Seismic Shifts Ahead for CalPERS?

August 8, 2002 ( - There are ominous indications in Sacramento at the nation's largest pension fund, the $150 billion California Public Employees Retirement System (CalPERS).

A series of recent developments potentially sets the stage for a new era at CalPERS.

Fund watchers note that the influence of State Treasurer Phil Angelides over the fund’s board is about to become manifest (see Cal. Treasurer Targets Firms Heading Offshore ) at a shift with huge implications for the fund’s investments. 

Angelides has made no secret of his social agenda, nor of his desire to see CalPERS adopt a more aggressive investing agenda when it comes to issues like the environment.

“Check” Mates?

Historically, a strong investment staff at the fund, plus allies at the board level, have blocked the more fanciful social and other-worldly agenda espoused by board members. But increasing turnover among the staff threatens this, according to sources close to the fund.

Mark Anson, the well-regarded chief investment officer of the fund, remains in place, but sources say that efforts to hire new staff are foundering.

Turnover at the Top

James Burton, the CEO of the fund, has announced that he will be leaving before the end of the year, reportedly to take over the reins at the World Gold Council in London, an organization dedicated to promoting the yellow metal.

Also gone are Kayla Gillan, CalPERS’ general counsel, to Washington, DC-based Independent Fiduciary Services, and deputy director James Gomez, to the public sector in California.

These departures come in the wake of the recent decisions by two or the board’s more centrist members, Bill Christ (see CalPERS Weighs in on Option Expense Debate )  and Michael Flaherman, not to seek reelection.

Finding a high-profile replacement for Burton will be a particular challenge, not least because the position can be confidently expected to be engaged in a bitter and continuing battle with the powerful Angelides over whether investments are made primarily for return or for a political agenda.

It may well be that the fireworks that have characterized the last five years at CalPERS have simply been a curtain raiser for the turmoil to come.