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The 2015 Pension 40: Ted Eliopoulos

No. 31 Ted Eliopoulos, Chief Investment Officer / California Public Employees’ Retirement System

31
Ted Eliopoulos
Chief Investment Officer / California Public Employees’ Retirement System
Last Year: 11

In November the board of the $294 billion California Public Employees’ Retirement System voted to lower the fund’s target rate of return to 6.5 percent a year from 7.5 percent. The decision was part of a plan, proposed by CalPERS chief investment officer Ted Eliopoulos, 51, and the fund’s senior staff, to reduce CalPERS’s investment risk and liabilities over time. CalPERS was responding to the fact that as its beneficiaries grow older, it is paying out more in benefits than it takes in as contributions. The board recognized that reducing risk is going to require state and municipalities to pay more into the fund, but they wanted to reduce its market-based volatility. In fact, after several high-performing years, CalPERS returned only 2.5 percent for the 2015 fiscal year, ended June 30. (Fiscal 2016 so far has been worse: down 4.9 percent through September.) CalPERS’s decision to embrace risk mitigation, which included exiting hedge fund investing, was a major turnabout for a plan that was once in the market-risk vanguard of public pensions. Lowering the assumed rate, however, won’t happen overnight. CalPERS will drop the rate a few basis points and rebalance into less risky assets every year it performs above a set bogey. Currently, to reach 6.5 percent, CalPERS has to return 11.5 percent or more; when that doesn’t occur, the fund will not be able to ratchet down its discount rate. Immediately after the November decision, California Governor Jerry Brown criticized the plan as “irresponsible,” saying the push to lower the rate “will only keep the system dependent on unrealistic investment returns. This approach will expose the fund to an unacceptable level of risk in the coming years.” CalPERS board president Rob Feckner disagrees, but the political storm clearly puts the onus on Eliopoulos, a former real estate attorney who took over as head of the fund’s real estate assets in 2007 and became acting CIO in 2013 and CIO in 2014, to deliver big returns.

The 2015 Pension 40

1. Bruce Rauner
Illinois
2. John & Laura Arnold
Laura and John Arnold Foundation
3. Chris Christie
New Jersey
4. Randi Weingarten
AmericanFederation of Teachers
5. Phyllis Borzi
U.S. Department of Labor
6. Kevin de León
California
7. Alejandro García Padilla
Commonwealth ofPuerto Rico
8. Laurence Fink
BlackRock
9. Rahm Emanuel
Chicago
10. Sean McGarvey
North AmericanBuilding Trades Unions
11. John Kline
Minnesota
12. J. Mark Iwry
U.S. TreasuryDepartment
13. Damon Silvers
AFL-CIO
14. Jeffrey Immelt
General Electric Co.
15. Joshua Gotbaum
Brookings Institution
16. Robin Diamonte
United Technologies Corp.
17. Mark Mullet
Washington
18. Terry O'Sullivan
Laborers' International Union of North America
19. Raymond Dalio
Bridgewater Associates
20. Ted Wheeler
Oregon
21. Thomas Nyhan
Central States Southeast and Southwest Areas Pension Fund
22. Karen Ferguson & Karen Friedman
Pensions Rights Center
23. Randy DeFrehn
National Coordinating Committee forMultiemployer Plans
24. Robert O'Keef
Motorola Solutions
25. Caitlin Long
Morgan Stanley
26. Kenneth Feinberg
The Law Offices of Kenneth R. Feinberg
27. Orrin Hatch
Utah
28. Kathleen Kennedy Townsend
Center for Retirement Initiatives, Georgetown University
29. Ian Lanoff
Groom Law Group
30. Joshua Rauh
Stanford Graduate School of Business
31. Ted Eliopoulos
California Public Employees' Retirement System
32. Edward (Ted) Siedle
Benchmark Financial Services
33. Teresa Ghilarducci
New School for Social Research
34. Denise Nappier
Connecticut
35. W. Thomas Reeder Jr.
Pension BenefitGuaranty Corp.
36. Hank Kim
National Conference on Public Employee Retirement Systems
37. Paul Singer
Elliott Management Corp.
38. Bailey Childers
National PublicPension Coalition
39. Amy Kessler
Prudential Financial
40. Judy Mares
U.S. Labor Department

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