In January 2014, SFERS
lured Bill Coaker
into returning to SFERS
as its Chief Investment Officer.
Prior to returning to SFERS, Coaker was the senior managing director of public equities in the University of California’s Office of the Chief Investment Officer for just over six years, earning $505,939 in 2013 helping manage the university’s $90 billion pension, endowment, and campus assets portfolio.
Many observers believe Coaker
was lured back to SFERS
in January 2014 for his
so-called expertise with hedge funds and the “endowment model” of investing.
Bachler didn’t comment on the equities portfolio’s performance under Coaker
Who Is Bill Coaker?
Coaker had formerly been a Senior Investment Officer at SFERS for just over two-and-a-half years between June 2005 and January 2008 managing SFERS’ “domestic and international emerging market” strategies before leaving for his six-year stint at the University of California.
Prior to first joining SFERS in 2005, Coaker had been the Chief Investment Officer (CIO) at the Roman Catholic Diocese of Monterey for a stint of 13 years managing the Dioceses’ pension, endowment, and corporate assets programs.
Why Coaker left the University of California and the Monterey Diocese to take a significant pay cut to be in charge of managing SFERS’ much smaller pension portfolio isn’t known, leaving observers wondering about a downward spiral in his career.
also presented “Mix 6B” on October 8, 2014 as an example of investing up to 36% — $7.2 billion — in hedge funds using an “endowment model” used by various private universities, illustrating the lunacy and weakness of industry-standard “optimizer” software that does not take into account public pension plans vs. private endowments, or the true risk of hedge funds and their illiquidity.
On June 1, Coaker
first recommended allocating 15% to hedge funds.
proposal also ran into stiff opposition and intense scrutiny by one SFERS
At the beginning of SFERS’ December 3, 2014 meeting, Commissioners were handed a third alternate proposal dated the same date of the meeting (December 3) that was reportedly developed by the trio of Makras, SFERS’ Executive Director Jay Huish, and Coaker to invest 5% in hedge funds.
On the very same day as the 5% proposal was introduced, Coaker
and Huish went back on the 5% proposal developed with Board president Makras, showing their agenda for a much larger percentage!
By report, SFERS’ staff favored direct hedge funds where Coaker
would make the decisions directly.
skipped attending the class that taught that pension funds are not endowments, as he
mistakenly brags on his
Linked-In resume that he
recommended implementing at SFERS
also claims that “absolute returns” — an interchangeable term for “hedge funds,” when hedge funds are getting bad media coverage — have a lower volatility, but most observers believe hedge funds are highly volatile, as many hedge funds have lost nearly 100% of their value.
Linked-In profile claims that his
first gig as SFERS’ senior investment officer between June 2005 and January 2008, he
had increased International and Emerging Markets Equity asset allocations in the first quarter of his
employment, and over the two-and-a-half years of his
first tenure between June 2005 and 2008, both international and emerging market stocks had outperformed the U.S. Equity market by 37% and 106% respectively.
But various data from SFERS
paint a very different picture, and some observers disagree with Coaker
whether international and emerging markets had outperformed domestic equity shortly after he
had fiddled with asset allocations during his
first stint at SFERS
First of all, it takes time to fund various investment managers and more time for investment results to materialize, so where Coaker
obtained data that his
recommendations had performed better by the end of 2008 is questionable, at best.
So during his
first two-and-a-half-year job at SFERS
appears to have chosen to increase allocations to the poorest performing asset classes.
Coaker’s February 2014 “Letter of Introduction” starts off saying he
is “humbled” to serve as SFERS’ Chief Investment Officer, and he
hopes to serve with “class.” Do we need his
goes on to state that SFERS
incurred a “peak-to-trough” decline of a negative 32% during the FY 2008–2009 Great Recession.
bemoans the fact that SFERS’ portfolio has not generated “excess returns (meaning “ alpha”) over the past ten years, and SFERS’s total return has been completely dependent on the beta exposure of its asset allocations.” By chasing alpha, Coaker
is again inviting hedge fund investment disaster.
expects to eke out a 6.5% return is one 800-pound gorilla.
Despite the advice of two towering billionaire figures in the financial industry advising not to invest pension funds in hedge funds, rookie Chief Investment Officer Bill Coaker thinks he knows better than the two billionaires.
Apparently Coaker has the concurrence of rookie cop Brian Stansbury, rookie investor Joe Driscoll (who’s been woefully wrong before), and conflict-of-interest conflicted Wendy Paskin-Jordan, all SFERS Commissioners hoodwinked that they and Coaker know better than the two billionaire experts.
Or take Kevin Callanan, another Fire Department retiree, who noted on September 7 that Bill Coaker
may have “smoke and mirrored the unassuming Diocese of Monterey, but rest assured retired employees of [the City] will not stand for another carpet bagger raiding our [pension system].”
Finally, take retired firefighter Ted Gold, who noted to Huish and Coaker on November 1 that SFERS Commissioner Brian Stansbury had forwarded Elmer Carr a link to an article by Richard Baker on the Institutional Investors Alpha web site that advocated for using pension funds to invest in hedge funds.
Since the conservative-leaning Chronicle is concerned about the risky “high-flying” idea and recommends against it, hopefully SFERS’ Board will play closer attention when it considers again on February 11 whether to adopt Coaker’s goofy “endowment model of investing” public retirees’ funds in hedge funds — against the beneficiary members’ substantial objections.
Halloran asserts that SFERS
has before it “expert advice,” from experts — ostensibly including SFERS’ expert Chief Investment Officer, Bill Coaker
— who believe that placing some assets in alternative investment mechanisms is the best way to achieve some sort of balance.
Apparently Halloran and Vallejo, along with Coaker, know more about “sophisticated” investing that do Soros and Buffett.
Given that Coaker’s first stint at SFERS
between 2005 and 2008 involved just a two-and-a-half year tenure, and his
tenure at UC Regents was just six years, it’s difficult to believe that Coaker
will even be around 10 years hence to evaluate how his
“endowment model” and hedge fund asset allocation recommendations will have played out.
As far as that goes, few of SFERS’ current Board will be around 10 years from now either, to see how things work out should they approve to invest in hedge funds.
Coaker’s new proposal admits that illiquid investments will increase significantly to 35%, and noted illiquid investments from earlier asset allocation recommendations he
made in December would have increased to 45%.
As senior leaders in SEIU Local 1021 have noted, when you add in what SFERS
is planning to invest in “alternative equities” (without calling alternative equities out as a separate asset allocation class), plus a hedge fund allocation at 15%, SFERS
may be considering somewhere between 28% and 45% in risky and very illiquid investments.
Amazingly, Coaker’s February hookah proposal claims SFERS’ staff will “conduct onsite visits to CALSTRS (the California State Teacher’s Retirement System), one or two other pension plans, or endowments” to pick their brains on specified allocations to infrastructure.
says not one word about reaching out to CalPERS to investigate why CalPERS had pulled out of hedge fund investments entirely.
Why would Coker do due diligence reaching out to CALSTRS, but not with CalPERS?
Coaker’s February 11 proposal asserts that a 5% allocation to hedge funds would not reduce the volatility of returns, even though Angeles Investment Advisors
asserts in the Bloomberg article that it would.
Do we have disagreement here on “facts” between Coaker
and SFERS’ general consultant, Angeles Investments Advisors?
Coaker’s February 11 proposal also claims on page 11 that returns from hedge fund investments are projected to be 8.0%.
Coaker’s February 11 recommendation claims that “fund-of-hedge-funds” — purportedly preferred by SFERS’ Board but opposed by SFERS’ staff — have fallen out of favor with “institutional investors” for s