Former North Carolina Pension CIO: Board, Not Sole Fiduciary, Should Oversee Investments

north carolinaAndrew Silton, a retired money manager and former CIO to the North Carolina Retirement System, wrote a column on Monday calling for reforms in the way investments are overseen at North Carolina’s pension system.

Currently, investments are overseen by one person: state Treasurer Janet Cowell, who acts as the sole trustee of the system.

Silton, however, writes that investments should be overseen by a board consisting of multiple trustees:

Over a year ago, the state treasurer received a report from the Investment Fiduciary Governance Commission, a group she appointed to provide guidance on the overall stewardship of pension investments. By a narrow majority, the commission recommended that pension investments be overseen by a board of trustees, rather than by the state treasurer as sole fiduciary. The minority recommended retaining the sole fiduciary model, while significantly strengthening the role of the investment committee. In May 2014, the treasurer deferred a decision on this important step, but promised to submit legislation this year.

The General Assembly did enact some of the consensus reforms, including a periodic audit and greater hiring flexibility. However, any audit comes long after all the investment decisions have been made, and billions of dollars in capital have been committed to alternative investments. I fought very hard, and with limited success, to improve staffing, so I applaud the effort by the legislature and treasurer to provide the flexibility needed attract and retain the requisite expertise.

However, the key reform needed to bring greater accountability before investment decisions has not been enacted. The treasurer never submitted a bill. Given the pension’s continued commitment to alternative investments, soaring fees, and frosted glass transparency, pension beneficiaries and taxpayers should demand that the treasurer dust off the commission’s report and submit a reform proposal.

Read the full, insightful, piece here.

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