CalPERS Chief Investment Officer Nicole Musicco Resigns Abruptly, Intensifying CalPERS’ Senior Staffing Instability

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On September 15, just before it hit the newswires, a CalPERS insider e-mailed me to say the CalPERS Chief Investment Officer Nicole Musicco, was resigning as of September 29. She had been at CalPERS only for about 18 months.

This is bad for CalPERS in many respects, particularly the suddenness of Musicco’s departure, where the official rationale of “immediate needs of family” does not add up, particularly given that California has statutory six week family leave that Musicco was entitled to having passed probation yet did not utilize. We’ll turn to that aspect shortly.

The Chief Investment Officer at a major pension fund is the top producer and should be, and is at CalPERS, its best paid employee. After former Chief Investment Officer Ted Eliopoulos left, CalPERS went through an extended search process for his replacement, Ben Meng, who did not meet the qualifications for the position set forth in the search process. Meng had never managed money but had merely selected managers when he worked for China’s State Administration of Foreign Exchange. Meng resigned in August 2021, a mere nineteen months into the job due to a conflict of interest which this site exposed, that of owning Blackstone stock at the same time he oversaw the approval of a $1 billion investment in a Blackstone fund.

CalPERS then went into another protracted search process, with the press commenting on how unseemly long CalPERS was taking to find Meng’s replacement. CalPERS and its search firm made the pay potential even higher than it had been under Ben Meng, with a five year investment performance component that could bring the annual total to $2.4 million. That was seen as important to encourage the new incumbent to stay, since even the longest-lived recent Chief Investment Officer, Ted Eliopoulos, was in the role for only four years.

The recruiting brief also stressed the need for the Chief Investment Officer to have a strong moral compass.1 That seems more than a little ironic given that CEO Marcie Frost flagrantly misrepresented her mere high school degree both before and after joining CalPERS, claiming to be close to getting a dual degree in a non-existent program when she’d also never matriculated.

CalPERS had several candidates who were unquestionably qualified for the role, including two finalists. But CalPERS was not about to hire a white man. Instead they rejected all candidates and began over.

In the second round they settled on Musicco, who had been rejected in the first round presumably because she fell well short of the requirements for the role. She had worked only in private equity, never had made investment decisions in liquid securities, and had never managed a large investment team. Indeed, the scope of Musicco’s management authority shrank after she left the public sector in Canada, and had a only a one year tenure at AIMCO and two at private equity firm RedBird.

Inside sources report that the most investment savvy board member, Stacie Olivares, resigned to protest Musicco’s hiring.

CalPERS now looks like an unstable operation. On top of the highly visible turnover at the Chief Investment Officer level, there have been many departures from senior roles, such as Chief Operating Investment Officer Elisabeth Bourqui, Investment Director Ron Legnado, and Managing Investment Director for Board Governance & Sustainability Anne Simpson.2 On top of the senior turnover, a pension fund that had had a CEO convicted of bribery for taking cash in a paper bag and then a Chief Investment Officer who had refused to take the basic step of selling individual stocks to avoid a conflicts of interest problem does not look like a safe career bet.

And there is the wee additional issue that top investment professionals might not be keen about working for a high-school-only educated CEO who’d lied about her educational attainment, and even worse, in public regularly acts as if she were in charge of private equity, meaning an investment amateur regularly infringing on the Chief Investment Officer’s turf.

In other words, as one investment professional pointed out, CalPERS is starting to look a lot like the New York City pension system, which is widely recognized as a hot mess and has had trouble keeping a Chief Investment Officer for more than a year.

And let us not forget that longevity in the Chief Investment Officer is widely viewed as necessary condition for good investment performance, as the contrast between the results of CalPERS Sacramento sister CalSTRS attests. CalSTRS, the state teacher’s pension fund, is another multi-hundred dollar public pension fund, with a very long-tenured Chief Investment Officer, Chris Ailman. CalSTERS regularly beats CalPERS’ investment returns even though CalPERS has a bigger investment office.

