Charles J. Spiller, top ‘alternative investment’ official for the Pennsylvania Schools Retirement System, is the latest executive in the troubled $71 billion plan to step down as trustees seek to reshape the investment portfolio that ‘he helped build it to be more like other pension plans.
Spiller, 69, Pennsylvania’s second-highest-paid state employee, “will be retiring on March 11,” said Jason Davis, the West Pennsylvania high school teacher who leads the committee. investment of the PSERS, during a meeting on Friday.
Spiller has raised $400,000 a year, trailing only his boss, James L. Grossman Jr., 54, who agreed in October to step down as chief investment officer effective last week. Their boss, executive director Glen Grell, plans to leave early next year. Grell and Grossman had been targeted for removal by board dissidents amid two federal investigations into the education employees pension fund.
Trustees voted in August to dump hedge funds from the system, a class that Spiller and his boss Grossman had championed. But board members said the investments performed poorly. They said the PSERS would have made billions in extra profits had it ignored the team’s exotic investment recommendations and invested more in US stocks during the bull markets of the Obama, Trump and Biden administrations.
In a statement, Spiller took credit for growing PSERS’ private assets from $1 billion in 1997 to $29 billion today during his tenure. He said he recently became a grandfather and was looking forward to spending more time with his family.
Spiller, who attended Northeastern University from 1970 to 1975, already had years of investment management experience before joining PSERS – the public school employee retirement system – in 1994 to purchase and manage property directly. for the fund.
A change in strategy quickly tasked Spiller with hiring professional investment managers to purchase these assets for the system. He was appointed managing director of private equity and real estate in 1997.
In this position, Spiller led the staff who found and recommended hundreds of private investments, real estate, hedge funds and other “alternative” investors in non-exchange-traded private assets.
After Grossman took over as chief investment officer in 2015, Spiller was named one of his deputies, still focusing on private investments, and given the added responsibility of building a direct investment portfolio. , which now includes properties such as a shopping mall in Florida, a pistachio farm in California and a series of mobile home parks in the Midwest and South.
Spiller recommended numerous investments to the board, including the purchase and demolition of three city blocks in downtown Harrisburg, beginning in 2017, for redevelopment that did not occur. These transactions are now the subject of separate investigations by a federal grand jury in Philadelphia and the United States Securities and Exchange Commission. No one has been charged with wrongdoing.
Spiller’s supporters, including his bosses, have praised his vast knowledge of Wall Street opportunities and practices. After 2008, system leaders, burned by the stock market losses of the Great Recession and the earlier dot.com collapse, accelerated the system’s pursuit of high-cost investments, in areas where Spiller and his team are specialized.
But these investments did not generate additional cash as hoped by their promoters. Instead, the PSERS “missed the 10-year bull market upside” for U.S. stocks, as state treasurer Stacy Garrity told her fellow trustees at Friday’s meeting, forcing school employees this year to pay more for their pensions.
PSERS officials did not respond to requests for comment on Spiller’s planned departure on Friday. It came the same day the directors renewed their support for a plan that would sell off $7 billion in hedge funds, one of Spiller’s areas of focus, and replace those investments with U.S. stocks.
Trustee Eric DiTullio, representing Pennsylvania school board members, has championed the PSERS strategy in recent years. He said the idea of nearly doubling equity investments had given him “heartburn” in the face of high inflation and the threat of losing US financial dominance: “I see that as a huge risk.”
But colleagues on the board made it clear that it was a new day at PSERS. The plan had become “an outlier,” compared to other state plans, said Chris Santa Maria, PSERS board chair and Harriton High School history and social studies teacher. on the main line.
Selling hedge funds and buying more stocks along with other smaller changes “brings us closer to where the rest of the pension world is,” the chairman added.
“This represents a cautious approach,” added Joe Torsella, Governor Wolf’s representative on the board, after years “on the wrong track.”