CalSTRS Appoints New Director Of Corporate Governance

Kirsty Jenkinson will be director of corporate governance for the California State Teachers Retirement System starting in January 2019. She replaces Anne Sheehan who retired in March 2018.

More information on Ms. Jenkinson can be found in this report from BusinessWire:

Ms. Jenkinson comes to CalSTRS from Wespath Benefits and Investments in Illinois, where she has led Wespath’s sustainable investment strategies team since 2014. She also directs Wespath’s environmental, social, governance (ESG) integration, corporate engagement, portfolio screening and proxy voting activities.

“Ms. Jenkinson brings great value to CalSTRS via her stellar experience and rich global perspective,” said CalSTRS Chief Executive Officer Jack Ehnes. “CalSTRS commitment to long-term sustainability for California’s educators is bolstered by having Kirsty onboard.”

At CalSTRS, Ms. Jenkinson will lead an ESG portfolio of more than $4.1 billion. “Kirsty is the ideal person to lead CalSTRS’ ESG investment policies into the future,” said CalSTRS Chief Investment Officer Christopher J. Ailman. “It is a high-performing team forged by her predecessor, Anne Sheehan, and I’m confident Kirsty is poised to lead our ESG efforts as we grow, adapt and change to meet the investment challenges ahead.” “It has been an honor to work with Wespath, and I feel privileged to lead the dynamic team at CalSTRS, one of the world’s most respected leaders in ESG investing and corporate governance,” said Ms. Jenkinson.

The Pension vs. 401k Debate Harms Teachers


This post originally appeared on

Each year, around 150,000 new teachers are hired to work in American public schools. Those teachers might not pay much attention to their retirement except to note that they’re enrolled in their state’s pension plan. A “pension plan” sounds good, safe, and secure, much better than “risky” 401k plans typically offered in the private sector.

This is a dangerous and flawed misperception. Of the 150,000 new teachers, slightly more than half won’t stick around long enough to qualify for the pension they were promised. They’ll get their own contributions back, but in most states, they won’t earn any interest on those contributions, and they won’t be eligible for any of the sizable contributions their employers made on their behalf.

These teachers are worse off than if they had been in a 401k plan. The federal government has laws governing private-sector retirement plans to ensure that workers start earning retirement benefits early in their careers, but those laws do not cover state and local governments. Teachers are left exposed to the whims of state legislators, and during tight budget times, states cut benefits for new teachers. Today, nearly every state makes teachers wait longer to qualify for their pension than private-sector workers wait for employer benefits from 401k plans. Four states require seven- or eight-year waiting periods (called “vesting” requirements) and 15 states, including populous ones like Illinois, Maryland, New Jersey, and New York, withhold all employer contributions for teachers until 10 years of service. In these states, teachers could work up to nine years without any form of employer-provided retirement savings. This would be illegal in the private sector.

Teachers are often told they’re trading lower salaries while they work for higher job security and more generous benefits. But that trade only works well for teachers who actually stick around until retirement. Most don’t. Most teachers get the worst of both worlds—they earn lower salaries while they work and they forfeit thousands of dollars in lost retirement savings when they leave. Check out our report, Hidden Penalties, to see how many teachers are affected in your state and how much they’re losing.


Photo by gfpeck via Flickr CC License

Pew: Investment Performance Falls As Alternative Allocations Rise

Seeking to boost returns on their investments, many state pension funds turned to hedge and private equity funds for help. Alternative investments grew from 11% to over 26% of the average public pension plan.

A Pew study reports that as of fiscal year 2016 (latest available data), state pension funds now have a combined $1.4 trillion deficit, up $295 million from 2015. State pension plans now have total pension liabilities of $4 trillion while having only $2.6 trillion in assets.

John Schoen filed this report in CNBC:

To try to make up that deficit, state pension fund managers have shifted investments away from the traditional mix of stocks and bonds to a greater reliance on alternative investments like hedge and private equity funds. Between 2006 and 2016, the average plan has raised its share of alternative investments from about 11 percent of assets to 26 percent.