But let’s turn to the bigger question, of Musicco’s sudden exit.

The convention for a top official who wants or needs to leave pronto is to give a month’s notice, and the employer lets the employee stop performing most of his duties much earlier.

Executives do not quit and give only two weeks of notice. Musicco was either forced out or left angry and wanted to make a statement.

That does not mean that the cover story is not true, but that is it not likely to be the operative truth. The germane parts of CalPERS’ press release:

Musicco said the decision to leave CalPERS will allow her to attend to the immediate needs of family in her native home of Toronto, Canada.

….Musicco said. “However, at this time I need to prioritize those who need me the most, my family and children.”

Musicco, who joined CalPERS in the spring of 2022, has been shuttling between Toronto and Sacramento in recent weeks to help members of her large, multigenerational family.

As this is written (and the text was almost certainly negotiated between Musicco and CalPERS), this makes Musicco look like a flake, that she has not worked out that she’s be expected to be in Sacramento most of the time and somehow overlooked the implications for her personal life.3

It is also more than a little convenient that Musicco is leaving at the end of annual bonus cycle.

Unless Musicco has a job quietly lined up in Toronto that she can take after a diescrete-looking interval, she’s damaged her career. Women do not make the sacrifices required to compete in a man’s world only to toss it all away when they finally get to the top table, which is what Musicco becoming Chief Investment Officer at CalPERS amounts to.

And since, as mentioned at the top, California provides for a six-week family leave as a matter of law, it is not as if Musicco needed to quit to manage “immediate” family matters. As you can see from her Form 700 embedded below, Musicco has more than $3 million in carry, at least at year end 2022 valuations, and received over $100,000 in carry distributions in 2022 at preferential capital gains tax rates.

The text above states Musicco had started commuting again to deal with Toronto demands. Again, putting aside Musicco’s right to six weeks of paid family leave, if a top executive were in good standing, the normal approach is for the employer to try to accommodate the employee, as in find a way to give them some additional personal time so they could stabilize a family crisis.4 Then only after a period of failed experiments with solutions might the employee throw in the towel. So even for those unfamiliar with California’s generous family leave law, the resignation is too sudden to fit the professed fact pattern.

In addition, there is cause to think CalPERS knew the Musicco “resignation” was in the works.5

Marcie Frost was named in the Pensions & Investments list of “Influential Woman in Institutional Investing,” which went live on September 11. One would think that merely being the CEO of CalPERS would do. But the Pensions & Investing piece came off as if it had to rationalize Frost’s inclusion by bizarrely accepting her “high school only” status as a diversity marker. No, I am not making that up. From the article:

The advice has come in handy during her close to seven-year tenure at the $465.7 billion California Public Employees’ Retirement System, Sacramento, where she came under fire early for lacking a college degree.

“The board supported diversity of thought, diversity of background,” she said.

I got a lot of disgusted messages from CalPERS beneficiaries, such as:

This is the first time that I’ve heard that being uneducated is a category of “diversity.” But the issue isn’t just that she is completely un-lettered, it is that the public was misled about it for a significant period of time, and her bafflegab had to be the source of that falsehood.


Diversity??? What a joke!!!

The Board had previously hired a liar CEO and he went to prison.

They had previously hired a woman as CEO, of course that woman was educated.

So yes, it must be the uneducated lying woman, that makes Marcie diverse in this case.


Hitler was Time Magazine “Man of the Year.” She is influential, just in a bad way.

And to return to the “lying” point, Frost seems constitutionally incapable of sticking to the truth when the opportunity to burnish her story arises. The Pension & Investments article has a verifiable falsehood as its opener:6

When CalPERS CEO Marcie Frost was bullied as a youngster, her grandfather, a Medal of Valor winner, told her that she had to know how to take a punch.

