calpers investment returns

CalPERS Pays $9 Million in Bonuses in 2014; Up 14 Percent From 2013

As a result of exceeding investment return benchmarks, CalPERS paid out a total of $9 million in bonuses in fiscal year 2014. The fund paid out $7.9 million in fiscal year 2013.

More details from SF Gate:

The rewards are based on three-year performance verses a benchmark, as well as the earnings of each asset class and individual portfolios, said spokesman Brad Pacheco.

“These awards are part of the overall compensation we provide to recruit and retain skilled investment professionals needed to ensure success of the fund,” Pacheco said.

[…]

The biggest bonus earner was Ted Eliopoulos, the chief investment officer, who recorded a $305,810 bonus last year in addition to his $412,039 base pay.

That bonus was paid when Eliopoulos was acting chief investment officer after predecessor Joe Dear died in February from cancer. Prior to that, Eliopoulos headed the fund’s real estate portfolio. He now earns $475,000 in base pay after he was tapped for the top investment job in September.

[…]

Four executives outside the CalPERS investment office were paid a total of $295,930 in bonuses last year, the fund said. CEO Anne Stausboll got $113,679; Chief Actuary Alan Milligan earned $75,748 and Chief Financial Officer Cheryl Eason was paid $89,703, almost double a year earlier.

CalPERS says it pays bonuses to compete with Wall Street for talented staff.

The pension fund’s investments returned over 18 percent in FY 2014.

CalPERS To Pull Back 40% of Hedge Fund Investments

There is a growing desire by funds around the country to avoid large investment fees, and that trend has led many funds to reduce their investments in hedge funds. Now, CalPERS has hopped on that train. From MarketWatch:

[CalPERS’] hedge-fund investment is expected to drop this year by 40%, to $3 billion, amid a review of that part of the portfolio, said a person familiar with the changes. A spokesman declined to comment on the size of the reduction but said the fund is taking more of a “back-to-basics approach” with its holdings.

CalPERS’ decision comes on the heels of a similar move by the Los Angeles Fire and Police Pensions fund. The difference is, the LA fund separated itself from hedge funds altogether. From MarketWatch:

The officials overseeing pensions for Los Angeles’s fire and police employees decided last year to get out of hedge funds altogether after an investment of $500 million produced a return of less than 2% over seven years, according to Los Angeles Fire and Police Pensions General Manager Ray Ciranna. The hedge-fund investment was just 4% of the pension’s total portfolio and yet $15 million a year in fees went to hedge-fund managers, 17% of all fees paid by the fund.

The HFRI Fund Weighted Composite Index, which measured hedge fund performance, indicated hedge funds returned 3.2 percent in the first six months of 2013, compared to a 7.1 return for the S&P 500 index.

Jerry Brown Sends CalPERS Board Back to School

California Gov. Jerry Brown wanted to make sure that the members of the CalPERS board knew what they are doing when making decisions regarding the fund’s nearly $300 billion investment portfolio. Now, Brown can rest assured that the members have spent some time in the classroom, studying up on the topics that are relevant to the governance of the country’s largest public pension fund. That’s because he just signed a bill requiring all board members to receive 24 hours of education on a variety of investment issues every two years.

From the Associated Press:

AB1163 by Assemblyman Marc Levine, D-San Rafael, originally was introduced as a way to meet Brown’s request to “bring financial sophistication” to the California Public Employees’ Retirement System’s 13-member board, which is dominated by public employees and labor union representatives.

Its original language required adding two board members who had financial expertise and did not have a financial interest in the pension system. It also proposed replacing the State Personnel Board representative with the state Director of Finance.

The bill was changed to give board members 24 hours of education every two years, require records of board members’ compliance with education requirements, and provide an annual report on CalPERS’ website.

The topics of the training are varied, but they include fiduciary responsibilities, ethics, pension funding, benefits administration, investment management, actuarial matters, and governance. All great things to learn about when you govern one of the largest pension funds on the planet.

You can read the entire bill here.

Photo by Eric James Sarmiento via Flickr CC License