CalPERS hires new investment chief, aims to keep her with pay package of up to $2.8 million

CalPERS has selected a new chief investment officer, filling a vacancy that sat open for 18 months after the abrupt resignation of the last investment chief.

The retirement system chose Nicole Musicco, 47, who leads a team at New York private investment firm RedBird Capital Partners. Previously she worked for about two decades at public firms in Canada.

Musicco will start work at the California Public Employees’ Retirement System, recently valued at $477 billion, on March 28. She’ll be the second woman ever to hold the job, in which she’ll manage investments that support the pensions of about 2 million people.

Ben Meng, the last investment chief, resigned in August 2020 after an anonymous complaint raised concerns about him overseeing CalPERS’ investments in a firm in which he was a shareholder.

Musicco is tasked with growing the system’s investments by 6.8% each year, even though consultants have told the CalPERS board the system should only expect 6.2%.

The system logged a 21.3% return for the fiscal year that ended June 30, closing out the year valued at $477 billion amid a booming stock market. The fund’s value kept climbing, closing out December worth more than $500 billion, before dropping back to its June level last week as markets have faltered.

To boost returns, the board recently voted to expand its holdings in private equity to 13% of the fund, up from 8%, along with other changes. Private equity carries more risk but has brought the highest returns for CalPERS among asset classes in recent years.

Before going to work at RedBird, where she manages Canadian investments, Musicco led private and public equity teams at the Ontario Teachers’ Pension Plan, where she worked for 16 years. She said the plan was valued about $200 billion while she was there.

And she led the private markets investment program at the Investment Management Corporation of Ontario, which manages a pool of smaller public pension funds, for about a year, she said.

Her predecessor, Meng, was the sixth person to hold the CIO job at CalPERS in the last two decades, and he left after less than two years. Deputy chief investment officer Dan Bienvenue filled the job in the interim.

CalPERS CEO Marcie Frost and the board focused on finding a replacement who would stay longer, and the board last year approved new long-term incentives.

Musicco will earn a base salary of $707,000 and up to 150% of that in annual incentives, according to CalPERS. After five years, she could earn up to $2.8 million if she meets all return targets.

She said she doesn’t own stock in public companies outside of passive investment vehicles, and will disclose all of her holdings through the CalPERS public disclosure process. CalPERS does not invest in RedBird, where Musicco works now, spokeswoman Megan White said in an email.

Musicco said her interest in “purpose-driven investment” helped her make the decision to leave the private New York firm and make the move to Sacramento.

“I do see it as a necessity to be in this role for a good portion of time,” she said.

Frost said the recruitment process included identifying “anything that would get in the way” of a candidate staying for at least five years.

“When I went through the process with Nicole, I found that she really believes in these defined benefit plans, the importance of retirement security,” Frost said.

This story was originally published February 22, 2022 at 10:51 AM.