As an alert CalPERS-watcher pointed out:

What is this “Medal of Valor” that Marcie’s grandfather is alleged to have won? A public safety Medal of Valor was established in 2001 but there does not appear to be any such military honor. More bafflegab.

Let’s go with the assumption that Musicco jumped as opposed to was pushed.7 What would the likely reasons be?

One might be getting out before investment performance, particularly in private equity, tanked. Musicco was an aggressive advocate for CalPERS’ plan to increase its exposure to private equity. Recall that in the last quarter, it was the public equities that Musicco was trying to reduce that rescued CalPERS’ performance. Recall also that Musicco said when she joined CalPERS that she wanted eventually to return to private equity. Perhaps she also wanted to go back before a prolonged down cycle made that hard.

A second reason might be pressure, above all from Marcie Frost, to do politically as opposed to investment-driven deals. Mind you, CalPERS has too much of that already, witness its white elephant 301 Capitol Mall project, aka “hole in the ground” or its lackluster California venture funds.

The reason this is a real possibility is, in the words of Maya Angelou, when people tell you who they are, believe them. Marcie Frost has for years spoken as if she is running private equity.

Third is getting out before a scandal shoe drops. Some CalPERS-watchers speculate that there are more chapters following the instances we documented of Musicco and her son securing highly prized, tightly controlled courtside “owner seats” at Sacramento Kings playoff games. The official explanation, that Musicco had season tickets and had somehow in the natural course of events been able to leapfrog long-suffering Sacramento Kings season tickets holders of many years, does not pass the smell test. For instance, as one wrote:

The cause of the Musicco resignation is pure speculation. However, the stakes are too high not to speculate. This stinks to high heaven!

Everything that I’m seeing in the media “spin” points to those court-side seats. Of course the WSJ talks about a “divided board” as if Margie [Brown] and JJ [Jelincic] were still on it.

Since it would be irresponsible not to speculate, I’m imagining that [General Counsel] Matt Jacobs bullying her into writing a pre-dated check for those tickets was too much to swallow. She probably also got a lot of flack from circumspect friends and family on the other side of the Maple Curtain about dragging her son into the spotlight.

A private equity professional pointed out that l’affaire seats could have made Musicco realize that she was in potentially a lot of hot water for filing a false 2022 Form 700 or needing to put things on her 2023 Form 700, or per the “pre-dated check” option, pony up for them to keep herself out of trouble. It could be as minor as a paid round of golf or something with a bigger price tag, like a lift on a private plane. If Musicco had taken a gotten a seat on a private equity owned or contracted private jet, that should be a firing event.8 Note that CalPERS staff have been caught out in the past for accepting private jet rides and other “luxury” gifts and not disclosing them, so at a minimum, maney managers are more than willing to buy favors with public pension investment professionals.9

However, this line of thought looks like the cognitive bias called the availability heuristic, of explaining things in terms of the most readily available information: “Gee, Musicco’s departure sure has a whiff of scandal about. It must be connected to the Musicco scandal we know about.” Well, actually, maybe not.

But what we can see is CalPERS continues to lurch from crisis to crisis, even in the absence of board member watchdogs and pesky bloggers exposing CalPERS’ dirty laundry to try to get them to clean up. What might come next?

1 From the article in Chief Investment Officer:

[Ben] Meng’s resignation came after state ethics investigators launched a formal investigation into whether he violated conflict of interest laws when he oversaw investments in private equity firm Blackstone Group at the same time that he was personally invested in the firm….

CalPERS Chief Executive Officer Marcie Frost told the board on Oct. 16 that tying maximum compensation to staying for five years as CIO is intentional….

Meng lasted 18 months, and his predecessor, Ted Eliopoulos, served for four years….

Audience members and board members also expressed at the Oct. 16 meeting that they wanted the next investment officer to have strong ethics. It is a sensitive issue at CalPERS, not just because of Meng’s resignation.

CalPERS Chief Financial Officer (CFO) Charles Asubonten was forced to resign in 2018 less than a year into his job after it was discovered his résumé was falsified.