Despite paying higher costs, pension plan performance has fallen. Among the funds Pew studied, none met its investment target. The shortfall has left many retirement systems owing more in liabilities than they can afford to pay out, in some cases much more.

Pension fund systems in New York, South Dakota, Tennessee and Wisconsin had enough to cover at least 90 percent of their liabilities in 2016, while pension funds in Colorado, Connecticut, Illinois, Kentucky and New Jersey were less than 50 percent funded, according to Pew.

Another 17 states had less than two-thirds of the assets needed to pay future retirement benefits. Kentucky and New Jersey had the lowest funded ratios among states at 31 percent and Wisconsin had the highest at 99 percent.

Meng Returns To CalPERS As New CIO

After three years in China as the deputy chief investment officer for the State Administration of Foreign Exchange, former employee Ben Meng will return to CalPERS as Chief Investment Officer (CIO). He will succeed Ted Eliopoulos who was CIO since 2014.

Adam Ashton filed this report in the Sacramento Bee:

”We are pleased to have (Meng) back,” CalPERS Board of Administration member Henry Jones said Monday. “He has deep understanding of our investment operations. We look forward to introducing him personally to our members, employers (and) stakeholders in the future when he returns to the United States.”

Meng, 48, worked at CalPERS from 2008 to 2015, including a term as head of asset allocation. State salary records show he earned almost $500,000 in his last year at the fund. He’ll be able to earn up to $1.77 million in salary and bonuses as CalPERS chief investment officer.


“Ben’s strong investment background makes him well-suited to lead our investment strategy,” CalPERS Chief Executive Officer Marcie Frost said in a news release. “He understands the need to drive investment returns to help us achieve a fully funded system.”

Pew Says Modest Economic Downturn Could Spell Doom For The Most Underfunded Pension Systems

A relatively healthy US economy has helped keep state pension funds afloat over the past several years but a recent study from The Pew Charitable Trusts suggested that even a modest downturn in economic fortunes could push off the cliff some of the more troubled state pension funds like those in New Jersey and Kentucky.

Here is an excerpt from a report on pension funds from CBS:

“Even after eight years of economic recovery — eight straight years of stock market gains — the public pension plans are more vulnerable than they’ve ever been to the next recession,” researcher Greg Mennis said in an interview.

Governments have been ramping up contributions to the funds to help cover the promises they’ve made to retirees, but that leaves less money to spend on schools, police, parks and other core government services.

Another option is reducing pension benefits. A plan to do that in Kentucky led to teacher walkouts earlier this year.

Some Risk Is Good For Defined Benefit Plans, Says Study

Safe investments are good. But investments that are too safe also carry potential risks for beneficiaries. A study by two Iowa University professors suggests that defined benefit plan sponsors should expand their investment choices to riskier assets and go beyond liability-driven strategies that rely on fixed-income assets.

“Employees have some desire to have a fair risk-return trade-off,” said Wei Li, one of the authors of the study. “They would prefer to have some risk exposure.”

Alicia McElhaney reported on the Iowa University study in this article printed in Institutional Investor:

The research contradicts the view held by some defined benefit plan sponsors that given their fixed-income-like payouts, they should engage in liability-driven investment strategies, which rely on fixed-income assets to secure returns.

According to the research, this isn’t exactly beneficial for employees. Here’s why: many employees rely on their pension funds completely for retirement savings, according to the research. Regardless of how their plan sponsors invest, these employees are taking on some risk because their pensions could be wiped out if their employers file for bankruptcy. And while the Pension Benefit Guaranty Corp. (PBGC) provides insurance for pension funds, retirees are only insured up to a ceiling, the paper noted. For higher-paid employees expecting to retire with large pensions, a bankruptcy could spell trouble.


There is, perhaps, a better way to distribute the risk fairly according to the paper: defined contribution plans. These plans make up 48.6 percent of pension assets in the seven major pension fund markets, according to Willis Towers Watson, and are steadily increasing their market share. Assets under management at these defined contribution plans increased by 5.6 percent over the past 10 years, while they grew by 3.1 percent at defined benefit plans during the same time frame, the report shows.

