Seth Kelly, the chief investment officer of the $11.6 billion Missouri State Employees’ Retirement System (MOSERS), resigned from his position on December 3, a spokesperson confirmed with CIO.
Shannon Davidson, deputy chief investment officer, will serve as interim CIO, and the system will launch its search for a new CIO in January, the spokesperson added. The retirement system did not divulge the reason behind Kelly’s departure.
Kelly was deputy CIO prior to the departure of Rick Dahl, who resigned in 2016 after serving for 21 years as CIO at the pension. Under Kelly’s stewardship, the portfolio underwent a significant modernization “to address the challenging return environment,” Kelly wrote in the latest annual report. He shepherded the strategic asset allocation to one inclusive of more growth-oriented investments, as well as real assets (both public and private), hedge funds, and private credit.
Kelly also put a strong emphasis on cutting overall fees, and reduced the fees the portfolio pays by $54 million in fiscal year 2019. Over the past three years, Kelly helped MOSERS reduce its annual management fee costs by $24 million, primarily from the decrease of partnerships with “high fee” situations like hedge funds and private equity partnerships.
Missouri State Treasurer Eric Schmitt issued a warning in 2017 that the state was in an “alarming” scenario given the downward spiraling funding ratio, and strongly suggested the fund significantly reduce its “expensive investment fees,” which Kelly has done.
The MOSERS portfolio generated a 1.8% outperformance in fiscal year 2019, returning 4.3% compared to the 2.5% benchmark.
“I appreciate the opportunity to serve as the chief investment officer at MOSERS. I am a lifelong resident of central Missouri and have personal relationships with many MOSERS beneficiaries,” Kelly said in the retirement system’s latest annual report. “Those relationships allow me to witness the great things that pension plans, like MOSERS, provide to Missouri state employees in retirement. Those relationships also motivate my everyday behavior to produce results that make the future benefits of the retirees secure.”