And former CalPERS CEO Federico Buenrostro Jr. was sentenced to 4 1/2 years in federal prison in 2016 for accepting more than $200,000 in bribes and trying to direct investments to a former board member who ran an investment firm.

[Michael] Kennedy [senior Korn Ferry recruiting partner] said the search firm would screen candidates carefully.

“We recognize that these are public pension plans. And, as such, you can’t afford to hire someone who doesn’t have high ethics and high integrity, “ he said. “So that’s something we’re going to be very, very attuned to.”

He added a grim note on the honesty of corporate executives’ résumés.

“You will be surprised at the number of executives who are in their 50s even in the country today, who, for whatever reason, their education was never verified, and they’re pretty senior in their careers, and now the CFA or the MBA from Columbia that is on the résumé is not really accurate,” he said.

2 Additional senior departures in recent years:

Liana Bailey-Crimmins, Chief Health Director

Donna Lum, Deputy Executive Officer

Paul Mouchakkaa, Managing Investment Director

Beth Richtman, Managing Investment Director

Greg Ruiz, Managing Investment Director

Anthony Swiene, Deputy Executive Officer Customer Service and Support

3 The “multigenerational family” points to one or both of her parents being part of the “immediate” demands. Again, I hate to sound clinical, but top executives do not quit their jobs because their parents are dying. They are not about to be taking care of bedpans or colostomy bags. They are not medical or end of life professionals. And there is only so much time you can spend with an ailing parent at home with nurses or at a hospital. It might take a bit of doing to line up good team to help care for the sick or dying parent, but money looks to be no obstacle to getting adequate care. Admittedly, there could be an additional ugly wrinkle, like the parent or parent has gotten ensnared in a fraud and the fam]ily is trying to do forensics and find what if any recourse they have.

4 It could also be that Musicco was or felt she was misled by CEO Marcie Frost. At the start of her tenure at CalPERS, Frost was flying back most weekends to her home in Washington State. Musicco had her teenaged son stay in school in Canada and was commuting early in her tenure at CalPERS. That presumably had been discussed and agreed; Frost may have discussed her early months to reassure Musicco that it could be made to work. But commuting to Toronto is not the same as commuting to Washington. And Marcie Frost has been insistent that employees now return to the office, even the immunocompromised who have good reason to need an accommodation to continue working largely at home for their health. Could a row have started with Frost insisting that Musicco be more in the office so as to show senior-level compliance with the “back in the office” policy?

5 If the departure was less than amicable, CalPERS and Musicco would have negotiated a separation agreement. Those usually take a minimum of ten days to get done with each side needing to have counsel review terms. The key parts are agreeing on mutual releases and the official story, with strict confidentiality language (as in what amounts to a mutual gag order) not to say anything different or more about the reason for the departure. So there would have been some time to try a media charm offensive. Admittedly the Pensions & Investments annual list was in the works for some time, but CalPERS could have turned up the pressure to get Frost included if Pensions & Investments was waffling.

6 Musicco was well liked by the board, so for Marcie Frost to have outed her, the most plausible scenario is Frost presenting Musicco with facts, as in kompromat, that if exposed would make Musicco continuing in the role untenable.

Some have speculated that Musicco could have had a visa problem, but that seems very unlikely. CalPERS has hired many Canadians for senior staff/executive positions, so it knows the drill.

7 This is not a stretch, given that private equity firms regularly offer empty seats on private jets to other professionals in the industry, even at competitor firms. The flip side is that anyone making such an offer to someone who worked for a public pension fund would be jeopardizing that individual’s career, which would give the private equity firm great leverage over the public pension fund passenger. So someone taking up that offer, if not self destructive or having an unduly high risk tolerance, would presumably do so only in case of acute need and/or with someone they trusted highly not to let the cat out of the bag about the ride.

