The chief investment officer of the nation’s largest public pension fund resigned Wednesday amid controversy over his ties to a Chinese sovereign massive wealth fund.
The California Public Employees’ Retirement System—better known as CalPERS—manages about $360 billion and has been described as one of the most influential pension fund investors in the U.S. It said Wednesday that its chief investment officer, Yu “Ben” Meng, had stepped down from his position after less than two years on the job.
Meng’s appointment to the CIO slot was controversial from the start because he had most recently worked for China’s State Administration of Foreign Exchange (SAFE), the country’s shadowy foreign-exchange and currency regulator that manages a $3 trillion investment fund.
Exactly what role Meng played as SAFE deputy chief investment officer is unclear, in large part because almost everything about SAFE is concealed behind a China Wall of secrecy. CalPERS did not respond to a request for more information about Meng, who managed a multi-million portfolio of assets for the pension fund before he went to SAFE.
After Breitbart News reported on CalPERS selection of Meng, he contacted the Wall Street Journal to say that he is a U.S. citizen who was a “foreign contractor” to SAFE.
Fox Business reports:
Banks wrote a letter to California Gov. Gavin Newsom raising concerns about Meng in February.
“If this were up to me, I would fire [Meng] immediately because of these suspicious ties,” Banks told “Mornings with Maria” in February. “We learned that Mr. Meng, who is the chief investment officer of CalPERS, was actually recruited to this position by the [Chinese Communist Party] through something called the Thousand Talents Program. Now he’s denied it.”
CalPERS defended Meng in February, calling him a “globally-respected financial expert and a proud citizen of the United States.”
Few in the U.S. understand the role SAFE plays in the global economy. China is a closed economy, which means foreign currency flows are tightly controlled. When a Chinese company receives dollars by exporting goods to the United States, it is required to exchange them for China’s domestic currency. The local bank making the exchange turns the dollars over to the People’s Bank of China, the equivalent of China’s Federal Reserve.
The PBOC then turns the dollars over to SAFE, which is charged with investing the funds to further China’s strategic and economic goals. In the past, this mainly involved buying ultra-safe U.S. assets such as Treasuries and bonds backed by U.S. government-sponsored entities. But in recent times China’s investment strategy shifted to investing in technology and supporting China’s One Belt One Road schemes.
An investigation by the U.S. government into China’s actions with respect to U.S. technology found that Chinese investment strategy is significantly “driven by non-market factors. These factors stem from the Chinese government’s extensive intervention – in the Chinese economy in general, and in foreign investment in particular – to achieve industrial policy objectives.”
That investigation led the Trump administration to begin imposing tariffs on China’s exports.
“I deeply believe in the CalPERS mission of serving those who serve California,” Meng said in a statement. “I’m proud of the work we did to change the portfolio, build a skilled Investment Office, and set CalPERS on a strong path to achieve our return target. But at this time, it’s important for me to focus on my health and on my family and move on to the next chapter in my life.”