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Why Talented CIOs Quit — and How To Keep Them Happy

More CIOs are leaving their jobs, in spite of the emotional and intellectual rewards of public pension life. That’s a shame, and it doesn’t have to be that way.

There are many motives for investors to consider pursuing a career at a public pension. One of the most powerful incentives is the opportunity to serve society. 

Of course, if we are being honest with ourselves, other reasons matter as well. There is the accelerated learning potential that accompanies the responsibility of investing large pools of capital and the opportunity of interacting directly with some of the top investors in the world, like Howard Marks and Ray Dalio. Many public pensions are also located in less expensive and less congested areas of the nation compared with major financial centers, where residents can take advantage of outdoor activities such as hiking, skiing, or fishing. And the work-life balance typically available in these organizations can be attractive for experienced professionals who want to continue their investing career but maybe take a step back from the marathon hours on Wall Street.

Still, those who choose to pursue this career are indeed public servants. The desire to give back and make a positive impact on society is one element of the decision to take a public pension job for all who go into the field — and for many it is the main, if not sole, factor. This is often why many seasoned investment professionals with deep private sector experience take senior roles at public plans: to make a difference.

These individuals want to tackle the problem of an aging society that is under-saving for retirement. Increasing life spans coupled with rising healthcare costs — particularly for the aging — and underfunding of retirement plans can’t be ignored, especially when steps taken today can have such a meaningful impact down the road. The ability to contribute towards making a better life for other people instead of merely more dollars for a corporation as the metric for success isn’t just a positive factor for some; it’s pretty much the whole point. 

It’s a noble pursuit, and one that can be very rewarding. And the pay, while not nearly as lucrative as a Wall Street job, isn’t bad. 

But if that’s the case, why do so many public CIOs quit after relatively short stints? (To wit: Exhibit A, B, and C.)

Unfortunately, working at a public pension can sometimes come with frustrations that suck the joy out of the work, even more so for those truly trying to advance the mission.

Public pensions are a third rail of politics — and often a prime battleground for partisan factions. In some cases, those in positions of oversight have twisted the math to make it say what they want, instead of being intellectually honest. It’s far easier to avoid tough choices and let them be the next guy’s problem than it is to make the hard decisions which drive true sustainability. In other cases, states have simply failed to fund them, diverting the spending to other projects. Unfortunately, the math doesn’t matter if you don’t save. Sometimes, investments are wrongfully blamed for the underfunding and employees find themselves embroiled in questionable lawsuits or pushed out for political reasons.

Aside from the outright bruising battles of politics, entrenched governmental bureaucracies tend to make the job much harder than need be. While I’m fortunate to work at a strong institution, I have experienced tougher situations previously. And I know at times it can feel like being a truck driver, but instead of being allowed to just climb up and drive, U.S. public pension investment professionals are forced to tie a rope to the front bumper and pull the load by hand. The truck may still get where it needs to go, but slower than it should and with a lot of unnecessary pain and effort.

For example, a private sector CIO will certainly have formal processes and approvals to go through in order to make an allocation to an investment manager, and they will be prudent and analytically rigorous. However, they will also be timely, efficient and commercial. That same CIO in a public plan may well find herself with four or five more layers of approvals, all of which have different schedules, required paperwork, and none of which add any real merit as investment oversight. 

Now, multiply that by dozens of decisions each year. 

And that same CIO probably has four times as many assets to deploy and less than half as many people to do it with as she did in the private sector, all for a fraction of the pay. While each situation is certainly different, the rote pretext of “more time with my family” or “to pursue new opportunities” may well be diplomatic cover for “it’s just not worth it.” 

And it doesn’t serve anyone’s interest — employees, politicians, or the beneficiaries — to see talented investors turn over. There are explicit administrative costs and even larger implicit portfolio transition costs to constant attrition.  

So how can public plans improve the retention of such critical knowledge workers? 

Oversight is important, but it sure seems to me like we are making the job harder than it should be, just to provide the appearance of control. Maybe, just maybe, if we handed these CIOs the keys and let them drive like professionals, they could move the mission forward more effectively, and with less blood and sweat for all. 

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