When he headed up the Washington State Investment Board, Joe Dear oversaw a $67 billion portfolio. Now that he's the new honcho at CalPERS, the California public employees pension plan and the largest plan of its kind in the country, he's dealing with almost that much just in annual losses.

Dear, who was brought to Sacramento in January, does not fall into the usual mold for a CalPERS chief. His predecessor, Russell Read, was an investment banker. Dear was chief of staff to former Washington Governor Gary Locke and then an assistant secretary of labor in the Clinton administration. During those years, he built a reputation for being a smart and careful manager. So what's his prescription for CalPERS? He's pouring billions into the same kinds of investments that helped bring the portfolio its 26 percent decline. He believes in the existence of a pendulum. "We invest in an economic system that has, by its very nature, cycles," he said on a talk show recently. Dear thinks he can take advantage of "where we currently are in the cycle." He sees opportunities in beaten-down private equity and hedge funds and, particularly, California real estate.

With funding for its liabilities at a low of 66 percent, CalPERS has been under pressure to ask localities to step up their contributions to the fund by an additional 5 percent. Dear chose to give localities a break--setting the increase at around 1 percent. But that will add to the pressure on him to keep the CalPERS fund producing big returns.