With $293 billion of assets under management the California Public Employees’ Retirement System (CalPERS), is the largest US public pension plan. It puts $25 billion of that $293 billion into retail, office, industrial and other property types making it one of most significant limited partners in the real estate market. So when CalPERS makes a change at the top it has the potential to send more than just ripples across the industry.
The industry can expect waves of change now that Paul Mouchakkaa, formerly managing director at Morgan Stanley Real Estate Investing (MSREI), takes on the senior investment officer (SIO) for real assets role. Known to peers in the market as “super smart and very practical”, Mouchakkaa will oversee a 60-person team and be charged with implementing and managing the investment strategy and policy of the pension plan’s $29.6 billion real assets portfolio globally. He also will serve as part of the senior management team of CalPERS’ investment office in developing the pension plan’s overall investment strategy.
“Paul is a talented and experienced real estate professional, and we’re thrilled to have him on our team,” Ted Eliopoulos, CalPERS chief investment officer, commented at the time of Mouchakka’s appointment. “He has a proven track record of success and I’m confident that will continue at CalPERS.”
For Mouchakkaa the appointment to one of the highest-profile positions in private equity real estate is a major career leap. Mouchakkaa received a bachelor’s degree with highest honors in economics from Carleton University, and an MBA from the University of Oregon. He then spent three years at the Royal Bank of Canada, working his way up to senior manager, before two spells as managing director of real estate consulting services at Pension Consulting Alliance. His most recent position was as Los Angeles-based global head of research and strategy at MSREI, a newly created position he took up back in November 2011.
But, sources say that the market should not read too much into the move from research to head of CalPERS’ real estate team. Market sources tell PERE that one of the advantages Mouchakkaa had over rivals was that he is a former CalPERS staffer. He worked as a real estate portfolio manager between December 2007 and March 2009, overseeing research, operations and analytics for CalPERS’ property portfolio supervising a 15-member real estate staff. He also worked closely with the pension plan when he worked at the Pension Consulting Alliance.
“More importantly than anything else he has worked at CalPERS and so understands the political environment which is essential to surviving there,” said one US-based real estate fund manager. “It’s a huge state pension plan and you have trustees and a lot of constituencies and it can be very bureaucratic, Paul is someone who is willing to cut through bureaucracy, but do so without alienating people.” As the largest pension plan in the US, CalPERS comes under intense scrutiny from all quarters and market sources say that to be effective “you have to know how to wind your way through the halls.”
Mouchakkaa’s appointment is good news for real estate fund managers too, add the market sources. The interim head, Tom McDonagh, who took over at the start of last April, was a senior portfolio manager in the global fixed income asset class before replacing Ted Eliopoulos, who had been named interim chief investment officer upon the passing of Joe Dear. But, sources say McDonagh far from endeared himself to all of the real estate marketplace.
“They [CalPERS] were really a rudderless ship when he [McDonagh] was there because he was a bond guy and he was forcing them to do the most ultra-core assets going, and right now core is not where you want to be, or certainly you want to be diversifying as core pricing is very rich,” said the US-based fund manager, who added that Mouchakkaa will be a vast improvement.
“Paul will bring a much better perspective to the role and I would anticipate we will see CalPERS doing much more interesting investing and much more appropriate investing. They’ll likely move up the risk spectrum as the bond guy pushed them way down. For CalPERS not to be playing all across the risk/reward spectrum just makes no sense.”
And for a man who wrote in a 2012 paper entitled “Views from the Observatory: Real Estate Portfolio Risk Management and Monitoring” that he has always been fascinated by comets, perhaps the sky is not the limit.
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