The CalPERS board will make a decision next week on whether to include a long-term incentive compensation element as part of an incoming CIO’s remuneration package, something that the fund’s chief executive, Marcie Frost, said is a contributing factor to the fund putting its search for a new investment head on hold.
The fund has been without a CIO since Ben Meng’s resignation last year, and put its search for a new CIO on hold last week citing a number of factors including the need for greater clarity regarding the positions’s compensation and incentive structure.
In an interview with Top1000funds.com, Frost said the board would decide next week whether to include a long-term incentive structure as part of the remuneration for the role. It currently does include a long-term incentive despite other roles at the fund having this as part of their structure.
“One of the problems we have is the retention of that position. The long term incentive is intended to get people to think five years out. The board will make a decision on that next week on whether to include the long term incentive for the CIO position and will be taking guidance from our compensation consultant,” she said.
Frost said an additional contributing factor was the competitive environment in recruiting for this level position, citing many funds currently recruiting for chief investment and chief strategy officers.
“When we compare to say the top Canadian funds our compensation is not that competitive,” she said. “We do think the long term incentive plan will help, but in talking to candidates there is some caution, and a lot of questions about working in a very public, often characterised as a political, environment. Is the CIO able to focus on the portfolio and the people in the investment office or is the CIO more externally focused?
“Most of the candidates we were talking to are in the former. They are talented investors they want to work with a talented team and really want to have structure to keep the CIO focused there and not so much externally around stakeholders. They want to execute on the strategy.”
Frost said that potential candidates also expressed reluctance to move their families during the pandemic.
“It’s not a good time to ask people to relocate,” she said.
The CalPERS board is also considering whether to require a new CIO to transfer all of their personal stock holdings into a blind trust while they are a CalPERS’ employee. The move follows Meng’s resignation and an ethics investigation related to some of his personal investments.
CalPERS will begin a new search for a CIO in early summer.