Her appointment, and her plans for private equity, heralds a major shift in how the nation’s largest public pension plan, beset with staff turnover and political infighting, meets its obligations to millions of California workers. It could also mean billions less flowing to Wall Street.

In her interview with the board, Musicco laid out a vision for a team inside Calpers that would buy stakes in private companies, according to people familiar with the matter. The change would mean more control and reduce the fees to firms such as Blackstone Inc. or Carlyle Group Inc. It’s a common arrangement in her native Canada, but not in the U.S.

An industry veteran north of the border, Musicco’s focus has long been private equity. But she faced opposition from some board members in the hiring process, said the people familiar, who asked not to be named because the talks were private. Eventually, the concern that she lacked experience overseeing a pool of money as large and sprawling as Calpers was pushed aside by supporters who believed Musicco could embolden the organization’s private equity efforts.

“The full board is supportive of Nicole’s hire and we are excited to have her join Calpers,” Theresa Taylor, the Calpers board president, said in a statement, without providing further details on the hiring process.

Musicco, who spent more than 16 years at the Ontario Teachers’ Pension Plan and a year at the Investment Management Corporation of Ontario before joining RedBird Capital Partners, will arrive in California at a pivotal moment. The fund is making dramatic changes, including stepping up investments in private markets and using borrowed money to boost performance.

But she faces a tricky task to win over different factions at the pension, all the while operating without the freedom typical at Canada’s public systems.

“I’m not sure Calpers is ready for Nicole Musicco,” said Claude Lamoureux, who was chief executive officer of Ontario Teachers’ for 17 years. “She will do a great job, I have no doubt about it.”

Canadian pensions have other advantages over their American peers. They can attract dealmaking talent more easily without the same stretched budgets and caps on pay, and many of them don’t operate in the same public glare as U.S. pension funds.

The Calpers CIO seat has been vacant since August 2020. During a first round of searches, the board couldn’t agree whether to pick an investing chief best suited as a manager or an investor.

Top candidates included Commonfund CEO and investment chief Mark Anson, people familiar said. He’s also a former Calpers CIO. Amid the disagreements, Calpers paused a search that consultant Korn Ferry spearheaded, and resumed later with recruitment firm Dore Partnership.

Spokespeople for Korn Ferry, Dore Partnership and Commonfund did not reply to requests for comment.

Job Challenges

“This role certainly comes with challenges but we believe Nicole is up to the task,” Calpers spokesman Joe DeAnda said in an emailed statement.

Calpers declined a request to interview Musicco after announcing her appointment Tuesday. She starts on March 28 and will report to CEO Marcie Frost.

“I have ‘grown up’ in the Defined Benefits Pension industry, and have witnessed first hand with family, and in my community, the importance and impact defined pensions have on individuals and the economy,” Musicco wrote in a LinkedIn post about her new position.

Calpers, in sheer size and complexity, is unparalleled: It’s governed by an often quarrelsome 13-member board, some of whom are elected and often air their differences in public. It has a staff of more than 2,800 and a budget of $1.9 billion.

Returns lag the pension’s 20-year benchmark and until recently were behind its 5-year, 3-year and 1-year measures. Calpers had only about 80% of the funds needed to meet its long-term liabilities at the end of fiscal 2021. (That’s an improvement of nearly 10 percentage points over the previous fiscal year.)

As it seeks to boost gains, Calpers, like other large pension funds, is moving deeper into private equity. Last year it adopted plans to increase such investments to 13% from 8% of assets, and added a 5% allocation to private debt.

Some Calpers officials have expressed concern that private equity investments are riskier and more expensive than other asset classes. Buyout firms typically charge about 2% of assets under management and 20% of profits and require investors to keep money locked up for long periods.

One of the earliest public pension funds to get into private equity, Calpers started to see its returns in the asset class lag behind peers over time as more investors crowded into buyout funds in search of higher returns.

Ted Eliopoulos embarked on a plan to slash the number of managers during his tenure as CIO from 2014 to 2018, hoping for more bargaining power when negotiating fees and terms. He also floated plans to set up Warren Buffett-style vehicles that would hold companies for the long-haul and discussed the possibility of outsourcing the private equity business to BlackRock Inc.

Those ideas fizzled out after his successor Ben Meng took over. Under Meng, Calpers expanded coinvestments, which are typically deals done alongside funds that help to reduce fees.

PE Direction

During her time at Ontario Teachers’, Musicco moved to Atlanta when the fund struck a deal to buy travel tech firm Worldspan. She was there for several months to work with the company’s president. That helped the executive carry out a turnaround in a memorably successful deal, according to Jim Leech, who was head of the pension’s private equity division at the time and later became its CEO.

“I’m not sure whether they have the courage to go as far as the Canadian model, but she will undoubtedly push them in that direction,” said Leech. Ontario Teachers’, established in 1990, has about C$228 billion ($179 billion) in assets, and is fully funded.

In recent years, Calpers has faced turmoil in its leadership ranks. Meng, Musicco’s predecessor, left abruptly in August 2020. Calpers determined he approved an investment into a private equity fund managed by Blackstone at the same time he held Blackstone shares. Meng has said he had disclosed all his financial holdings to Calpers. No evidence has surfaced that he made investment decisions to boost personal shareholdings.

A trauma that continues to haunt many Calpers staff is a pay-to-play scandal in the aughts. In 2016, former Calpers CEO Federico Buenrostro was sentenced to four-and-a-half years in prison for steering $14 million in fees to a former board member in exchange for cash bribes and gifts.

“People worried they couldn’t find anybody good,” to fill the CIO position, said Ashby Monk, executive director of the Stanford Research Initiative on Long-Term Investing. He added that it could take some time for Musicco to acclimate to the Calpers environment.

“She’s really got to understand the organization in advance of understanding the portfolio,” he said.

I'm sure she'll do a great job at cutting fees and gaining more control on the PE portfolio and more. Just give her some time to implement her strategy.