Ben Meng, the new chief investment officer of the California Public Employees’ Retirement System (CalPERS), said he will conduct a full review of the investment activities of the largest pension plan in the US in the next 180 days.
Meng, speaking at the pension system’s semiannual retreat meeting in Rohnert Park, said the review will include an investment performance attribution analysis to uncover the drivers of CalPERS returns.
The CIO of the $345.6 billion pension plan said he wants to see what is working investment-wise—and what is not.
He said CalPERS needs to focus on its “comparative advantages” as a large investor. Meng said with a long-term time horizon, the pension plan is able to invest in illiquid markets and use its size at times to negotiate better fees from external managers. At the same time, he acknowledged the retirement plan’s large size prevents it from being as nimble as a small investor.
Meng, who started on January 2, also gave a full endorsement of CalPERS environmental, social, and governance (ESG) investment focus. The pension plan was one of the early adopters of ESG, particularly as a tool to engage companies in its portfolio on climate change issues and corporate board diversity.
One new CalPERS board member, police Sergeant Jason Perez, who was sworn in at the Jan. 22 meeting, has said he feels CalPERS has put too much focus on ESG and not enough on maximizing investment returns.
CalPERS had an investment return of 8.6% for the fiscal year ending June 30, 2018, but the pension plan is only 71% funded. Massive investment return losses during the great financial crisis and more recently its December 2016 decision to lower investment return average yearly expectations to 7% from 7.5% have contributed to an unfunded liability of almost $139 billion.
Meng, 48, was selected as the new CIO of CalPERS in September. He had been serving as the deputy CIO at the State Exchange of Foreign Administration in China, which manages the country’s foreign exchange reserves. He is a US citizen born in China.
Meng is not a stranger to CalPERS. He had previously worked at the pension plan as investment director of asset allocation, leaving in 2015 after a seven-year tenure. He has worked for the Chinese government agency for the last three years.