It’s becoming harder and harder for CalPERS to hide its dirty laundry.
Last May, Elisabeth Bourqui joined CalPERS as its Chief Operating Investment Officer. Bourqui had an extremely impressive background and if anything was overqualified for the role,1 to the degree that some thought she might be a Chief Investment Officer in waiting.2
Bourqui departed suddenly on Monday, with interim replacements Dan Bienvenue and Eric Baggesen taking up her duties.
It is hard to convey adequately how badly this resignation reflects on CEO Marcie Frost. It confirms her inability to attract and retain competent professionals. Recall that Frost not only hired but doggedly defended resume fabulist Charles Asubonen, who was booted shortly after CalPERS did what it should have done when we presented Frost and the board with detailed documentation of his fabrications.
For such an accomplished professional as Bourqui to join CalPERS said that the institution still had enough cachet to attract top people. Her unceremonious exodus is sure to give pause to anyone capable that CalPERS tries to recruit for a senior position.
The fact that Bourqui left without any transition or advance warning means it is well nigh certain that she had a dispute with Marcie Frost. Recall that the departures of the head of private equity, Real Desrochers, the former Chief Operating Investment Officer Wylie Tollette, and Chief Investment Officer Ted Eloupoulos were all announced in advance.
Initial reports indicated that Bourqui was well liked and well respected by employees, so it seems inconceivable that her performance was sub-par. It seems pretty clear what the real issue was. As one said:
There is no way this is not about private equity.
And from another prominent stakeholder:
This is bad. She was honest.
It was part of Bourqui’s job to assess investment risks and operational implications. Just as her predecessor Wylie Tollette regularly discussed private equity fees and costs with the board in public session, and presumably in private too, cost and operational issues related to the new private equity scheme would have fallen to Bourqui.
CalPERS’ staff has been forced to ‘fess up, late in the game, to expectations that argue for ditching the private equity plan: that it will have higher expenses in the early years and will also earn less. Worse, General Counsel Matt Jacobs gave the apparent real reason for CalPERS’ determination to push through the program anyhow: that it will enable CalPERS to reduce disclosure.
So the giant pension is hell bent to get this program launched even though it has admitted it will hurt beneficiaries, just because staff wants to escape press and public scrutiny. The board, the senior staff, and the professional advisers on this scheme have just put a monster target on their backs. Expect a big ticket breach of fiduciary duty suit a few years down the road if the board is so foolish as to approve this scheme.
Bourqui previously headed Mercer’s National Funds Group in Montreal, meaning its public pensions group in Canada. She is certain to have first-hand knowledge of the Canadian public pension funds’ successful efforts to bring private equity in house. With the benefit of hindsight, it is noteworthy that CalPERS made non-PE expert John Cole the front for this initiative, and never let Bourqui present about it or take questions from the board in open session. If she was also kept away from the board in closed session, that would be a monster red flag.
As a former CalPERS senior officer wrote:
I was really impressed when CalPERS announced Elisabeth’s hiring just a few months ago. She appeared really well qualified and a real catch for them. So the fact that she is out after only a few months is a bad sign no matter how you cut it.
I think there are two possibilities, both troubling:
1) As a competent, sophisticated individual, Elisabeth raised concerns about the PE plan and Marcie couldn’t stand to be contradicted so essentially fired her; or
2) As a competent, sophisticated individual, Elizabeth looked around at what a joke CalPERS has become, which she didn’t expect based on its old reputation, and figured she needed to quit before she got caught up in the bad stuff.
The fact that her resignation was effective immediately is a terrible sign. It means that Marcie didn’t want her in the building, which probably is because Marcie didn’t want any board members to be able to talk to Elisabeth and ask her why she is leaving.
Axios focused on the fact that high turnover is a sign of institutional weakness at CalPERS, but if anything, the truth is likely to be worse. Given Marcie Frost’s fondness for shows of fealty in the form of burgundy attire and ribbons, it’s all too obvious that she values personal loyalty over professionalism and doing the right thing for beneficiaries and California taxpayers. Frost’s misrule is diminishing CalPERS’ competence and reputation. But as long as she is accountable to only a captured, cronyistic board, she may wind up crashing and burning the institution before anyone is willing to oust her.
Bourqui has more than two decades of experience with pension asset management, consulting, and investment banking. She currently is the head of pension assets and liabilities management at ABB Group. Prior to ABB Group, she was an investment consultant with Mercer specializing in public and private pension funds.
Bourqui holds bachelors and masters degrees in mathematics, and a PhD in mathematics and financial mathematics, from the Swiss Federal Institute of Technology, Zurich. She also is a member of the Swiss Society of Actuaries. She is fluent in French, English, German, and Japanese. In 2017, Bourqui was one of the winners of Chief Investment Officer Magazine’s Industry Innovation Award, and was recognized by IPE in its Pension Fund Achievement of the Year category at its annual awards ceremony.
2 Bourqui did apply for the CIO position. Since she did not have an investment background, the idea that she might have been led on during the hiring process and then resigned when the promotion did not come through seems far fetched, particularly since she had moved her family to Sacramento. It would be imprudent to have relocated if she planned to stay with CalPERS only if she won the CIO position after Ted Eliopoulos left.