“Focus on the job,” says CalPERS Chief Investment Officer Stephen Gilmore, on how to handle tough assignments with a lot at stake.
Today, he keeps his focus trained firmly on overseeing $600 billion in assets for CalPERS members. In the 1990s, he exercised that same discipline half a world away in the Central Asian nation of Tajikistan, advising the government on how to rebuild its economy following the collapse of the Soviet Union.
Gilmore, a trained economist, was working for the International Monetary Fund when it dispatched him to help the Tajik government—which was fighting a brutal civil war.
Economic reforms were enacted, and inflation was tamed amid the chaos. Gilmore counts this job as one of his most impactful, and the riskiest.
Later in his career, he held the chief investment officer role at a fund owned by the New Zealand government.
Gilmore nearly doubled the fund’s value in the five years he was there. It was also ranked as the world’s top-performing sovereign wealth fund in 2023.
Gilmore has made a similarly big impact at CalPERS since joining as chief investment officer in 2024.
Investment earnings came in at 11.6% in the last fiscal year, beating expectations. Recent earnings have boosted CalPERS’ funded status—a key measure of a pension fund’s health—to 84%, up from 75% in 2024.
Gilmore wants to do even better. Last year, he convinced the CalPERS Board of Administration to adopt a new investment strategy to streamline operations and increase returns—which are used to make pension payments to members.
We caught up with him recently to discuss his accomplishments, commitment to public service, and the books he’s been reading.
Tell us about the work your team is doing on behalf of CalPERS members.
The most important thing that the investment team does, of course, is to invest the portfolio, and we do that with the aim of generating strong, risk-adjusted returns so that we can pay pension benefits.
Our portfolio has outperformed since you joined. Why do you think that is?
It’s largely driven by three things: Strong equity markets, very good relative performance from our private market investments, and generally strong contributions from a very capable investment team.
CalPERS has adopted a new approach to investing under your leadership. Can you explain what it is?
One of the things that has generated a lot of attention in recent times is our shift to what is called a total portfolio approach. What that means is that the investment team must think about the whole portfolio in making investments. The reason we’re moving to this approach is that we can generate better risk-adjusted returns, and that should make the pension system more sustainable.
What kind of due diligence goes into the investments that CalPERS makes on behalf of its members?
We undertake substantial due diligence when making investments. Our internal team and the managers we hire must ensure that we make good investments and not take on too much risk. We should also have a good understanding of potential scenarios and where we could be wrong.
Our portfolio is invested in many types of assets and is professionally managed. Why is that necessary, and why is active management important?
We invest in a wide range of assets because we get benefits from diversification. What that means is that when some assets are performing poorly, others may be performing well.
Some critics say we should just put retirees’ money in large index funds. Why would this approach not work for us?
CalPERS doesn’t just invest in passive indexes. CalPERS is an active investor. We are active because we think we can generate additional returns beyond what passive investing would achieve.
Tell me about your time at CalPERS. Can you speak about your other accomplishments and areas of focus?
It’s wonderful to see that the funded ratio has improved. We’ve had some standout areas. The private equity portfolio has done well. We were laggards, and now we’re leaders. So, thanks go to Anton Orlich, our private equity head, and his team.
There’s also a greater focus on talent development, innovation, and continuous improvement. I think our team feels empowered to invest and use the advantages we have as an organization.
I’m also pleased with the people we’ve hired. I hire people who are curious and have a growth mindset. The people coming in are impressive and additive to the team.
Lastly, one area of improvement has been the modernization of our data and technology to support the move to a total portfolio approach, and it should also improve efficiency.
What motivates you to do the job?
The thing that motivates me at CalPERS is the mission, serving 2.4 million members. You can’t stand still in a job like this and you’re continuously learning, and that motivates me as well. I like this field and leading teams, seeing people develop. I like delivering for members.
How would you describe your management style?
I like to be able to delegate to people and empower them. I get a lot of satisfaction from seeing people grow and collaborate.
The decisions you make are hugely consequential, with billions of dollars at stake and millions of people counting on you to succeed. How do you handle the pressure?
In some ways, you must disassociate yourself from thinking about it in those terms. The responsibility of looking after the financial well-being of 2.4 million people is a motivator, but you’ve got to focus on the job, and that means investing the portfolio in the best way we can.
Artificial intelligence (AI) is all the buzz these days. What’s your take on this technology?
We look at it from multiple perspectives. We’re investing in this technology. We invest through listed companies; we invest directly in some of the AI developers. Our portfolio is generally exposed to developments in artificial intelligence. I think it is transformative. I expect that AI is going to be extremely helpful in complementing the work that our people do. I expect that it will free people to think more creatively.
How do you like living in California?
I like California. The climate is great, and I’m finding Sacramento to be a friendly community. I also enjoy going out to hear music, and the city’s close to a lot of places, but I feel like I haven’t explored enough of the state.
What do you miss about New Zealand?
Naturally, I miss my family and friends. I do miss the accessibility. It’s a small country with a lot of variety in terms of environment, and it feels easier to get away into nature.
OK, last question. What are you reading now?
Well, you’ve caught me between books. So, a recent book I’ve read is “The Invisible Hands.” Other books I’ve read recently are “The Missing Billionaires” and “Chip War.” These books cover pensions, offer good investment advice, and provide a history of the computer chip industry. I also re-read “Think Again,” which explains the benefits of being open minded and willing to change one’s mind when the facts change.