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Calpers Investment Chief Dear Cedes Duties Over Cancer

By Michael B. Marois and Dan Levy
June 14, 2013 10:40 PM EDT
Calpers CIO Joseph Dear
Calpers CIO Joseph Dear

Joseph Dear, who led a $96 billion post-recession recovery as chief investment officer of the California Public Employees’ Retirement System, has given up some duties as he fights prostate cancer, the fund said.

Dear, 62, handed his day-to-day responsibilities for the $259.8 billion system, the largest U.S. pension, to Theodore Eliopoulos, the senior investment officer for real estate, said Brad Pacheco, a spokesman for the fund, known as Calpers. Dear still works in the office and from home, he said.

“This is a personal issue and we respect the privacy of Joe and his family,” Pacheco said yesterday by e-mail. “We wish Joe a very successful treatment.”

Prostate cancer is one of the most common forms of the disease affecting American men, including California Governor Jerry Brown, who was treated for it earlier this year. Almost 239,000 cases will be diagnosed in the U.S. this year and the affliction will kill about 30,000 of its victims, according to the American Cancer Society.

Dear took on his Calpers job in March 2009, about two months after the fund’s assets had reached a recession low of $164.7 billion, down from a peak of $260.6 billion in October 2007. Under him, assets rebounded to reach a record $267.6 billion on May 21, and stood at $260.7 billion on June 10.

Eliopoulos Restructuring

Eliopoulos, 49, was California’s chief deputy treasurer before joining Calpers in 2006. His real-estate group had a 37 percent loss in fiscal 2010, as it wrote off residential investments as property values slumped.

Calpers invested about 8 percent of its assets in real estate as of March 31, or about $21.1 billion, according to its website. The target allocation for the segment is 9 percent. About half the fund is in publicly traded stock.

Eliopoulos has restructured the system’s property holdings to focus on income-producing assets and reduce related debt, Pacheco said. For the 12 months through April, the segment gained almost 12 percent, he said.

Public pensions have been under pressure to boost investment returns after record losses during the global financial crisis. Calpers, fully funded when the recession began in December 2007, has about 74 percent of the money it needs to meet its long-term commitments and has asked the state and cities to increase contributions.

Under Dear’s hand, the Sacramento-based fund reported a 13.3 percent return on assets last year, compared with a 13.4 percent gain for the Standard & Poor’s 500 Index of U.S. stocks.

Asset Gains

Calpers regained its value by sticking to an asset-allocation policy that emphasizes equities, including riskier stocks, Dear said April 30 at a conference in Beverly Hills, California. He defended the fund’s assumption that it can achieve a 7.5 percent annual return.

“It’s attainable,” Dear said. “Here’s the thing: In order to have that kind of return, you have to have a lot of growth-risk in the portfolio.”

The assumed rate of return is used by Calpers and state policy makers to forecast the gap between the fund’s assets and projected obligations to retirees. Dear said the pension had gained 9.1 percent annually for the past three years, and 8.6 percent a year since 1987.

Dear came to Calpers from the Washington State Investment Board, where he had been executive director since 2002. From 1997 to 2001, he was chief of staff for Washington Governor Gary Locke, a Democrat who is now the U.S. ambassador to China.

Calpers Membership

Calpers had almost 1.7 million members, including about 552,000 beneficiaries, as of June 2012, according to a fact sheet on its website. Almost 3,100 government employers, including state and local agencies and school districts, contribute to the system along with workers.

The fund’s 13-member governing board is set to hold a monthly three-day public meeting in Sacramento beginning June 17. Dear usually delivers remarks about investment performance at such gatherings. Pacheco said Dear may attend some parts of the conference.

The pension system was developing a succession plan for senior managers when Dear’s illness became known, Pacheco said. He had no further information on the planning.

Prostate cancer is the second-deadliest form of the disease for men, after lung cancer. Most cases are discovered in the earliest stages, where survival for more than five years is almost 100 percent, according to the cancer society.

Survivors of the affliction include Brown; Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A); former New York Mayor Rudolph Giuliani; and Andy Grove, a co-founder of Intel Corp. (INTC), the world’s largest computer chipmaker.

To contact the reporter on this story: Michael B. Marois in Sacramento, California, at mmarois@bloomberg.net. Dan Levy in San Francisco at dlevy13@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net; Kara Wetzel at kwetzel@bloomberg.net

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