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But because of the size of the $244 billion pension fund, the way it sets its policies, and the enormous investment returns it has generated in recent years, the departures will likely lead to few changes in the limited partner’s alternative assets strategy.
“I highly doubt their departures will have a material impact on the private equity program,” says David Fann, CEO of the private equity advisory firm PCG Asset Management in La Jolla, Calif., which has helped shape CalPERS’ cleantech, emerging markets and growth capital investments. “Both Fred and Russell were very conscientious to build a strong investment team.”
A big reason not to expect many changes—if any at all—is that the leadership of the LP’s Alternative Investment Management program remains intact. That includes Leon Shahinian, AIM’s senior investment officer, as well as his deputy, JonCarlo Mark, and the rest of the 15 investment professionals who work for them.
“They have a lot of experience. They’ve done exceeding well,” Fann says.
In addition, Buenrostro and Read did not play active roles in the more minute decisions about which buyout or venture funds to back; the pair simply had too many other responsibilities. The chief investment officer, for example, oversees investments in international equity, U.S. Treasury debt, high-yield bonds, mortgage-backed securities, real estate, corporate governance, venture capital, buyouts and hedge funds.
CalPERS spokesman Brad Pacheco underscored Fann’s prediction of few changes. “CalPERS Board is responsible for setting the asset allocation of our fund, including our private equity program. The day-to-day operations of the program are delegated to [Shahinian], so I don’t anticipate any immediate changes in our investment strategy.”
Still, Pacheco adds, “until we have a new CIO on board, it is unknown if there will be any changes in the future.”
The departures could have a larger effect on CalPERS’ nascent push into infrastructure and other inflation-linked assets; the LP created an allocation for this sector in November. Already, however, CalPERS’ investments in several infrastructure projects have reportedly generated friction. Several of CalPERS’ board members are pushing for union employees to work on the projects, creating some gridlock, according to some press reports.
Read, 44, who joined CalPERS two years ago from Deutsche Asset Management, has set a departure date of June 30, after which he plans to launch his own investment shop specializing in the cleantech sector. Anne Stausball, CalPERS’ chief operating officer for investments, has been named interim CIO.
Buenrostro, 58, CEO since 2002, says that he could stay with the pension fund through 2008; after that, his plans are unknown. Although CalPERS has yet to hire a search firm, the statepension fund’s board will formally meet May 15 to discuss next steps, including the timing of the Buenrostro’s departure.
The departures of read and Buenostro comes a few months after Christina Wood, formerly a senior investment officer at the state pension fund, left CalPERS in January to join hedge fund Capital Z Asset Management following its purchase by buyout firm Paine & Partners. —Constance Loizos