Cultivating a Risk-Tolerant Culture in Pension Fund Management

In this episode of How I Invest, I sit down with Marcie Frost, CEO of CalPERS, the largest public pension fund in the United States. From her beginnings in public service to leading a $502.9 billion portfolio, Marcie shares her journey and offers insights into managing one of the most influential pension funds globally. We discuss the challenges of governance, integrating climate change risks into investment decisions, and the importance of building a culture of trust and innovation. Marcie also delves into CalPERS’ strategic focus on sustainable investments, diversity, equity, and inclusion initiatives, and how the organization is setting benchmarks in transparency and fiduciary responsibility.

Highlights: Public Service Journey: Marcie’s transition from Washington state's Department of Retirement Systems to leading the largest public pension fund in the U.S.

CalPERS’ Mission: The role of a $502.9 billion portfolio in securing the financial future of over 2 million California public sector workers and their families.

Strategic Asset Allocation: How CalPERS utilizes its Asset Liability Management process to inform asset allocation decisions and set investment return assumptions.

Integrating Climate Risks: The incorporation of climate change risks into investment decisions across all asset classes and the launch of a $100 billion sustainable investment strategy aimed at reducing carbon emissions intensity by 50% by 2030.

Building a Culture of Trust: Marcie’s approach to fostering an inclusive culture through the development of CalPERS' first Diversity, Equity & Inclusion framework.

Sustainable Investments: CalPERS' commitment to sustainable investing, including its role as a founding member of Climate Action 100+, an initiative with 700 signatories and $68 trillion in assets under management.

Stakeholder Engagement: Expansion of stakeholder outreach to ensure all parties are informed and have a voice in the system's future.

Advocacy for Defined Benefits: Marcie's belief in providing equitable and affordable health care and retirement options for public employees.

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Guest Bio: Marcie Frost is the Chief Executive Officer of CalPERS, overseeing the largest public pension fund in the United States. With over 30 years of experience in public service, Marcie is a dedicated advocate for financial security, transparency, and sustainability. Under her leadership, CalPERS has advanced its goals in asset management, stakeholder engagement, and cultural transformation, ensuring that its over 2 million members can retire with dignity.

Our Podcast now receives more than 200,000 downloads a month. Are you interested in sponsoring an episode? Please email me at dweisburd@gmail.com.

We’d like to thank @ReedSmith for sponsoring this episode!

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Sponsor: Reed Smith is a dynamic international law firm dedicated to helping clients move their businesses forward. With an inclusive culture and innovative mindset, Reed Smith delivers smarter, more creative legal services that drive better outcomes for their clients. Their deep industry knowledge, long-standing relationships and collaborative structure make them the go-to partner for complex disputes, transactions, and regulatory matters. Learn more at www.reedsmith.com.

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Stay Connected: X / Twitter: David Weisburd: @dweisburd

LinkedIn: David Weisburd: https://www.linkedin.com/in/dweisburd/ Marcie Frost: https://www.linkedin.com/in/marcie-frost-56a30a281/

Links:

CalPERS: https://www.calpers.ca.gov/

Questions or topics you want us to discuss on How I Invest? Email us at dweisburd@gmail.com.

(0:00) Episode preview (0:35) CalPERS' strategic asset allocation, risk limits, and board dynamics (2:39) Composition, election, and decision-making of CalPERS' investment committee (5:25) Understanding board members' risk appetite and stakeholder engagement (9:07) Navigating political aspects and role differentiation at CalPERS (14:02) Changing organizational culture and focusing on investment results (18:29) Sponsor: Reed Smith (21:22) Managing media scrutiny and its impact on investment decisions (22:36) Stability and importance of the CIO role at CalPERS (23:13) Emerging managers, diversity, and strategic planning for 2025-2029 (24:55) Evaluating private markets, liquidity premium, and active vs passive management (27:47) Building relationships as a first call partner to managers (29:43) CEO reflections and fostering a world class culture at CalPERS (31:27) Key takeaways about CalPERS for listeners (34:38) Closing remarks