State Teachers’ Retirement System Names Chief Investment Officer

The $68-billion California State Teachers’ Retirement System decided not to rehire Tom Flanigan, the fund’s chief investment officer for the last 11 years, replacing him with Patrick Mitchell, the fund announced Friday.

Mitchell has worked at Calsters since 1988 and is currently the fund’s director of fixed income and equities.

The fund, which has suffered from below-average performance over the last five years, actively sought candidates last year to apply for Flanigan’s job, advertising in publications and later hiring an executive search firm.

Flanigan’s contract expired in December and he had been working without a contract since then.

“With Tom Flanigan there were some ongoing debates with the board about whether the asset allocation was being adhered to,” said California State Controller Kathleen Connell, who sits on Calsters’ board. “The board is strongly behind Pat Mitchell.”

Flanigan, who had reapplied for the job, was offered the job of strategic investment consultant at the fund for at least a year. Flanigan wasn’t at work on Friday and couldn’t be reached for comment.

One issue with Flanigan had to do with his control of a discretionary account that allowed him to invest in any combination of U.S. or international stocks or U.S. bonds, and accounted for about 10% of Calsters’ portfolio.

In 1996, that account earned $66 million. An investment that mirrored this discretionary account’s benchmark of 40% in the Standard & Poor’s 500 index, 20% in Morgan Stanley’s EAFE index and 20% in U.S. government bonds would have added $541 million to the fund.

Last year, the total fund returned 9.9%, ranking it in the 92nd percentile of public funds over $1 billion tracked by pension consultants Wilshire Associates.

Over three years, it returned 10.6%, in the 87th percentile, and over five years, 10.3%, in the 92nd percentile.

On Thursday, Calsters’ board voted to change its asset allocation, adding more global stocks and allowing the fund to invest in international bonds if managers choose. It also did away with the discretionary tactical allocation account.

Before joining Calsters, Mitchell, 48, who wasn’t immediately available for comment, worked for 10 years for three large West Coast financial institutions.

He has a bachelor’s in business from the University of Idaho and a master’s from Idaho State University with an emphasis in finance.

As chief investment officer, Mitchell will earn a base salary of $185,000 to $230,000 with a 10% bonus incentive.