SBCERA's Don Pierce: Why Cash Has Option Value in Private Markets

How does a $20B+ pension fund generate $1 billion in gains from rebalancing alone? In Episode 14 of “The Institutional Edge,” host Angelo Calvello sits down with Don Pierce, Chief Investment Officer at San Bernardino County Employees' Retirement Association (SBCERA). Don shares his distinctive income-first approach to private markets investing, including a 50% allocation across private equity, credit, and real commodities. He discusses SBCERA's recent European credit expansion, innovative master custody arrangements enabling emerging manager access, and the philosophy behind owning real assets versus traditional funds. Don also addresses practical challenges of managing illiquidity and shares his perspective on AI for investment forecasting versus operational efficiency, emphasizing his quantitative, numbers-driven investment approach. Donald Pierce serves as Chief Investment Officer at San Bernardino County Employees' Retirement Association (SBCERA), a position he has held since October 2010. He is responsible for day-to-day operations of the investment division, including policy development, investment objectives, and manager selection. Don has served as an Investment Officer at SBCERA since 2001, having previously worked with Watson Wyatt for nearly four years on pensions, healthcare, and investments. He spearheaded SBCERA's rebalancing methodology, which has contributed over $1 billion in gains since 2006. Don holds a Bachelor of Science in Statistics from San Diego State University and is a CFA charter holder. In This Episode: (00:00) Introduction of guest Don Pierce, discussion of his role at SBCERA (02:46) Quick-fire round with Don, exploring passion versus numbers approach (03:43) Private markets portfolio overview, allocation breakdown across asset classes (05:52) European credit expansion strategy, diversifying private credit exposure globally (11:28) Alternative asset opportunities in cattle, grain silos, and commodities investing (19:09) Managing illiquidity challenges and portfolio construction in private markets (28:17) Governance innovations - emerging manager programs and master custody arrangements (31:06) Perspectives on AI implementation and alternatives in 401k plans Like, subscribe, and share this episode with someone who might be interested! Dr. Angelo Calvello is a serial innovator and co-founder of multiple investment firms, including Rosetta Analytics and Blue Diamond Asset Management. He leverages his extensive professional network and reputation for authentic thought leadership to curate conversations with genuinely innovative allocators. As the "Dissident" columnist for Institutional Investor and former "Doctor Is In" columnist for Chief Investment Officer (winner of the 2016 Jesse H. Neal Award), Calvello has become a leading voice challenging conventional investment wisdom. Beyond his professional pursuits, Calvello serves as Chairman of the Maryland State Retirement and Pension System's Climate Advisory Panel, Chairman of the Board of Outreach with Lacrosse and Schools (OWLS Lacrosse), a nonprofit organization creating opportunities for at-risk youths in Chicago, and trustee for a Chicago-area police pension fund. His career-long focus on leveraging innovation to deliver superior client outcomes makes him the ideal host for cutting-edge institutional investing conversations. Resources: SBCERA: https://www.sbcera.org/ Email Angelo: [email protected]