CalPERS, with $51B in real estate holdings, taps new CIO

California has closed an 18-month gap by naming a chief investment officer for the largest public pension system in the nation, with $478.28 billion in assets that include $51 billion in real estate.

The California Public Employees’ Retirement System has named Nicole Musicco, a longtime public pension executive, to the post, the Wall Street Journal reported.

Musicco replaces Ben Meng, who left in August 2020 amid concerns about his personal investments. She will be the second woman to take the helm of CalPERS.

Mussico most recently served as a partner at New York-based RedBird Capital Partners Management, leading the growth-equity investment firm’s Toronto office. She’s spent most of her career managing Canadian pension plan assets.

Her selection for the nation’s top pension manager aims to slam a revolving door at CalPERS, which has seen six chief investment officers over the past two decades.

The CalPERS Board of Administration approved a compensation package that allows the CIO to earn as much as $2.8 million if the pension’s performance hits certain milestones. It also sought someone willing to make a long-term commitment to the job.

It was important that the new CIO “be willing and able to work with us for a minimum of five years,” said Marcie Frost, CalPERS’ chief executive. Some financial incentives in the Musicco’s contract only kick in after five years.

The new CIO must target actuarial returns of 6.8 percent per year, while leading an investment team of nearly 350 professionals. The pension invests in real estate funds and assets, public equities and bonds and hundreds of private-equity and venture-capital funds and hedge funds.

CalPERS in November announced plans for a new portfolio mix that will put 15 percent of its investments in real assets, up from a current 13 percent, or $62.18 billion. Real assets include real estate, infrastructure, and commodities.

Real estate accounts for 82.1% of the real asset portfolio, according to IPE, or $51 billion.

Musicco said she’ll first identify any talent gaps in the staff, where resources may need to be redeployed, and whether CalPERS should invest even more in higher-return-generating, albeit riskier, assets like private equity. She also plans to explore making more commitments to infrastructure – and real estate.

[WSJ] – Dana Bartholomew

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