CalPERS appoints New Zealand Super Fund CIO as new investment chief

April 3, 2024 (Preqin News) – CalPERS has appointed the Chief Investment Officer (CIO) of New Zealand Superannuation Fund as its new CIO, ending the six-month search following the surprise departure of his predecessor last September.

Stephen Gilmore joins from the $73bn sovereign wealth fund, known as NZ Super Fund, where he spent five years as CIO during which time the fund nearly doubled in size. His CV also includes Chief Investment Strategist of Australia’s SWF, the Future Fund, as well as senior positions with AIG Financial Products and Morgan Stanley, and assignments with the International Monetary Fund and the Reserve Bank of New Zealand.

He replaces Nicole Musicco, who stood down in September after less than two years in the role, and will be the fourth CalPERS CIO in six years.

‘Stephen has worked in very public roles during his career for organizations where transparency and resiliency are essential,’ CalPERS CEO, Marcie Frost, said in a statement. ‘He brings not only a wealth of investing knowledge to the job, but he also has the temperament to understand the needs of our members and public sector employers who depend on CalPERS to be a steady, long-term partner.’

NZ Super Fund posted an 11.9% one-year fund return last year across the portfolio. CalPERS, which has a portfolio valued at $494.6bn, fell short of its annualized return target of 6.8% in the year ending June 30, 2023, reporting a preliminary return of 5.8%. It posted a -6.1% return in the previous year.

Gilmore is joining a fund that has a much larger exposure to alternatives than his current employer. The NZ Super Fund allocated 10% of its portfolio to alternatives, which it defines as ‘investment options outside of traditional investments such as stocks, bonds, and cash’. The SWF separately discloses its allocations to private equity (4%), real estate (4%), infrastructure (4%), and infrastructure (5%).

In March this year, the CalPERS board approved plans to increase allocations to private markets from 33% to 40% of its portfolio, which it estimates will increase returns by 10 basis points. In the 10 years to 2023, private equity was the fund’s top-performing asset class, with an 11.8% annualized return.

‘I’m grateful to CalPERS’ leaders for the trust they've put in me to help shape the pension fund's next chapter,’ Gilmore said. ‘There are high expectations, and rightly so when it comes to fulfilling the promises made in serving those who serve California.’

CalPERS’ scheme was 72% funded at last measurement in June 2023, a slight improvement from the 70.9% in the prior year. A report published in January from the Equable Institute, The State of Pensions 2023 - Year End Update, found that the aggregate funding ratio for US public pension funds was 78.1%, up from 74.9% in 2022 – this equates unfunded liabilities of $1.44tn for the 2023 fiscal year.

‘Stephen has made a significant contribution to the sophistication of the NZ Super Fund since he joined us in early 2019, a period during which the Fund has grown by more than $30bn, nearly doubling in size’, Acting CEO of the NZ Super Fund, Paula Steed, said in a statement announcing his resignation. ‘He has championed the role of new technology in enabling better investment decision-making, brought innovative and disciplined thinking to our investment processes and, as Chair of our responsible investment strategy refresh, has been key to our shift towards a sustainable investment approach.’

_{The opinions and facts included within the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin providing the information in this content accepts no liability for any decisions taken in relation to the above.}