Deals and People April 28, 2000

Interview: Patrick Mitchell, CalSTRS CIO discusses his career move

April 28, 2000 (PLANSPONSOR.com) - It's a pull every top plan sponsor feels, the riches and freedom to be had in the private sector. So also for Patrick Mitchell, the top investment manager at one of the world's largest pension funds, the California State Teachers' Retirement System.

Reported by

Nevin E. Adams

“The disparity between private and state sector pay was three times a decade ago. It’s now ten times,” Mitchell said in an interview with PLANSPONSOR.com. “The responsibility has risen much quicker than the pay.”

His reasons for leaving shed light on other recent defections of top managers in the California pension system. A few months ago, Sheryl Pressler, CIO at the California Public Employees’ Retirement System left for a private company. She was followed last week by Bob Boldt, senior investment officer at CalPERS.

12-Year “Itch”

Mitchell, 50, joined CalSTRS after roughly a dozen years working in commercial banking, which was preceded by 12 year stint working for the US Forest Service and logging operations in Idaho. Consequently, after a dozen years at CalSTRS, it was clearly time to move on to a new endeavor.

At CalSTRS, he was the investment chief for the last three years. Mitchell noted that in 1972 California had no retirement fund, per se – paying teacher’s retirements as a yearly budget expense. Now those obligations are supported by a $115 billion fund – but the responsibilities of managing that fund have risen much quicker than the pay.

Still, Mitchell said, it’s not really about the money. While Mitchell is appreciative of the support and professionalism of his associates at CalSTRS, he reiterates that the private sector is generally more flexible and responsive to the need to spend money to grow revenue. “The emphasis is on controlling expense,” he explained. “It’s hard to add a person, even if you can make a million (dollars).”

The Perfect Job

He intends to pursue other career interests, though he won’t begin his job search for several weeks. His resignation is effective July 15.

Mitchell says in his new job, he’s looking for:

An opportunity to be an “owner”, with an equity interest in the company
Some control over his destiny – an ability to directly set and implement direction
A chance to work with people that he knows and respects, or that are known to people he knows

Having taken the CalSTRS fund from the bottom half of the TUCS (Trust Universe Comparison Service) three years ago to outperforming 72% of other large public pension funds, it “just can’t get any better professionally,” according to Mitchell.

The CalSTRS fund had achieved its goal of consistently adding value, outperforming their strategic benchmark by 230 basis points annually over the past 2 1/2 years, adding $4.5 billion in value beyond the mean return expected for the fund’s risk parameters and equity exposure.

Brain Drain?

“We did not collude” he chuckled when asked about the “wave” of defection announcements hitting public retirement systems in California this year. He acknowledged that while they did talk, and while their motivations for departing may be similar, the timing was totally coincidental.

Mitchell acknowledges a variety of reasons for serving in the public sector; the people, the breadth of responsibility, physical location, a desire to serve. But at some level, the bottom line may ultimately be – the bottom line. “It’s not opaque,” Mitchell said, “it was just time, personally.”

– Nevin Adams