CalPERS Names Stephen Gilmore as New CIO

Matt Toledo of Chief Investment Officer reports CalPERS Names Stephen Gilmore as New CIO:

The California Public Employees’ Retirement System has selected Stephen Gilmore as its new CIO, succeeding Nicole Musicco, who stepped down in September 2023.

Gilmore’s appointment is effective in July, the CalPERS board announced Tuesday.

“Stephen has worked in very public roles during his career for organizations where transparency and resiliency are essential,” said CalPERS CEO Marcie Frost in a statement. “He brings not only a wealth of investing knowledge to the job, but he also has the temperament to understand the needs of our members and public sector employers who depend on CalPERS to be a steady, long-term partner.”

Gilmore will be leaving his role as CIO of the Guardians of New Zealand Superannuation, which manages the New Zealand Superannuation Fund, a position he has held since 2019. A native of New Zealand, he was previously chief investment strategist at the Future Fund, the sovereign wealth fund of Australia, and has held roles with the International Monetary Fund.

Robin Wigglesworth of the Financial Times also reports the worst job in investing has finally been filled (for now):

One day after April Fools’, the $495bn California Public Employees’ Retirement System has announced that another sucker has decided to subject themselves to what might be the worst job in the entire global investment industry. Willingly. 

SACRAMENTO, Calif. — The California Public Employees’ Retirement System has selected Stephen Gilmore, a senior investment leader with extensive experience in public and private financial institutions and across cultures and geographies, as the pension fund’s chief investment officer. 

His appointment is expected to become effective in July. 

Gilmore, an internationally recognized investment leader whose career has spanned 40 years, comes to CalPERS after more than five years as the chief investment officer of the New Zealand Superannuation Fund (NZ Super Fund), a sovereign wealth fund owned by the New Zealand government and valued at more than $73 billion (NZD). 

“Stephen has worked in very public roles during his career for organizations where transparency and resiliency are essential,” said CalPERS Chief Executive Officer Marcie Frost. “He brings not only a wealth of investing knowledge to the job, but he also has the temperament to understand the needs of our members and public sector employers who depend on CalPERS to be a steady, long-term partner.” 

Gilmore was chief investment strategist of the Future Fund, Australia’s sovereign wealth fund. There, he oversaw efforts such as portfolio strategy, portfolio overlays, and investment risk. He has also held senior international positions with AIG Financial Products and Morgan Stanley, as well as assignments with the International Monetary Fund and the Reserve Bank of New Zealand. 

On one hand, leading one of the world’s biggest pension plans should be incredibly desirable. You’re doing a vital job on behalf of over 2mn current and future retirees, and managing sums of money so vast it would make Croesus weep with envy. Fee-hungry Wall Streeters will fete you, and journalists treat your pronouncements as newsworthy in themselves. 

But Calpers has become a poisoned chalice. There are always a lot of different interests to manage at the top of a pension plan, but the psychodrama between the board, plan members, the investment staff, the media, and local, regional and national politicians has been quite something to behold over the years. One former Calpers CIO outright laughed (hollowly) when FTAV once asked what the job was like. 

So Gilmore — the fifth Calpers CIO in the past decade! — has quite the job ahead of him, which he obliquely nodded to in the pension plan’s statement:

 “I’m grateful to CalPERS’ leaders for the trust they’ve put in me to help shape the pension fund’s next chapter,” Gilmore said. “There are high expectations, and rightly so, when it comes to fulfilling the promises made in serving those who serve California.”

 Lets hope it’s a longer chapter than those written by his predecessors. Joe Dear (2009-14) was taken by cancer, but judging by the reigns of Ted Eliopoulos (2014-18) Ben Meng (2019-20) and Nicole Musicco (2022-23), it seems the average length of a Calpers CIO stint is getting closer to one year.

Oh those Brits, they can be downright nasty and judgmental little buggers!!

You can read the full CalPERS' press release on his nomination here. 

Let me congratulate Stephen Gilmore on being nominated to this prestigious (and yes, precarious) position.

I hope he signed an ironclad contract and is getting paid well to leave beautiful New Zealand for Sacramento, California. He's in for a culture shock in more ways than one!

One piece of advice for CalPERS' new CIO: proceed cautiously and don't rock the boat.

Your predecessor wanted to implement changes quickly and as you'll realize, CalPERS isn't a place where you can implement anything quickly, it's fraught with politics and bureaucracy and has its own unique culture.

Anyway, what can we expect from Stephen Gilmore?

