Nicole Musicco Steps Down as CalPERS CIO
The California Public Employees’ Retirement System said Chief Investment Officer Nicole Musicco will step down less than two years after she joined the largest US pension fund, sparking another round of turmoil in the high-profile public investing office.
Musicco, 49, will leave her position at Calpers Sept. 29 to focus on her family in Canada, according to a statement on Friday from Calpers. She oversaw about 400 employees and managed an investment portfolio of about $500 billion.
She joined Calpers early last year after a long search to replace Ben Meng, who abruptly departed in August 2020. Meng, who held the position for about 18 months, resigned amid allegations that he ran afoul of rules governing disclosure of personal investments, triggering an investigation by a state regulator.
Musicco held the job for less time than it was vacant after Meng’s departure. Her replacement will become the pension’s third CIO in the past five years and fifth in the past decade, a turbulent period that included Joseph Dear’s death from prostate cancer, Musicco and Theodore Eliopoulos’s resignations citing family reasons, and Meng’s messy exit.
Late last year, Calpers recently lost another high-profile executive, Greg Ruiz, who served as global head of private equity at the pension and left to join Jasper Ridge Partners.
Musicco led the charge on a commitment by the pension to invest $1 billion in emerging and diverse managers in private markets. Previously, she was a partner at RedBird Capital Partners, where she led the firm’s Canadian investment business.
Deputy Chief Investment Officer Dan Bienvenue, who has been with Calpers since 2004, will serve as interim chief, according to the release.
Musicco, a Canada native, was born in Toronto and grew up in Southwestern Ontario. She worked briefly on Wall Street before obtaining an MBA and beginning a 16-year stint at the Ontario Teachers’ Pension Plan, where she ultimately led the fund’s private equity and public equity investment teams.
“I think I was employee number ten in the private equity group,” Musicco said in an August interview. “I was hired onto the direct investing team, and right out of the gate, we set out to really create a direct investing program.” The Ontario fund’s strategy was innovative at the time, and paved the way for what is now known as the Canadian pension model.
Musicco has been under pressure to meet Calpers’ annual return target of 6.8%. If the pension fund falls short, municipalities across the state could be forced to increase payments and cut city services to meet the pension obligations of more than two million Californians.
The fund reported a preliminary return of 5.8% for the fiscal year ended June 30, below the fund’s 10-year average of 7.1% and slightly below the California State Teachers Retirement System, which returned 6.3%.
Calpers had a funded status of 72% during the most recent fiscal year ended June 2023, which is slightly below the funding level of other US public pensions tracked by Milliman, for example. When Musicco was hired by Calpers, the pension said in a statement at the time that it was using investments in private markets to close the gap.
Palash Gosh of Pensions & Investments also reports CalPERS CIO stepping down at end of September:
Nicole Musicco is stepping down as chief investment officer of the $463.6 billion California Public Employees' Retirement System on Sept. 29.
Isla Binnie of Reuters also reports California pensions investment chief steps down less than 2 years into job:
The Chief Investment Officer of the largest U.S. state pension manager, the California Public Employees Retirement System (CalPERS), will step down on Sept. 29, CalPERS said in a statement on Friday.
Nicole Musicco, who was the second woman in its history to have led the investment operations of the $463 billion fund, is leaving to "attend to the immediate needs of family in her native home of Toronto, Canada", CalPERS said.
CalPERS said Musicco's deputy Dan Bienvenue will serve as interim chief investment officer and it will soon start a global search for her replacement.
Musicco took the role overseeing a 400-strong investment office less than two years ago, in February 2022, according to CalPERS website.
"I've spent my entire career making the necessary trade-offs between my personal and professional life," Musicco said in a post on the website. "But lately, those trade-offs have come at too high of a cost."
The post added that she has two children and a "large, multigenerational family" and has "been shuttling between Sacramento and her native Toronto to attend to pressing matters".
