California's huge pension fund has turned to a trusted insider to take over the daunting job of directing almost $300 billion in investments, crucial to the retirement of more than 1 million current and former state and local government workers.
After a nationwide search, the California Public Employees' Retirement System said Wednesday that it had picked Ted Eliopoulos, a seven-year investment expert at the fund who has been the interim chief investment officer since February.
Just this week, Eliopoulos, 50, of Sacramento, guided the CalPERS board through its decision to sell $4 billion in complex and costly hedge fund investments over the next year. Many market watchers gave the pension fund high marks for rethinking its investment strategy.
After concern in recent years about CalPERS' speculative investments and some feeble returns during the recession of 2008-09, Eliopoulos and his late predecessor, Joseph Dear, came up with a new strategy.
"We're lowering the risk profile," Eliopoulos told the board in February 2011 in a briefing on changes in real estate holdings. "It's a gradual transformation of the existing portfolio. We're building up a base, particularly of quality real estate over a sustained period of time."
The new caution, a recently strengthening national and global economy and a domestic bull stock market have been good to CalPERS, largely under the investment guidance of Eliopoulos. CalPERS reported an 18.4% return on investment for the most recent fiscal year that ended June 30. It was the fourth year of double-digit returns in the last five years.
By contrast, the fund had lost 23.6% of its value in fiscal 2009.
The new tactics, both in real estate and CalPERS' decision this week to slowly sell hedge fund investments, is a positive move, said Marcia Fritz, a pension-reform advocate. She is a longtime CalPERS critic and president of the California Foundation for Fiscal Responsibility.
"I think he's being more prudent. We'll probably see less volatility in the assets level," Fritz said, noting that she would like to see the fund display the same kind of prudence on the benefit side of its operations.
Eliopoulos' bosses at CalPERS like what they've seen since he was formally named interim chief after Dear's death from cancer in February. The board finished up a handful of interviews for the permanent post on Wednesday, officials said, and promptly made the announcement.
Eliopoulos will manage the largest investment portfolio of any public pension fund in the nation along with a 400-person professional staff based in a low-rise, well-appointed campus five blocks south of the state Capitol.
"Ted distinguished himself during the selection process as the best candidate for the position," said Rob Feckner, president of the CalPERS Board of Administration. "He has the intellect, temperament, leadership ability and investment experience necessary to succeed."
Eliopoulos joined CalPERS in 2007 as senior chief investment officer for real estate. Soon after, the portfolio, which included highly speculative undeveloped residential properties, plummeted in value during and in the aftermath of the recession.
During that period, CalPERS' real estate holdings plunged 42%. Afterward, Eliopoulos played a principal role in stabilizing the real estate holdings and shifting investments to more stable, revenue-generating, so-called core investments, mainly commercial office buildings.
In the just-finished fiscal year, CalPERS public equity investments returned 24.8%, private equity 20%, bonds 8.3%, real estate 13.4%, commodities and other inflation-protected assets 8.3% and hedge funds 7.1%.
"These are solid numbers fueled in part by the significant rebound of the financial markets," Eliopoulos told the CalPERS board July 14.
Before joining CalPERS, Eliopoulos served as deputy and later chief deputy state treasurer from 2002 to 2006.
He received a bachelor's degree from Dartmouth College and a law degree from the University of Virginia.
Eliopoulos' background and his work as interim chief prompted praise from state Treasurer Bill Lockyer, a longtime CalPERS board member. He called Eliopoulos "an extraordinarily gifted public servant," whom the board trusts "to keep the system's assets growing."