CalPERS begins search for next CIO as incumbent Meng resigns

The US's largest public pension has been exploring ways to reach its target private equity exposure, including via secondaries investments.

Ben Meng, chief investment officer of the California Public Employees’ Retirement System, has stepped down after less than two years in the role.

Deputy CIO Dan Bienvenue will replace Meng on an interim basis and CalPERS will start an immediate search for a permanent successor, according to a statement on Wednesday.

Meng joined as CIO in January 2019 from State Administration of Foreign Exchange, China’s foreign exchange regulatory agency in Beijing. This is the second time he has left CalPERS, having previously served as investment director of asset allocation and portfolio manager of fixed income between 2008 and 2015.

Yu Ben Meng, CalPERS CIO
Meng: Second departure from CalPERS. Credit: CalPERS

“I deeply believe in the CalPERS mission of serving those who serve California,” Meng said in the statement.

“I’m proud of the work we did to change the portfolio, build a skilled Investment Office, and set CalPERS on a strong path to achieve our return target. But at this time, it’s important for me to focus on my health and on my family and move on to the next chapter in my life.”

Sacramento-headquartered CalPERS has been an ardent participant in the secondaries market over the years and committed $300 million to Ardian‘s latest programme which raised $19 billion in June. Last year it was exploring expanding its secondaries investment capabilities as a way of dealing with raging competition in the private equity market.

Speaking at its investment committee meeting in February, Steve Hartt of Meketa Investment Group said that greater opportunistic direct investment, co-investment and secondaries investments could help CalPERS reach its target private equity exposure without having to rely on GPs and their fundraising cycle.

During Meng’s tenure the $390 billion institution developed a bold strategy to meet its long-term return target. The “7 Percent Solution” would involve a “moderate level of leverage to take advantage of the low borrowing cost in today’s low interest rate environment and use those funds to acquire assets with potentially higher returns”, Meng said at CalPERS’ 15 June investment committee meeting.

Meng’s plan drew mixed responses from board members and stakeholders.

“I’m encouraged by his work and support his efforts to help us achieve the returns we need to pay benefits our members have earned,” board president and investment committee member Henry Jones told sister publication Buyouts in an email earlier this year.

During public comment, one stakeholder – retired prosecutor David Soares – criticised Meng’s remarks in an interview with Bloomberg in which the CIO had put the chances of hitting its 7 percent target return over a decade at less than 50-50 even if it allocates more to private assets and uses leverage.

“In other words, adding risk of not just missing return targets but adding the risk of actually losing trust assets to creditor failure and bankruptcy during the coming global pandemic downturn, has less likelihood than guessing when a coin flip will turn up heads,” Soares said.

“Mr Meng’s leverage strategy is speculative in nature and by its very nature is an inappropriate strategy for a fiduciary charged with protecting public trust assets to pursue.”

– Justin Mitchell contributed to this report.