Earlier today CalPERS put out a press release stating CIO Nicole Musicco will step down at the end of September:
SACRAMENTO, Calif. – The California Public Employees’ Retirement System (CalPERS) announced today that Chief Investment Officer Nicole Musicco will step down on September 29.
Musicco said the decision to leave CalPERS will allow her to attend to the immediate needs of family in her native home of Toronto, Canada.
“Leading the CalPERS investment office has been an honor, and I am proud of the work my team has done to fulfill the retirement promises made to the 2 million Californians who have spent their lives in public service,” Musicco said. “However, at this time I need to prioritize those who need me the most, my family and children.”
Musicco, who joined CalPERS in the spring of 2022, has been shuttling between Toronto and Sacramento in recent weeks to help members of her large, multigenerational family.
“Nicole has brought to her work the vision and the values that we needed, the kind of approach that added real clarity and strength to our investing,” said CalPERS Chief Executive Officer Marcie Frost.“ While it will be hard to see her go, we know it’s the right decision to put her family first and we applaud the strength it took to do so.”
CalPERS Deputy Chief Investment Officer Dan Bienvenue will serve as interim chief investment officer. Bienvenue joined CalPERS in 2004 and has held several leadership roles with the Investment Office. Prior to joining CalPERS, he was a principal and senior portfolio manager with Barclays Global Investors, leading an international equity portfolio management team responsible for $55 billion across developed and emerging markets.
“One of our guiding principles at CalPERS is to recognize the importance of our employees and their families,” said CalPERS Board of Administration President Theresa Taylor. “While we will greatly miss Nicole’s leadership, we support her decision and will keep her and her family in our thoughts. We thank Nicole for her hard work toward strengthening our members’ retirement benefits.”
Musicco is only the second woman to have led the investment operations of the nation’s largest public pension fund, which has a current market value of $463 billion.
During her tenure at CalPERS, Musicco led efforts to evolve and accelerate CalPERS programs aimed at private market investing, including new co-investing opportunities. The CalPERS Investment Office has also expanded its focus on high-value sustainable investing and is currently focused on new initiatives built around the core principles of innovation and resiliency.
Musicco also championed a $1 billion commitment in 2022 to identifying and supporting the next generation of emerging and diverse investor entrepreneurs in private markets.
With guidance from the board and chief executive officer, CalPERS officials will soon launch a global search to identify candidates for the position.
For more than nine 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. For more information, visit www.calpers.ca.gov.
It's Friday, I was stunned earlier today when a friend of mine texted me this news as I obviously didn't expect it.
Three weeks ago, I covered Nicole Musicco's interview with Carlyle co-founder and co-chair David Rubenstein on Bloomberg Wealth to discuss r
he decision to leave CalPERS will allow her to attend to the immediate needs of family in Toronto and that she has been shuttling between Toronto and Sacramento in recent weeks to help members of her large, multigenerational family.
Anyway, it's done, she wants to spend time at home with her children and family who need her and she has the full support of CalPERS CEO Marcie Frost and CalPERS Board of Administration President Theresa Taylor.
There's a lot of speculation as to why Nicole left but the truth is she has an excellent reputation and she was doing a great job at CalPERS which isn't the easiest place to be a CIO.
I know this firsthand through discussions I had with her predecessors.
Anyway, CalPERS is now in an unpleasant situation where it has to launch yet another search for a CIO.
The last one took two years but I expect this one will be shorter.
I'm going to publicly recommend CalSTRS CIO Chris Ailman who I think is a great fit but there are other excellent candidates.
As far as myself, I have no interest living in Sacramento, way too hot in the summer and the state of California is too leftist for my taste (Texas and Florida are more my style but crazy heat there too in the summer).
Whoever the next CIO is, I hope they stay at least two 5-year terms and that the political interference stays at a minimum (it's California, they politicize everything, including their pension investments).
Let me also be clear on something, the changes Nicole Musicco implemented, selling weak stakes in private equity in the secondary market, co-investing with top PE funds and introducing leverage (that goes back to Ben's days) to capitalize on opportunities as they arise are critically important.