Keep in mind that CalPERS’ travel policy is coach class for domestic flights unless the employee has a medical need for a business class seat. I am told there are an awful lot of tennis players and otherwise active CalPERS staffers who have doctors who have sent in notes to CalPERS attesting that they have bad backs and therefore must have a plusher seat.

8 For instance, there are irregularities in Musicco’s expense reporting for a CIO Summit in Chicago. The amount listed as travel expense is implausibly low even if she flew from Toronto, and yet also double dipped, claiming transportation and meals twice for the same conference.

9 See this 2010 Los Angeles Times article, CalPERS investment staff receive luxury travel, gifts from financial firms:

The state’s embattled public pension fund for years allowed its top investment staff to accept private jet trips around the world and other luxury travel from financial firms with whom they were doing business — without disclosing any of the trips publicly, according to the court testimony of a senior portfolio manager.

This behavior is supposed to be a thing of the past…but it could also be happening in a more stealthy, less frequent manner.

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  1. griffen

    Behold the gift continues to give. Rats fearing the Titanic, in this instance, CalPers is merely in search of the nearest iceberg…It isn’t funny if I were a retiree depending on their investment performance and in-house expertise as it were. As goes California so goes the country….let’s hope that is a no.

    That is a “new” take on diversity and I’m quite unfamiliar with how to explain that other than, meh, California is also going to teach a new kind of math.

  2. David in Friday Harbor

    This is not amusing. As a CalPERS beneficiary dependent on my pension from Sacramento, I have ground my teeth down to the gums.

    The real question presented yet again by the resignation of another CIO, not explicit in this excellent piece, is where in the hell are Governor Gavin Newsom and State Senate pro tem Toni Akins (or her annointed successor Mike McGuire) who appoint the majority of CalPERS somnolent Board of Administration, Attorney General Rob Bonta, State Treasurer Fiona Ma, outgoing State Controller Betty Yee, or California’s billionaire-owned news media? Does anyone here think for a minute that retirees haven’t been shouting at the top of their lungs at these people for years?

    Could it be that the billions in unjustified fees annually gifted by CalPERS to grifters such as admitted Jeffrey Epstein-funder and accused rapist Leon Black of Apollo (the effectively unpunished source of the shoeboxes of cash that sent the ex-CEO of CalPERS to federal prison) Steve Schwarzman of Blackstone (source of payments laundered through Tsinghua University to the conflicted ex-CIO who held his stock while shoveling trust funds his way), or ex-lobbyist instant-billionaire real estate moguls Terry Fancher and Darius Anderson, are actually the source of tens of millions in “behested” political kick-backs that relieve California politicians and public employee unions of fundraising obligations to Nancy Pelosi and Kamala Harris?

    As always: Follow the Money.

    1. Greg

      Where is Gavin Newsome? He is having a five-star dinner at The French Laundry with the oligarchs he works for. They were going to buy Newsome’s finger paintings for $600,000 each… until Hunter did it first. Now they need a new plan. In the meantime, how do you like Newsome’s “I am not running for President… yet” song?

      Lockdowns, mask mandates and tax hikes for thee,
      Fancy dinners and mysterious cash payments for me!!!

      1. Lambert Strether

        > Lockdowns, mask mandates

        You need to get that knee seen to (in addition to providing a link on Newsome[sic]’s paintings, interesting if true). An unholy alliance between conservatives, who have demonized public health measures, and liberals, who have demonized and abandoned non-pharmaceutical interventions, has left the country in a situation for which “culling the herd” is not too strong a phrase.

        Adding, not sure what this comment is doing in a CalPERS post. This isn’t a forum.

  3. Sal in Sacramento

    I thought you might go for the jealousy angle.

    Marcie cornered the hottie role at CalPERS during her tenure until the hiring of Nicole. Nicole is educated and I assume well liked, the opposite of Marcie. And of course, Nicole is built like a real woman not some sad eyed young girl still waiting for puberty.

