State Retirement Fund’s Chief Investment Officer to Resign
Sheryl K. Pressler, who as chief investment officer of the California Public Employees’ Retirement System pushed the giant pension fund more heavily into the stock market at an opportune time, is leaving for the private sector.
She will resign from CalPERS, which oversees a retirement system with more than 1 million members, at the end of next month to become the chief of Lend Lease Real Estate of Atlanta.
Pressler, who joined CalPERS from McDonnell Douglas in 1994, made a then-controversial move to boost the percentage of the fund’s assets invested in stocks while reducing the percentage in bonds, arguing at the time that the shift was the logical decision given stocks’ long-term performance.
As it turned out, the change came as the market began a spectacular climb beginning in 1995. CalPERS’ assets have soared from $78 billion to $168 billion during Pressler’s tenure.
“As the numbers show, she did a great job,” said William D. Crist, president of the CalPERS board of administration. “She in effect helped CalPERS double the size of its fund.”
Pressler did not respond to a request for an interview. In a written statement, she voiced mixed emotions about leaving but concluded by saying she is “looking forward to the challenges related to running the nation’s largest real estate investment company.”
A source who spoke with Pressler said she considered the opportunity to join Lend Lease too good to pass up. Another, however, suggested that the closer political scrutiny of CalPERS investments in recent years may have been a factor in Pressler’s decision to leave.
Said Crist, who disagreed with the latter observation: “I think it has been apparent for some time that she needed additional challenges. She’s a very creative person, and this particular job she’s selected is very demanding.”
CalPERS Assistant Executive Officer Robert Aguallo will oversee the massive fund as interim chief investment officer while a nationwide search is conducted for Pressler’s replacement.
State Controller Kathleen Connell, who sits on the pension board and, during an interview Friday, applauded Pressler’s performance, said she hopes the search will not stop at U.S. borders.
“I would really hope the board would view this vacancy as a time to give reflection on the changing dynamic of what is required to manage an investment fund in a 24-hour global economy,” Connell said.
The financial community is likely to keep a close eye on the selection process, given the magnitude of CalPERS’ pension fund and the clout it wields as a result.
CalPERS has gained a reputation as an 800-pound gorilla of “activist” pension funds, in part because of the annual “hit list” of 10 under-performing stocks that it issues in an effort to improve those firms’ financial performances.
“To the extent that the person coming in would carry on that function, that could be valuable to shareholders generally in those firms,” said Michael Smith, a vice president at Economics Analysis Corp. in Century City who has studied CalPERS’ returns.
Because CalPERS, like most pension funds, primarily “indexes” its stock portfolio--that is, it buys and holds most of the shares included in major market indexes--the job of investment chief primarily involves fine-tuning the fund’s stock and bond mix and overseeing smaller specialized investments the fund makes.
Whoever is chosen to fill Pressler’s shoes will not only assume her financial responsibilities but will no doubt also be forced to deal with some sensitive political ones as well.
CalPERS has increasingly found itself entangled in a growing debate over how public agencies handle their pension fund investments, how open the process should be and whether social issues and national security matters should be considered when investing public money.
State Treasurer Phil Angelides, who also sits on the pension board, is expected to propose new criteria for emerging-market investments before CalPERS’ April meeting.
*
Times wire services were used in compiling this report.
