New PSERS investment officer will earn $515,000, the top salary in Pa. government

Benjamin L. Cotton, an investment officer with the Detroit-based United Auto Workers’ Retiree Medical Benefits Trust, has been approved by trustees of the Pennsylvania Public School Employees’ Retirement System as its new chief investment officer, more than a year after the departure of longtime CIO James L. Grossman.

Cotton, like his predecessor, will be the highest paid public official in Pennsylvania with a salary of $515,000. Grossman made around $490,000. In 2021, the state paid 10 other officials over $400,000. Two of them also managed money for PSERS; the others were supervising physicians or university presidents.

The choice of an experienced outsider to direct PSERS investments has been anticipated as a step forward by members of the once sharply divided board of public officials, teachers and school board reps that oversees around $70 billion in investments. The system, with half a million working or retired members, is funded by state and local taxpayers, investment profits, and payroll deductions.

Cotton, who holds the Chartered Financial Analyst certificate earned by professional investment managers, was chosen in a special board meeting Wednesday. He called the job “a humbling responsibility.”

Cotton had worked for the UAW trust since it was started in 2009 as part of a government-aided reorganization of GM employee benefits following the company’s financial rescue during the Great Recession. His responsibilities included overseeing investments in publicly traded stocks, bonds, derivatives and cash, as well as ensuring investments complied with the union’s environmental, sustainability and governance policies.

Before that, he was a pension and accounting pro with Ford Motor Co. and managed the company’s foreign-exchange, derivatives and commodities trading, as well as internal audit and debt securitization. A Marine Corps veteran of the Desert Storm campaign, he graduated from Texas’ Midwestern State University, holds an MBA from Thunderbird School at Arizona State University, and last month collected a doctorate of education in leadership from Vanderbilt University’s Peabody College.

The vote by the 15-member board to approve Cotton was nearly unanimous, with Sen. Katie Muth (D., Montgomery and Chester) abstaining. Muth has abstained or opposed many board actions over the last two years, objecting to what she describes as the lack of transparency and slow pace of reform at the agency, which in 2021-22 endured a string of internal and outside investigations and dissent over the agency’s investment program.

Under Grossman as chief investment officer, PSERS had reduced its holdings in U.S. stocks and increased investments in hedge funds, private equity and real estate funds, and direct real estate investments, but missed out on the bull market that boosted other funds’ returns during the Obama and Trump administrations.

After an attempt by several of the elected officials on the board to oust Grossman was defeated by his supporters, including Pennsylvania State Education Association board members and their allies, he announced his retirement in November 2021, as did executive director Glenn Grell. The system’s top private-investments and legal officers also left that year.

PSERS was the subject of a federal investigation starting in March 2021 after the agency acknowledged that it had approved an exaggerated profit report for 2011-2020 following a miscalculation error. The revised report forced an increase in many pensioners’ contributions to cover the accounting shortfall under a state law. The federal investigation ended without charges; an internal investigation has been followed by a reorganization of board committees and ongoing revisions of some of its policies.

A separate investigation by the Securities and Exchange Commission, including a subpoena demanding PSERS provide information about any gifts received from scores of Wall Street firms hired by PSERS, has been directed primarily at the firms and not the pension agency, according to people familiar with the probe.