“A more efficient contract would let employees to shoulder all the pension investment risk while keeping them insulated from firm-specific risks,” according to the paper. “Interestingly, this arrangement resembles what a defined contribution plan offers. Our analysis shows that such an arrangement may substantially reduce firms’ pension funding costs.”

CalPERS “Direct” Isn’t So Direct

The California Public Employees Retirement System (CalPERS) is considering launching two new investment partnerships that would manage more than $20 billion over the next ten years. But that plan has encountered fierce opposition from inside CalPERS.

The opposition to the plan has centered over the lack of control CalPERS will have over the investments that will be made by the partnerships. It was also not clear what were the benefits to be gained by giving up that control to the partnerships, said CalPERS investment Committee Member Margaret Brown.

Randy Diamond filed this report in Chief Investment Officer:

CalPERS plans to allocate $20 billion to two partnerships, one that would invest in later-stage companies in the venture capital cycle in technology, life sciences, and healthcare. The second would buy stakes in established companies like Warren Buffet and hold those stakes for extended periods of time.

(Former CalPERS CIO Ted) Eliopoulos told the investment committee at its Nov. 13 meeting that the pension plan’s investment staff had looked at CalPERS running the program itself or owning it directly as a captive company but what “we really settled on is the traditional partnership structure where you have a general partner and a limited partner.”


Critics of the plan say it is misleading to call the program “CalPERS Direct,” since the pension system will not make direct investments in private equity, like some of the Canadian pension plans.

“What they are proposing makes no sense,” said J.J. Jelincic, a former CalPERS Investment Committee member as well as a former CalPERS investment officer. Jelincic said Eliopoulos and other CalPERS investment officials haven’t detailed a logical rationale as to why they are giving up control of investment decisions or showed that they will be saving on the high fees that are part of CalPERS’s traditional private equity program.

OTPP Building New Careers?

Leo Kolivakis is a blogger, trader and independent senior pension and investment analyst. This post was originally published at Pension Pulse.

Rishika Sadam of Reuters reports, Apollo Global-led investor group to buy CareerBuilder:

A group of investors led by U.S. private equity firm Apollo Global Management LLC (APO) and Ontario Teachers’ Pension Plan Board will buy a majority stake in job portal CareerBuilder, the companies said on Monday.

CareerBuilder LLC is owned by Tribune Media Co (TRCO), TV station operator Tegna Inc (TGNA) and newspaper group McClatchy Co (MNI). These current owners will all retain a minority stake, Apollo said.

Apollo did not disclose financial details of the deal.

Reuters reported last month that Apollo was negotiating a deal that would value CareerBuilder at more than $500 million, including debt.

OTPP put out a press release, Apollo Global Management-affiliated Funds and Ontario Teachers’ Agree to Acquire a Controlling Interest in CareerBuilder:

Certain affiliates of investment funds managed by affiliates of Apollo Global Management, LLC (together with its consolidated subsidiaries, “Apollo”) (NYSE: APO), the Ontario Teachers’ Pension Plan Board (“Ontario Teachers'”) and CareerBuilder, LLC (“CareerBuilder”) announced today that they have entered into a definitive agreement, pursuant to which an investor group led by Apollo along with Ontario Teachers’ will acquire a majority of the outstanding equity interests in CareerBuilder. CareerBuilder’s current owners, TEGNA Inc. (“Tegna”), Tribune National Marketing Company, LLC (“Tribune”) and McClatchy Interactive West (“McClatchy”) will retain a minority interest.

“CareerBuilder is a global leader in human capital solutions, and we are excited to work with the Company in the next phase of its growth and development,” said David Sambur, Senior Partner at Apollo. “Matt Ferguson and his team have done an exceptional job capitalizing on CareerBuilder’s iconic brand to create an integrated solutions software-as-a-service (SaaS) platform, and we look forward to working with the team to support the Company’s continued growth and innovation.”

Matt Ferguson, CEO of CareerBuilder, added, “This is an exciting next chapter for CareerBuilder. We are very proud of the work we did during our partnership with Tegna, Tribune and McClatchy, and we look forward to collaborating with Apollo and Ontario Teachers’ to continue the successful transformation of our business.”

