E292: How the Former CalPERS CIO Built a High-Performance Investment Culture
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What inspired Nicole to transition from Ontario Teachers’ Pension Plan to CalPERS?
Nicole, I know this term gets used a lot, but you truly have one of the most prolific investment careers in the industry. And you went from Ontario Teachers Pension Plan to becoming the chief investment officer of CalPERS. What made you want to take that jump?
I had a slot in between as well as a GP. So I think the best way I'd articulate it is I really have always just been very mission-driven. I'm very inspired by the notion of being able to invest and then knowing that it's bettering or giving folks a retirement with dignity, if you will. And I think that's just because I spent almost 17 years at Ontario Teachers. And so when this opportunity came along to join really the largest pension in the U.S., but also one that's been quite storied and extremely complex, I really got excited just about the idea of being able to bring that toolkit of experience that I had sitting in what I think is still one of the most innovative pensions. certainly for its time.
And I can touch on that a little bit later, what made it so innovative. But coming from the learning I had from the very earliest days of my career at Ontario Teachers and being able to bring some of that Canadian style of governance and total portfolio approach, if you will, I thought, you know, what a great time in my career to do that. So I went, I jumped in, you know, fee first, super excited to take that on.
You brought this total portfolio approach, TPA approach. from the Canadian style to the largest pension fund in the United States, how were you able to get an organization to change that was just so vastly large like CalPERS and double-click on exactly how you went about implementing it?
To step back, the current CIO, Stephen Gilmore, is formally and officially moving the board to a TPA approach. I would say I tackled it a little bit differently. Again, I arrived in the middle of COVID. There was really no one in the halls just yet. California was still allowing state workers to work from home for the most part. And so I really started with a big listening tour. I know that phrase gets used a lot, but I genuinely just walked the halls for the first 90 days, not 100 days. My very first board meeting was minutes after I arrived. And so I said, you know, at my June board meeting, let me walk you through my observations. And so I think... Trying to take this, you know, classic listening tour approach really helped me to kind of identify.
And it was almost easier because there weren't folks in the hall. You could really see where the silos were. You could really feel where the organization just really needed to have clearer accountability and maybe a more collaborative approach to govern it, more connective tissue between teams. And so, yeah. From a total portfolio perspective, I really started with culture, which I think TPA is, you know, is actually about governance and culture and making sure you can approach the problem as a total fund as opposed to being siloed. And so I think gearing, you know, starting off with the culture pieces that make for better governance, make for better decision making, make for better accountability is what I tackled first.
And the traditional approach versus the TPA approach, the traditional approach is very much focused on buckets. This is how much is private equity. This is how much is venture. This is how much is credit. And the total portfolio approach, everything is competing against each other. And what that practically means is that teams are essentially competing for the same allocation. So how did you create the culture in such a way to make it collaborative, given that it's essentially encourages this kind of competition?
Yeah. So as you put it, you know, strategic asset allocation is allocated with a bunch of inputs that are based on where you think the market, where the markets have been or being used to make assumptions around where the markets are going. There's a policy portfolio you're trying to be, etc. TPA is really more about total fund. It's really thinking more about are you getting paid for the risk that you're taking in a manner that moves the needle at the total fund approach.
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Chapters
5 chapters
1
What inspired Nicole to transition from Ontario Teachers’ Pension Plan to CalPERS?
0:00–6:48
2
How did Nicole implement a total portfolio approach at CalPERS?
6:48–10:43
3
What challenges did Nicole face while leading organizational change during COVID-19?
10:43–20:29
4
How did Nicole foster a collaborative culture at CalPERS despite competition?
20:29–40:02
5
What strategies did Nicole use to align the board with the investment approach?
40:02–43:31
Speakers
2 identifiedMore from How I Invest with David Weisburd
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