Biggest U.S. Pension's Investment Boss Pushed Sports Deals Before Calling It Quits

Nicole Musicco, ex CIO of Calpers

Calpers explored a deal with the National Basketball Association’s Sacramento Kings, with owner Vivek Ranadivé visiting the pension fund’s office as part of the conversations, people familiar with the matter said.

The talks, which haven’t previously been reported, didn’t lead to a deal. Calpers declined to comment, and representatives for Ranadivé didn’t respond to requests for comment.

‘Toys for Billionaires’

Private equity firms have emerged as major financiers of professional sports teams, but given the additional risks, it remains an unusual investment strategy for pension funds responsible for the retirement nest eggs of millions of people.

Sports teams are “toys for billionaires” and a poor fit for a public pension fund, said Matt Cole, who left Calpers in 2022 after 16 years and now heads Strive Asset Management, the firm co-founded by Vivek Ramaswamy.

“They’re an underfunded pension and they keep doing the same thing; there’s desire for change,” Cole said. But if you allocate money to a team, “you’re hoping there’s a billionaire down the line that will give you a good exit,” he said. “It was one of the most baffling strategies that I’ve heard.”

Advocates for Musicco say she was attempting to right a pension portfolio that has long been among the country’s worst performers.

“When you’ve got 22-year veterans in these positions, who have consistently underperformed and under delivered and they get the carpet pulled out and moved around, there’s going to be pushback,” said Terry Brennand, director of revenue, budgets, and pensions at SEIU, California’s largest union, which closely monitors Calpers’ policies.

Calpers also pushed to invest $1 billion with investment firms TPG Inc. and GCM Grosvenor to back up-and-coming buyout firms. Some investment staffers thought this did the opposite of what Musicco was preaching in terms of trying to cut out the middlemen, a person familiar with the matter said.

Calpers did make some headway in doing private equity deals in ways that reduced fees during Musicco’s tenure. Its staff completed $3.9 billion in private equity co-investments, continuing their previous efforts. The pension fund also made a $300 million commitment to the venture capital firm Thrive Capital to help Calpers scale its venture-focused investments.

And Musicco was also building off momentum by staff to do more financing plays. Before she joined, Calpers was in the final stretch of sealing a $750 million commitment to Ressler’s Ares to finance sports, media and entertainment businesses.

Still, as Musicco wrapped up her first year on the job, some longtime employees expressed unease to each other about the decisions of the newly arrived boss, who frequently crisscrossed the continent.

Her constant travel not only put a strain on Musicco, according to a person close to her, but also on senior staff, who had been eager for a clearer blueprint on how the fund would meet its investment goals after an 18-month leadership gap.

Her predecessor, Ben Meng, resigned in August 2020 amid a review into whether his personal investments violated the pension fund’s rules. No evidence of wrongdoing has surfaced, and he disclosed the holdings. Meng declined to comment.

Courtside Seats

A flashpoint for some staff disgruntled with Musicco was a photo that began circulating around the Calpers office and appeared on the blog Naked Capitalism. The picture showed Musicco and her son at the National Basketball Association playoff on April 15 between the Golden State Warriors and the Sacramento Kings.

She was pictured next to Joe Lacob, the owner of the Golden State Warriors. Lacob did not respond to a request for comment. Myers said Musicco wasn’t acquainted with him before the game.

She also sat in the vicinity of Ranadivé, the owner of the team Calpers explored investing in, two people familiar with the matter said.

Some staff said the scene showing the guardian of civil servants’ retirement savings sitting in pricey courtside seats, near a potential investing counterparty, risked blurring personal and professional lines.

She paid for her own season tickets, Calpers said.

“Like many people, she has a personal love of sports,” Myers said. “She and her son embraced their new home team.”

Keith Brainard, research director at the National Association of State Retirement Administrators, likened the job of public-pension investing to working in a “fishbowl” because of the high degree of transparency required for everything from meetings to employee compensation.

“The level of knowledge and talent and expertise becomes elevated and the expectations and visibility and the pressure also increases,” he said in an interview.

Musicco attributed her decision to leave to the broader challenge of juggling work and home life.

“I’ve spent my entire career making the necessary trade-offs between my personal and professional life,” she said in a statement Friday. “But lately, those trade-offs have come at too high of a cost.”

(Image: Bloomberg) 

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