Stephen Gilmore, a native of New Zealand, joined CalPERS this July as chief investment officer. It’s an important and tough job: As head of the CalPERS Investment Office, Gilmore manages a portfolio worth more than $500 billion.
Gilmore is well-prepared to do the job, joining CalPERS with 40 years of experience in finance and economics gained through his roles at public and private financial institutions across the world.
Most recently he served as chief investment officer of the New Zealand Superannuation Fund, a sovereign wealth fund owned by the New Zealand government. The fund doubled in value in the five years he was there and in 2023 was named the best performing sovereign investor in the world.
He’s also held positions with Australia’s sovereign wealth fund, Morgan Stanley, AIG Financial Products, and the International Monetary Fund (IMF). Notably, the IMF sent Gilmore to war-torn Tajikistan in the mid-1990s to help its government rebuild the economy following the Soviet Union’s collapse.
What interested you about CalPERS and why did you apply to the job?
I thought it would be quite a challenge to take on the role, and the more I thought about it, the more interested I became. CalPERS is a storied institution, it has a long history, and it’s large. It has the capacity to make a difference because of its clout, and, of course, it has a meaningful purpose. That is appealing.
What do you see as the mission of the CalPERS Investment Office?
Its mission is to do its part to make the pension system sustainable. We can do that by generating good returns. My focus is using the advantages we have to generate long-term returns.
What is the most challenging part of accepting a position like this?
Some people might say it’s difficult to move to a new country, switch employers, and uproot your personal life, but for me it’s not so much that—I’ve done that a lot over the years. The most challenging thing is encouraging organizations to change and adapt. Often there are ways things are done, there are entrenched views and processes. The hard part is bringing people along and getting buy-in and executing. People will say, “We’ve always done it this way,” and that kind of thinking should change.
What motivated you to pursue a career in investing?
People often say they plan a particular career or direction in life. I wasn’t sure what I wanted to do growing up. I liked different things. In the end, I studied economics. My first job was lecturing in finance. I went to a central bank, and so on. I think becoming an investor was an evolution. The career affords one the opportunity to study a range of disciplines like economics, politics, and financial markets. To be successful, an investor must solve complex problems that cover multiple fields. In the process, you get to meet fascinating people, great thinkers. So, it’s rewarding to put all the pieces together. It’s even better to do that in service of something meaningful—providing returns for our members.
Who has been the most influential mentor in your career, and what did you learn from them?
There hasn’t been a single mentor but a collection of people through time who have provided insights or interesting suggestions. When I first started lecturing in finance, we had a visiting professor, Simon Benninga. He broadened my academic horizons. I also had a girlfriend with a great motto— “just do it”—and I always appreciated her encouragement and support. After a rough performance at a meeting, a board member told me to always get my story straight. That was good counsel. For public speaking, I once heard that you should always know your first line, be confident in your subject-matter expertise, and have fun.
What role have you enjoyed the most so far in your career?
The role I’ve enjoyed the most—the most impactful—was my job as the IMF representative in Tajikistan. I set up the office in 1995 under difficult circumstances. There was an ongoing civil war. It was one of the poorest of the former Soviet republics. Inflation was 2,000%. The biggest problem for the government, aside from the ongoing war, was figuring out how to feed the population. The IMF was working with the government to bring down inflation, among other things. We enacted reforms, and inflation came down dramatically. It’s still a place that faces a lot of hardships, but it’s a country of immense beauty. I enjoyed the culture, the work, and the experience.
The New Zealand Superfund earned impressive returns while you were CIO. What contributed to that?
The New Zealand Superfund has generated strong returns over a long period of time. First, the fund has a healthy risk appetite. Second, it takes a total portfolio approach, meaning that it will construct a portfolio to meet its overall investment objective. Third, there are strong governance arrangements in place to ensure it is well-managed. It also has a long investment horizon that allows it to buy when things are cheap and sell when they are expensive.
What’s the best piece of investment advice you’ve ever been given?
I will draw on advice from three investors: Jim Simons, George Soros, and Ray Dalio. Dalio says that pain plus reflection equals progress. Soros believes people should question how they could be wrong. Simons was focused on what you can learn when things go wrong. It’s important to be constructively criticized, for people to speak up, because you don’t know where the most insightful comment will come from. I think back to an investment committee meeting. The person who made the most insightful comment—and it took a lot of courage for her to speak up—was the most junior employee.
Are there any investors you admire?
I didn’t know him personally, but I admired Jim Simons. He created one of the most successful investment funds ever—Medallion Fund. Simons was a world class mathematician, a geometrician, and a code breaker. Then he decided to invest. He didn’t employ investors or people with finance backgrounds. He employed mathematicians, computer scientists, and an assortment of other scientists. For them, it was about solving market problems. In fact, there is a good book about Jim and the firm he created entitled “The Man Who Solved the Market.” Jim passed away recently but he was known to say that he did a lot of math, made a lot of money, and that he gave most of it away.
How is life in Sacramento shaping up so far and are you settling into your new role?
I am finding that time is racing by at CalPERS. There is so much to do. I am in listening mode right now. A lot of people have things to say, so I am enjoying that. I have lots of ideas. I am enjoying life in Sacramento. I found a loft quickly and it’s within walking distance to the office. I’m camping in my apartment right now, but I got news today that my furniture has finally left New Zealand for California.
What do you miss most about New Zealand?
Family and friends. The community there. I think also that it’s very small and accessible. But I’ve spent half of my life outside New Zealand. One of the good things about doing that is that you have an international perspective. There is a bit of home in each of the places I’ve lived.
Can you tell me about your hobbies?
My hobbies are eclectic. They are shaped by where I am and what is interesting about the place that I am in. My interest in music partially comes from my experience living in Melbourne, Australia, and Auckland, New Zealand. The food is great in Sacramento, so I think I will be more interested in cooking here. One of the hobbies I enjoyed when I was younger was hiking, so I am looking forward to doing that here.
Is there any place you’d like to visit now that you’re in the United States?
I’ve never been to Yosemite. I would like to visit the national parks. I’ve never been to Lake Tahoe, and I’d like to visit. I haven’t skied in a long time, and I’d like to do that too. I’d like to visit Nashville.
What are your favorite books?
“Samarkand” by Amin Maalouf and “The Master and Margarita” by Mikhail Bulgakov are a couple of my favorites. Also, “Shantaram” by Gregory David Roberts is a real page turner.
One trait that you see from some of the very best investors is that they have voracious appetites for reading, typically non-fiction. Some of the most thoughtful investors I’ve met would force you to take a book from a pile on a desk before saying goodbye. One of the things I’ve done is give reading lists to people who work for me.
Is there any message you’d like to pass on to CalPERS members?
It’s a privilege to be offered this role, and with that comes responsibility. I will be focusing on the long-term and how to make the pension system sustainable.