The transaction includes committed financing from Credit Suisse, Barclays, Deutsche Bank, Citigroup Global Markets and Goldman Sachs & Co. LLC; all are also acting as financial advisors to Apollo, along with LionTree Advisors and PJT Partners. Morgan Stanley & Co. is acting as financial advisor to CareerBuilder. Akin Gump Strauss Hauer & Feld LLP and Paul, Weiss, Rifkind, Wharton & Garrison LLP are acting as legal advisors to Apollo. Wachtell, Lipton, Rosen & Katz LLP is acting as legal advisor to the sellers.

The proposed transaction is expected to close in the third quarter of 2017, subject to regulatory approvals and customary closing conditions. Apollo’s investment is being made by the Apollo-managed Special Situations I fund.

About CareerBuilder

CareerBuilder is a global, end-to-end human capital solutions company focused on helping employers find, hire and manage great talent. Combining advertising, software and services, CareerBuilder leads the industry in recruiting solutions, employment screening and human capital management. It also operates top job sites around the world. CareerBuilder and its subsidiaries operate in the United States, Europe, South America, Canada and Asia. For more information, visit

About Apollo

Apollo is a leading global alternative investment manager with offices in New York, Los Angeles, Houston, Chicago, St. Louis, Bethesda, Toronto, London, Frankfurt, Madrid, Luxembourg, Mumbai, Delhi, Singapore, Hong Kong and Shanghai. Apollo had assets under management of approximately $197 billion as of March 31, 2017 in private equity, credit and real estate funds invested across a core group of nine industries where Apollo has considerable knowledge and resources. For more information about Apollo, please visit

About Ontario Teachers’

The Ontario Teachers’ Pension Plan (Ontario Teachers’) is Canada’s largest single-profession pension plan, with C$175.6 billion in net assets at December 31, 2016.  It holds a diverse global portfolio of assets, approximately 80% of which is managed in-house, and has earned an average annualized rate of return of 10.1% since the plan’s founding in 1990. Ontario Teachers’ is an independent organization headquartered in Toronto. Its Asia-Pacific region office is located in Hong Kong and its Europe, Middle East & Africa region office is in London. The defined-benefit plan, which is fully funded, invests and administers the pensions of the province of Ontario’s 318,000 active and retired teachers. For more information, visit and follow us on Twitter @OtppInfo.

In other related news, Cision PR Newswire reports, CareerBuilder Teams Up with Google to Help Connect More Americans with Jobs:

CareerBuilder’s evolution into an end-to-end human capital solutions company began with operating leading job boards around the world – something it has done for more than two decades. Today, CareerBuilder is excited to announce a powerful collaboration that will bring even more visibility to its clients’ job listings and help job seekers find those opportunities faster.

CareerBuilder is joining forces with Google to help power a new feature in Search that aggregates millions of jobs from job boards, career sites, social networks and other sources. CareerBuilder is fully integrated with Google to feed content to them, and will include all of its jobs from its job sites and talent networks in this new feature.

“CareerBuilder has been working closely with Google on this from the very beginning when Google was first reaching out to content providers,” said Matt Ferguson, CEO of CareerBuilder. “We saw a big opportunity to increase exposure for our clients’ jobs and today we stand as one of Google’s biggest suppliers of jobs content. Google has enormous reach and excellent search capabilities, so why not leverage these strengths for the benefit of our clients?”

Over the last 20-plus years, CareerBuilder’s model has always been to serve up jobs wherever job seekers are on the Internet, and today CareerBuilder’s job search engine is on more than 1,000 sites. CareerBuilder is embracing this new feature as another distribution channel for its clients that will capture even more potential candidates.

CareerBuilder has been working with Google on different initiatives and is exploring ways in which the two companies can further collaborate.

“CareerBuilder has always had an open ecosystem because it speeds innovation and produces better outcomes,” Ferguson said. “Our product portfolio has expanded so significantly – now covering everything from recruiting and employment screening to managing current employees. We think there is a great opportunity to work with Google as we grow our business.”

Google has been a traffic source for CareerBuilder for several years. Six months ago, CareerBuilder announced plans to use the Google Cloud Jobs API to power searches on its job site. CareerBuilder is pairing its deep knowledge in recruitment with Google’s expertise in machine learning to provide faster, more relevant results for workers looking for jobs on See the announcement here.

