San Diego Pension Parts Ways With Texas Consultant After Tumultuous Tenure

The board of the San Diego County Employees Retirement Association (SDCERA) voted unanimously on Thursday to part ways with Salient Partners, and firm that once served as the fund’s outsourced chief investment officer.

Salient Partners had a tumultuous relationship with the pension board; though the consultant had a couple staunch supporters on the board, many of the trustees had repeatedly endorsed firing Salient Partners over the past 10 months.

[Read Pension360’s SDCERA coverage here.]

The investment firm – and its man on the ground, Lee Partridge – became the subject of controversy when it got national press for Partridge’s high salary ($4.5 million over 39 months) and affinity for leverage.

More from the San Diego Union-Tribune:

Stephen Sexauer, the county’s new chief investment officer, credited Salient for its professionalism in implementing the transition, which will begin immediately.

He plans to move billions of dollars the Texas consultancy invested in “risk parity” and “trend” strategies into traditional index funds. Some of the less exotic investments overseen by Salient will be moved to stocks, fixed-income assets and hedge funds, he said.

“The transition portfolio has no leverage and no risk parity,” Sexauer said.

Salient had been collecting more than $8 million a year to manage the county portfolio, and Partridge was given broad authority to make day-to-day investment decisions.

His fondness for so-called alternative investments like credit default swaps and derivatives at one point exposed the fund to potential losses of more than double the portfolio value. A worst-case event could have lead the county to lose its entire fund and owe billions more.

Salient Partners will stay on at SDCERA through the end of July and the first two weeks of August.