One day after Pasadena Now reported on the contents of a letter written by City Manager Steve Mermell to the California Public Employees Retirement System, known as CalPERS, regarding concerns over its new riskier investment strategy, the company’s investment chief officer announced he was stepping down.
“I deeply believe in the CalPERS mission of serving those who serve California,” Chief Investment Officer Ben Meng said in a prepared statement. “I’m proud of the work we did to change the portfolio, build a skilled Investment Office, and set CalPERS on a strong path to achieve our return target. But at this time, it’s important for me to focus on my health and on my family and move on to the next chapter in my life.”
According to Reuters, in February U.S. Rep. Jim Banks (R-Indiana) in a letter to Gov. Gavin Newsom called for an investigation into Meng citing the CIO’s allegedly cozy relationship with Beijing, and assailed the fund’s investments in Chinese companies.
Banks called for Meng to be fired.
Meng — who was born in China — has twice worked for CalPERS, the first time in 2008 and the second beginning in January 2019 when he became CIO managing $400 billion in investments, according to the CalPERS website.
He earned $1.5 million last year according to Transparent California.
In March, U.S. National Security Advisor and Pasadena resident Robert O’Brien said the Trump administration is “looking at” investments in Chinese military companies by CalPERS.
Dan Bienvenue, CalPERS deputy chief investment officer, will serve as interim chief investment officer. CalPERS will start an immediate search for a permanent successor.
CalPERS manages pension funds in California, including nearly $1.3 billion for the city.
“Sadly, this is just the latest in a long line of scandals and misconduct within CalPERS leadership, which suggests a fundamentally broken governance structure that lacks both transparency and accountability,” said Robert Fellner, executive director of Transparent California. “Californians deserve better.”
In the letter to CalPERS by Mermell that was released to Pasadena Now, Mermell “CalPERS has an obligation to its members and agencies to not only provide a sustainable pension system, but to do so as a public agency that is transparent and accessible,” Mermell wrote in the letter mailed Monday.
“Pursuing an investment strategy that increases investments in private assets and equity is concerning due to both the added risk and the inability to publicly value the investment,” Mermell wrote.
The letter was also sent to the City Council, Assemblyman Chris Holden and state Sen. Anthony Portantino. Mermell met with CalPERS officials on July 28.
“We were not aware of the action and we and a lot of member agencies will be following it closely,” Mermell said.
In June, the CalPERS Investment Committee met in closed session to discuss a new investment strategy involving increased investments in private assets and emerged with a new strategy of better assets and more assets.
Two months later, the CalPERS board of directors voted to restructure the governance model and reduced the number of annual board meetings from nine to six.
In that meeting, the board also restructured its investment committee, changing it to a subcommittee with no decision-making powers, and decreased its annual meetings from nine to four.
Mermell called for regular and ongoing meetings with local agency members, including discussion methods beyond public comment at board meetings; conduct critical conversations regarding risk and investment plans in open session; and reconsider decisions to reduce the number of open session public meetings of the board and committees.
“The city of Pasadena respectfully requests that CalPERS begin to have regular and ongoing meetings,” Mermell wrote.
Less than 30 minutes after Pasadena Now’s story was posted, a representative from CalPERS called to discuss the story, and said a comment would be coming.
The comment came from Michael Cohen, CalPERS chief financial officer, but did not reveal Meng was leaving the company.
“We appreciate the opportunity to meet with city leaders at all times to discuss this and any issue,” Cohen said. “We have been clear and transparent from the very beginning that our plan is not without risk, as all investments are.
“Our goal to reach a 7 percent annual return is aggressive, but we have carefully considered those risks and developed a comprehensive plan to mitigate them as much as possible as we implement our approach over the next several years.
“Our board meetings, discussions, investment workshops, and education sessions are all public and available to watch live online. We’ll continue to meet regularly with public officials across California and seek their insights as we review the mix of our investments over the course of the next year. We look forward to partnering with them to provide retirement security for California’s public employees.”