    I don’t think all the attention Nicole was getting as the CIO sat well with Marcie.

    I’m guessing Nicole presented a serious challenge in the “getting all the attention department”, and Marcie wouldn’t stand for that.

    While all this seems rather petty you must remember Marcie still lives in the mean girl high school realm so my theory works.

    I wonder if any CalPERS insiders have the real scoop on Nicole’s departure?

  4. The Rev Kev

    Just when you think that they can’t stuff things up anymore, they rise to the challenge. What is wrong with these people? When you are handling billions of dollars, you want to recruit the best people. The fact that they chose as Chief Investment Officer somebody who never made the cut the first time but was then just resurrected after the successful candidates were all eliminated is just plain nuts. If they wanted diversity so much, they could have given the CIO a diverse staff with instructions to train them up to their level of expertise and encourage their career development. I use to wonder how California could tolerate this cluster*** of an organization that has charge of pensions but if they are willing to tolerate a Gavin Newsom, then I guess that they will keep on tolerating CalPERS too.

    1. ds

      The diversity priority in hiring/promotions at CalPERS is a decade-plus entrenched problem. Professional staff from outside the area who stay too long can’t leave because the private sector is well aware of the CalPERS taint. Those local to area with kids are stuck because one can’t make as much working anywhere else in Sacramento except CalSTRS. So it winds up this toxic mix of resentful staff who are qualified based on merit but passed over for promotion reporting to largely unqualified superiors who gain promotions bc diversity. Unfortunately the diversity hirings/promotions are only pyrrhic victories for managers/supervisors as they quickly learn how difficult it is to operate in a culture where you are not respected on merits, and then on top of it they make mistakes due to being less-qualified and those mistakes only compound the culture/respect problem. Imposter syndrome writ large. Now imagine this layered on top of traditional internecine trench warfare back-stabbing to curry favor with benefactors within and between asset-classes that existed culturally long before diversity policy came along. The smart with means leave fast. I’m not saying Musicco falls into this category, but I’m not ruling it out as a factor either. She may have been a diversity hire who quickly saw the lay of the land, saw some other Form 700 land mines that she didn’t want to deal with and got out while the getting was good.

      1. Yves Smith Post author

        You are missing that Musicco was the Chief Investment Officer. She was or should have been the most powerful person there except for Frost.

        A new Bloomberg article is up. If you understand the job, it’s clear Musicco was floundering. And I heard other comments from insiders that Musicco acted like the rules did not apply to her. Influential beneficiaries (several) think the tickets incident kicked off a conflicts of interest investigation and she was forced out. The article shows among other things that she was trying to do sports deals, as if she had the contacts and insights and even more important, as if that made any sense for CalPERS (it didn’t). She came from a firm that specialized in sports deals and had carry in three of its funds! Connect the dots.

  5. flora

    re: “One might be getting out before investment performance, particularly in private equity, tanked. Musicco was an aggressive advocate for CalPERS’ plan to increase its exposure to private equity. Recall that in the last quarter, it was the public equities that Musicco was trying to reduce that rescued CalPERS’ performance. Recall also that Musicco said when she joined CalPERS that she wanted eventually to return to private equity. Perhaps she also wanted to go back before a prolonged down cycle made that hard.”

    That’s my guess. She’s been with CalPERS long enough to have a good look at the books. What I read in the general press is that CalPERS lost a bunch of money in the last two years on its investments. From the LA Time a year ago.

    California pension fund reports $29-billion loss, first since Great Recession, amid market turmoil

    And from Forbes this January:

    California Dreamin’: CalPERS And CalSTRS Caught In Climate Crossfire

    Worse news seems to be on the horizon. I think she’s getting out ahead worse financial results to come.

    Thanks for your continued reporting on CalPERS, pensions, and PE.

  6. Matthew G. Saroff

    It is clear that a person or people in or around CALPERS are making illicit gains through this chaos and incompetence.

    Who and how?

Comments are closed.