In an exclusive interview with Jennifer Ablan and Julie Tadge of Pensions & Investments, he shared some insights:

CalPERS has tapped Stephen Gilmore, the chief investment officer of sovereign wealth fund New Zealand Superannuation Fund, as its new chief investment officer.

Gilmore has spent the last five years as CIO of NZ Super Fund, which is owned by the New Zealand government and valued at more than NZ$73 billion ($43.5 billion). He is is expected to start at CalPERS, the nation's largest public pension fund, in July.

Gilmore will succeed Nicole Musicco, who left the Sacramento-based California Public Employees’ Retirement System in September and became the second straight CIO to leave after only 18 months on the job.

“Stephen has worked in very public roles during his career for organizations where transparency and resiliency are essential,” said CalPERS Chief Executive Officer Marcie Frost, in an April 2 news release. “He brings not only a wealth of investing knowledge to the job, but he also has the temperament to understand the needs of our members and public sector employers who depend on CalPERS to be a steady, long-term partner.”

As chief investment officer for NZ Super Fund, CalPERS said Gilmore has overseen the world’s best-performing sovereign fund, with annual investment returns of more than 12% a year over the past decade. 

At CalPERS, Gilmore will oversee a team of more than 300 investment professionals and a portfolio valued at $494.6 billion. His arrival comes shortly after CalPERS’ launch of a sweeping Sustainable Investments 2030 plan, which includes investing $100 billion in climate solutions over the next six years.

In an interview, Gilmore said the position represented an “exciting opportunity,’’ not only because of the sheer size of the pension system but also because of its leadership in sustainable investing and its long-term focus. “California has been a leader in a lot of spaces,” Gilmore said.

He told P&I that a priority will be looking to improve CalPERS’ funding ratio, which was estimated at about 72% as of June 30, rising from 70.9% in 2022, but still reflecting a significant decline from 81.2% in 2021.

“If I look at the amount of active risk that’s being taken through time, it’s relatively low,'' he said. "It's hard to generate a lot of outperformance without taking some active risk, so I will be thinking about that.”

In his first 100 days at CalPERS, “I really want to spend a lot of time listening,” he said. “It’s always very dangerous to have preconceived notions before you actually talk to people.”

Before joining NZ Super in 2019, Gilmore was chief investment strategist at Australia's Future Fund. There, he oversaw efforts such as portfolio strategy, portfolio overlays and investment risk. He has also held senior international positions with AIG Financial Products and Morgan Stanley, as well as assignments with the International Monetary Fund and the Reserve Bank of New Zealand.

“Stephen brings an unmatched knowledge of global investing and managing diverse and high-performing investment professionals,” CalPERS President Theresa Taylor said in the release. “We conducted an exhaustive, worldwide search for a deeply skilled leader to continue our mission of providing retirement benefits to California’s public sector workers, and we are confident Stephen is the right person for the job.”

The annual salary for the position, not including incentives based on fund performance relative to established benchmarks, is $718,750.

No doubt about it, even though I don't know him, Stephen Gilmore has the experience and credentials to be a great CIO at CalPERS.

The fact that he's a man and not a woman might disturb some of you but this is a critical job and they picked the best candidate who was willing to take it, period.

Will he last five or more years at CalPERS? I certainly hope so because if he doesn't, the organization is in deep trouble.

Mr. Gilmore is about to lead CalPERS through the next financial crisis and it will be a very difficult one where he needs the support from everyone there.

This isn't a time to play California politics, it's a time to roll up your sleeves and get to work.

On that note, let me wish Stephen Gilmore and the entire team at CalPERS the best of luck.

Below, former Future Fund Chief Investment Strategist Stephen Gilmore has had a career that is both impressive and dramatic, dealing with warlords in Tajikistan, working at AIG during its bail out and finally at Australia’s sovereign wealth fund, the Future Fund. MarketFox columnist Daniel Grioli asks for his insights (November 2020).

If he dealt with warlords in Tajikistan, he's prepared to deal with warlords in California. -:)

Also, a year ago Stephen Gilmore, CIO at New Zealand Super Fund, interviewed Bridgewater's co-CIO Greg Jensen for Ted Seidles' Capital Allocators. 

Bridgewater is going through a tough slug lately as CEO Nir Bar Dea’s attempts to revamp the hedge fund over the past 18 months have had mixed results, underscoring how tough it is for any firm to evolve beyond its founder.

As I told Bloomberg's Nishant Kumar on LinkedIn earlier, in my opinion, once the founder of an elite hedge fund leaves, it's never the same shop, returns typically falter soon after. Hope I'm wrong as I like the folks at Bridgewater but I'm rarely wrong when it comes to my hedge fund calls. It's almost impossible to maintain elite status when the founder departs.