< The 2015 Pension 40: The Long Climb
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Ted Eliopoulos
Chief Investment Officer / California Public Employees’ Retirement System
Last Year: 11
In November the board of the $294 billion California Public Employees’ Retirement System voted to lower the fund’s target rate of return to 6.5 percent a year from 7.5 percent. The decision was part of a plan, proposed by CalPERS chief investment officer Ted Eliopoulos, 51, and the fund’s senior staff, to reduce CalPERS’s investment risk and liabilities over time. CalPERS was responding to the fact that as its beneficiaries grow older, it is paying out more in benefits than it takes in as contributions. The board recognized that reducing risk is going to require state and municipalities to pay more into the fund, but they wanted to reduce its market-based volatility. In fact, after several high-performing years, CalPERS returned only 2.5 percent for the 2015 fiscal year, ended June 30. (Fiscal 2016 so far has been worse: down 4.9 percent through September.) CalPERS’s decision to embrace risk mitigation, which included exiting hedge fund investing, was a major turnabout for a plan that was once in the market-risk vanguard of public pensions. Lowering the assumed rate, however, won’t happen overnight. CalPERS will drop the rate a few basis points and rebalance into less risky assets every year it performs above a set bogey. Currently, to reach 6.5 percent, CalPERS has to return 11.5 percent or more; when that doesn’t occur, the fund will not be able to ratchet down its discount rate. Immediately after the November decision, California Governor Jerry Brown criticized the plan as “irresponsible,” saying the push to lower the rate “will only keep the system dependent on unrealistic investment returns. This approach will expose the fund to an unacceptable level of risk in the coming years.” CalPERS board president Rob Feckner disagrees, but the political storm clearly puts the onus on Eliopoulos, a former real estate attorney who took over as head of the fund’s real estate assets in 2007 and became acting CIO in 2013 and CIO in 2014, to deliver big returns.
The 2015 Pension 40
1. Bruce Rauner 2. John & Laura Arnold 3. Chris Christie 4. Randi Weingarten 5. Phyllis Borzi |
6. Kevin de León 7. Alejandro García Padilla 8. Laurence Fink 9. Rahm Emanuel 10. Sean McGarvey |
11. John Kline 12. J. Mark Iwry 13. Damon Silvers 14. Jeffrey Immelt 15. Joshua Gotbaum |
16. Robin Diamonte 17. Mark Mullet 18. Terry O’Sullivan 19. Raymond Dalio 20. Ted Wheeler |
21. Thomas Nyhan 22. Karen Ferguson & Karen Friedman 23. Randy DeFrehn 24. Robert O’Keef 25. Caitlin Long |
26. Kenneth Feinberg 27. Orrin Hatch 28. Kathleen Kennedy Townsend 29. Ian Lanoff 30. Joshua Rauh |
31. Ted Eliopoulos 32. Edward (Ted) Siedle 33. Teresa Ghilarducci 34. Denise Nappier 35. W. Thomas Reeder Jr. |
36. Hank Kim 37. Paul Singer 38. Bailey Childers 39. Amy Kessler 40. Judy Mares |
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