If my worst fears come true and we head into a deep and prolonged recession and nasty bear market, CalPERS and its investment team need to be nimble and seize opportunities as they arise.
What else? Time for CalPERS to reintroduce hedge funds and focus on multi-strategy, global macro and CTA funds for now and then introduce L/S Equity and other strategies.
I'd hire Daniel MacDonald who is Head of Advisory and Pensions at Middlemark in San Diego (much nicer than Sacramento) to ramp up the hedge fund portfolio.
I have a lot more ideas on Infrastructure, Real Estate, Private Debt and more but CalPERS doesn't pay me enough to share all my good insights publicly.
That job goes to the next CIO whoever she or he will be.
Below, watch Nicole Musicco's interview on Bloomberg Wealth with David Rubenstein which was recorded August 8th in New York City.
It's sad to see Nicole depart CalPERS and I do wish her and her family well.
I'm certain she will reemerge somewhere in the Canadian pension landscape or at some private equity firm as that is her true love.
Update: Eliyahu Kamisher and Dawn Lim of Bloomberg report Calpers CIO’s vision failed to win over staff before exit:
In her first year atop the California Public Employees’ Retirement System as chief investment officer, Nicole Musicco gathered dozens of staff and laid out an ambitious vision for the largest US public pension fund.
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.
During her tenure the fund explored buying a stake in its hometown basketball team, the Sacramento Kings, said people familiar with the matter. Calpers also invited Tony Ressler, the billionaire Ares Management co-founder who owns the Atlanta Hawks, to speak to its board.
Read the entire article here as it's too long to cite it all.
This passage caught my attention:
Musicco’s attempt to import the so-called Canadian investment model, which emphasizes direct investments to reduce the fees paid to outside managers, didn’t sit well with key investing staff at Calpers, because there was no clear path communicated on how to do it, according to people close to the pension who were not authorized to speak publicly.
Some were also irked by Musicco’s focus on sports, technology and venture capital investments, saying she hadn’t clearly outlined how Calpers would pull off such deals, and specifically, how such a massive institution could successfully deploy money at scale and move the needle on returns. It didn’t help that she was frequently absent from the office as she commuted from her family’s home in Toronto, said people familiar with the matter.
Calpers spokesperson John Myers said Musicco was hired with the full backing of the pension board and staff leadership. Such fault-finding represents a small number of people lodging “water-cooler criticisms,” he said.
And this passage:
Advocates for Musicco say she was attempting to right a pension portfolio that has long been among the country’s worst performers.
“When you’ve got 22-year veterans in these positions, who have consistently underperformed and under delivered and they get the carpet pulled out and moved around, there’s going to be pushback,” said Terry Brennand, director of revenue, budgets, and pensions at SEIU, California’s largest union, which closely monitors Calpers’ policies.
Calpers also pushed to invest $1 billion with investment firms TPG Inc. and GCM Grosvenor to back up-and-coming buyout firms. Some investment staffers thought this did the opposite of what Musicco was preaching interms of trying to cut out the middlemen, a person familiar with the matter said.
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.
And Musicco was also building off momentum by staff to do more financing plays. Before she joined, Calpers was in the final stretch of sealing a $750 million commitment to Ressler’s Ares to finance sports, media and entertainment businesses.
Still, as Musicco wrapped up her first year on the job, some longtime employees expressed unease to each other about the decisions of the newly arrived boss, who frequently crisscrossed the continent.
Her constant travel not only put a strain on Musicco, according to a person close to her, but also on senior staff, who had been eager for a clearer blueprint on how the fund would meet its investment goals after an 18-month leadership gap. Her predecessor, Ben Meng, resigned in August 2020 amid a review into whether his personal investments violated the pension fund’s rules, although no evidence of wrongdoing has surfaced. Meng declined to comment.
There is probably some truth there as a leader who travels too much isn't present to clearly set the priorities and communicate effectively.