Calpers CIO Nicole Musicco broached her resignation in a somber comment to the pension plan’s investment committee Monday.
The largest state public pension plan in the US announced Friday that Musicco will step down at the end of the month, citing immediate family concerns as the reason for her departure a year and a half after her appointment.
“No one can be appropriately served in this role by only having a piece of my attention,” Musicco said in the meeting.
In a statement, the $463 billion pension plan said Musicco has been shuttling between her hometown of Toronto and Calpers headquarters in Sacramento in recent weeks to help members of her family.
Calpers appointed Musicco to CIO in February 2022, during a period in which the pension fund set its focus on growing its exposure to the private markets. In late 2021, it had adopted an asset allocation plan to increase its PE investments from 8% to 13% and added a private debt allocation of 5%.
Musicco brought private market investment expertise into her new role at Calpers, joining the fund from RedBird Capital Partners as head of the firm’s Canadian unit. Prior to that, Musicco managed the private markets investment program at the Investment Management Corporation of Ontario and spent 16 years at the Ontario Teachers’ Pension Plan, where she led both the PE and public equity teams.
Musicco was a proponent of Calpers increasing its exposure to PE and criticized its historically inconsistent deployment pacing in the asset class. In a September 2022 investment committee meeting, Musicco highlighted the system’s underperformance, estimating it missed out on at least $11 billion in gains during the decade between 2008 and 2018, during which the fund committed $5 billion or less annually to PE.
During what Musicco deemed Calpers’ “lost decade,” the PE industry grew exponentially, nearly doubling its AUM, according to PitchBook data. Consequently, Calpers’ returns lagged other large pensions in nearly every asset class throughout the decade with PE leaving the widest performance gap.
The loss had reverberating effects. From July 1, 2018 to June 30, 2022, Calpers missed its expected returns by 0.8%. While Musicco did not attribute the underperformance exclusively to PE, she said the 10-year break from capital deployment in the asset class had the “biggest impact by far.”
Optimism surrounding the fund’s growing allocations to the private markets fueled Musicco’s plan for the pension’s transformation. In a 2022 letter, Musicco noted that PE marked a “bright spot” the fund planned to build on.
“We made major strides in accelerating our private market investments,” she said in the Monday address.
In the same meeting, Musicco hinted at some resistance to her plans to overhaul the pension, just minutes after Bloomberg reported that her emphasis on direct investments didn’t bode well for some members of the investing staff at Calpers.
“There will always be a small minority that fights change,” Musicco added. Still, she said the majority of the investment team at Calpers supported her vision.
Calpers deputy CIO Dan Bienvenue will take over in an interim role. Musicco’s last day is expected to be Sept. 29.
