Anne Wagner, the head of the Municipal Employees’ Retirement System of Michigan, is not your typical fund management CEO. The 65-year-old went to Bible school in Chicago and founded a nursery school in a Mennonite community in rural Illinois before a divorce prompted her, at age 38, to return to her hometown near Lansing, Michigan, and take a job answering phones at a brokerage. Within a year she had risen to become an institutional bond broker, with MERS as a key client; four years later, in 1988, the pension fund tapped her to become its chief investment officer.

As CIO and then, since 2000, CEO, the unconventional Wagner has pushed MERS in bold new directions. The pension plan, which had $4.7 billion in assets at the end of last year, has pulled more of its fund management in-house and launched a variety of innovative programs, including a hybrid defined...