Deborah E. Gallegos tends a nest egg worth $85 billion. The chief investment officer for New York City manages five separate pension funds for city employees, but unlike most investment funds that exist solely to make money, these come with political agendas and public scrutiny firmly attached.
Ms. Gallegos's most crucial task involves monthly meetings with the boards of trustees for the five pension systems, which cover retirement programs for police, firefighters, teachers, and civil servants. Each board has eight to 10 members, each with a different agenda and investment philosophy.
"That job requires having a good and respectful relationship with trustees, because ultimately they make the decisions," says Robert Apodaca, an early mentor to Ms. Gallegos who now is business development director for the California-based architectural firm McLarand Vasquez Emsiek & Partners. "What makes her successful is she displays great maturity for her age and an even temper. That's unusual in her work – people get stressed out with a lot of highs and lows."
Few jobs have such a complex decision-making process. Despite her CIO title, Ms. Gallegos can't approve investments; that depends entirely on votes by the trustees. And once they approve an investment, Ms. Gallegos doesn't execute it. Instead, she passes the decision to one of many outside fund managers who directly buys the stocks, bonds, real estate, or private equity. Investments in each of these asset classes are measured against a standard benchmark (such as the S&P 500 for stocks) to ensure financial performance.
"We need to look at the long term and see how we can invest so the returns will fund current retirees and future retirees," says Ms. Gallegos. "So we engage in an actuarial study that uses all kinds of statistics to calculate what returns are required. Then we use a consulting firm to allocate our capital in real estate, domestic equity markets, and the other asset classes."
Meanwhile, everyone from union members to Wall Street moguls can keep tabs on the public funds. Even Ms. Gallegos' salary ($195,000) is public knowledge. "You could easily not have a private life," says Mr. Apodaca.
Political agendas enter the process in an attempt to balance financial returns against so-called "targeted social investment." The idea is that public pension funds should invest to benefit the local community by funding local business, government, or real estate projects. Such investments can create local jobs and strengthen the unions that pay into the funds. Based on his years in the industry, Mr. Apodaca believes "it is possible to get the same rate of return [as other investments] and do social good."
Ms. Gallegos buys the concept with the caveat that every investment must deliver acceptable returns. "As a fiduciary of these assets, our job is to invest them in the retirees' best interest. That means earning a competitive rate of return. If you can do that at the same time as re-investing in your community, you're investing in their best interest financially as well as socially," she says. Some of the city funds have dedicated a percentage of their assets to economically targeted investments in New York City.
With only three months on the job, Ms. Gallegos has already changed the city's investment strategy. The trustees have approved a plan to increase the allocation to private equity from 1 percent to 5 percent of the funds' capital. The real estate portion will rise from 1 percent to the 3- or 4-percent range, depending on the fund.
Ms. Gallegos now must hire consultants to vet management firms in these specialties to make the direct investments in companies and projects.
In dealing with the clubby world of New York financial circles, Ms. Gallegos admits she has had her "fair share of difficult moments as a woman and a minority," but she's determined to succeed. She prefers to focus on objectives rather than obstacles.
Moreover, she has the support of a boss who actively works for diversity in the industry. "Clearly the financial world hasn't had a huge percentage of people of color," says William Thompson Jr., comptroller for New York City and the man who hired Ms. Gallegos. "I'm the comptroller, and I'm African American. People don't have a choice – they have to deal with me. And they have to deal with Deborah. We have created opportunities for Latino, African-American, and women firms, and we will continue to do that. Does everyone on Wall Street like that? I don't think so, but they don't have an option. Right now it's not a question of how Deborah deals with Wall Street; it's about how Wall Street deals with her."
On a typical workday, Ms. Gallegos arrives at the office by 7:30 a.m. to handle requests from the comptroller and the media. Most of the day is a parade of meetings with fund managers, financial consultants, and staff.
Prior to coming to New York in January, Ms. Gallegos served in her native state as deputy investment officer for the New Mexico State Investment Council. She has worked previously as vice-president at JP Morgan Fleming Asset Management and in equity research for Morgan Stanley.
She started her financial career working for Callan Associates, an institutional consulting firm. Originally, she had dreamed of becoming a politician until the Callan experience steered her toward a career that merges politics and financial management.
Ms. Gallegos sits on the board of the Robert Toigo Foundation, which helps minorities enter the finance professions. Although not a member, she cooperates extensively with the New America Alliance, a group working for Hispanic economic empowerment.
"I share a lot of their principles – access to capital, access to opportunities, mentorship, and networking in the Hispanic business community," says Ms. Gallegos.
And while she has used her leadership positions to recruit and promote young people in financial careers, Ms. Gallegos wants to start the process even younger.
"When you ask children what they want to become, they say doctor, lawyer, teacher, or police. No one ever says stockbroker," she says. "It's a matter of educating them. This can be rewarding financially and from a social advancement perspective."
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