Musicco 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
Nicole Musicco is the new chief investment officer at California Public Employees’ Retirement System. Photo by Supplied/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.
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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.
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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.
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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.
On Tuesday, Bertram told the Financial Post that Musicco “has an excellent investment background, particularly in private equities, is familiar with the strategies employed by Canadian funds, and should prove to be a capable leader at CalPERS.”
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Claude Lamoureux, a veteran of the Canadian pension model, as well as Bertram’s first boss at Teachers, said Musicco is well-armed to succeed at CalPERS with her “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.
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“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.
More On This Topic Amazon’s Canadian landlord plans bond market debut CPPIB partners with Lennar in US$979 million U.S. apartment push Brookfield to raise US$25 billion for its largest infrastructure fund 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.
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Article content 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.”
• Email: bshecter@nationalpost.com | Twitter: BatPost
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