I don’t have much to add on this deal. I’m pretty sure the folks at Apollo know how to unlock the value in CareerBuilder. Moreover, if the company is working with Google to improve its products and services, that is a huge vote of confidence in my book.

Of course, if you ask me, Microsoft’s acquisition of LinkedIn will change the job search industry in ways we don’t even know yet, and this represents a major threat to traditional job search companies.

How traditional job search companies respond to this emerging threat remains to be seen. Will Google try to compete head on with Microsoft and potentially acquire CareerBuilder in the future? It certainly wouldn’t surprise me given the two companies are working closely together.

Maverick CalPERS Board Member Won’t Run Again

Reporter Ed Mendel covered the California Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at

CalPERS board member J.J. Jelincic, known for being reprimanded by fellow board members and asking frequent and detailed questions about agenda items, was expected to seek a third four-year term but decided not to run.

A collective sigh of relief from the board majority of the California Public Employees Retirement System may be premature.

A late entry last week in the race for the open seat, Michael Flaherman, a former board member, criticized the CalPERS board for watering down private equity fee reform legislation and has supported Jelincic in his latest board battle, calling it “procedurally atrocious.”

Among the three other candidates for the open seat is the current chairman of the CalPERS finance committee, Richard Costigan, who wants to switch from one-year appointments to an elected four-year term.

Costigan has been annually chosen by the State Personnel Board to fill its seat on the CalPERS board for seven years in a row. His appointment by former Gov. Arnold Schwarzenegger to a 10-year term on the Personnel board expires this year.

The other candidates are David Miller, a state Department of Toxic Substances Control scientist, and Felton Williams, a retired Long Beach Community College dean of business and social sciences.

The major public employee unions have not yet publicly endorsed a candidate. Flaherman said he has the endorsement of two large retiree groups, the Retired Public Employees Association and the California State Retirees.

Jelincic has been at odds with the CalPERS establishment since winning a race for an open board seat in 2009. It was a rare, if not unprecedented, case of a CalPERS employee becoming one of the 13 members of the powerful CalPERS board.

With the backing of the two retiree groups and a $74,812 contribution from the American Federation of State, County and Municipal Employees, the 25-year CalPERS investment officer defeated a candidate backed by the Service Employees International Union.

In his first year on the board, Jelincic was reprimanded by the CalPERS board for sexual harassment of co-workers, with words and suggestive looks. He was stripped of some committee posts and ordered to take sensitivity training.

Jelincic remained on his CalPERS job until being placed on leave with pay early in 2011. Three opinions from the state attorney general said he should not participate in board meetings on personnel, particularly about top management under which he may serve later.

The CalPERS board reprimanded Jelincic again for telling Pensions and Investments in 2014 that the newly promoted chief investment officer, Ted Eliopoulos, “doesn’t have the temperament or the management skills” needed for the job.

Jelincic told the publication he worked under Eliopoulos from 2007 until being placed on leave. Eliopoulos and another CalPERS officer reportedly had warned Jelinicic in 2009 about complaints of sexual harassment.

Two years ago, Jelincic seemed to trigger a committee discusion of “board member behavior” after filing Public Records Act requests to get weekly reports from new federal lobbyists, as specified in the contract, rather than monthly reports approved by the board.

A more serious clash surfaced at a CalPERS board meeting in Monterey last January. Board member Bill Slaton accused Jelincic of leaking confidential information from a closed-door session and urged him to resign.

The confrontation was first reported by Yves Smith on her website, Naked Capitalism. Flaherman said the article was accompanied by his video of the meeting, taken after Jelincic told him a key part might be omitted in the CalPERS video.

The CalPERS board disciplined Jelincic by requiring him to attend special training on open-government laws, the Sacramento Bee reported last month. Jelincic denies that he leaked the information, which remains formally unidentified because it’s confidential.

Jelincic said last week the latest disciplinary action isn’t the reason he decided not to run for re-election — adding if anything, it would motivate him to remain. But he will soon be 69 years old, Jelincic said, and he pointed to the frustration expressed on his website.

“I originally ran for the CalPERS Board because I thought the Board was not doing its job and was too often being manipulated by staff,” Jelincic said on his website. “After eight years on the Board, I can tell you it was even worse than I realized.”

He helped improve the situation, Jelincic wrote, but in doing so “angered some senior management and fellow Board members who are invested in the status quo. It is clear to me that this Board has abdicated its responsibilities to challenge, monitor and supervise the staff.”

Jelincic said the staff controls information given to the board, which routinely rubber stamps staff recommendations. He apparently referred to a closed-door action last September, not revealed until November, that shifted investments to less risky but lower-yielding investments.

“The Board recently changed asset allocations. Why? Secret! What factors were considered? Secret! What costs were evaluated? Secret! Was the impact on beneficiaries and employers considered? Secret!” he said on his website.

As an alternative, Jelincic has suggested CalPERS could look at covering four years of costs with bonds and other nearly risk-free investments, while putting much of the portfolio (valued at $323.3 billion last week) into riskier but potentially higher-yielding investments.

Flaherman also has ideas for change. He was a Bay Area Rapid Transit planner when elected to two four-year terms on the CalPERS board ending in 2002, followed by a decade of work for a private equity firm before becoming a visiting scholar at UC Berkeley.

Last year Flaherman said he got help from Jelincic in persuading state Treasurer John Chiang to seek legislation requiring more disclosure of private equity fees. He said AB 2833 was weakened by CalPERS, which reportedly feared some firms might reject investments.

If Flaherman is elected to the CalPERS board, he might be an advocate of change much like Jelincic. But he would not have the burden of being suddenly promoted from subordinate to superior, while continuing to wear both hats within the bureaucracy.

“We’d like to have a collegial board again, a board that works together,” Rob Feckner, CalPERS board president, told the Bee last month. “Mr. Jelincic can have great value if he puts his efforts in a positive manner.”

Jelincic is scheduled to leave the board in January. Active and retired CalPERS members are eligible to vote in the election for his open seat. Voter turnout often is very low, about 16 percent of 1.3 million eligible voters when Jelincic won in 2009.

In another election for a similar board seat, board member Michael Bilbrey is running for re-election with some union support.

The other candidates are Wisam (Sam) Altowaiji, retired Redondo Beach city engineer; Margaret Brown, Garden Grove Unified School District business services director, and Bruce Jennings, retired Senate Rules Committee principal consultant.

CalPERS on PE Fees: Staff “Can’t Track It”, But Software Can

CalPERS’ pays billions of dollars in fees to external investment managers each year.

But an official admitted last week that the fees are sufficiently complex that staff “can’t track” them by themselves.

It was revealed at last week’s board meeting that the pension fund uses an algorithm — part of software built for the pension fund by a third party – to track investment fees.

From the Wall Street Journal:

As the nation’s largest public pension funds plunge deeper into complicated investments as a way of chasing returns, they are becoming more reliant on machines to make sense of it all. Some executives worry that a greater reliance on databases, coding and other quantitative tools creates the false impression that they have a better handle on their investments than they actually do.


In California, Calpers turned to computer models to understand its private-equity costs. Calpers has roughly $26 billion invested with private-equity firms, which buy companies with the goal of earning more in a later sale or public offering. They typically charge pension-fund clients a management fee of 1% to 2% of assets and a performance fee of as much as 20% of the gains when they sell companies for a profit.

Calpers was long unable to separate one set of fees from the other, relying in part on a set of spreadsheets to keep track of the data. The information was also stored in a range of different formats, making it difficult to aggregate and analyze.

It took five years to develop a new data-collection system that relies on private-equity managers to fill out new templates describing their various fees. A data and accounting firm then compiles the information and feeds it into the software program.

The new quantification is changing the way Calpers operates, one official said. It is “motivating us to explore alternative ways of investing in private equity that might have less of a fee burden,” Mr. Tollette said in an interview.

Of course, the algorithms are only as good as the data you give them. And a continuing problem for CalPERS is the fact that many private equity managers hesitate to turn over all relevant data, if any.