Legislative Audit of Utah Pension Recommends Review of Investment Mix, Greater Transparency

Utah’s Legislative Auditor General’s Office released its audit of the Utah Retirement System (conducted at the urging of an anonymous lawmaker) on Tuesday.

The report found that the System has turned in average performance in recent years. But the report also said the fund could be leaning too heavily on alternatives – which make up about 40 percent of System assets – and should conduct a review of its asset mix.

Additionally, the audit suggested the System incorporate a greater level of transparency when it comes to administration.

From the Salt Lake Tribune:

Auditors hired a consultant, Chris Tobe, to study the agency’s investment performance. He said it has been about average compared with peer agencies. But it holds more alternative assets and hedge funds than normal, and a change toward them since 2004 may have cost it the $1.3 billion extra in assets.

URS now has about 40 percent of its assets in such investments, up from 16 percent in 2005. Similar agencies average about 25 percent.

The study said URS’ pre-2005 mix of investments — with no hedge funds and fewer alternative investments — would have performed better through 2013, and increased holdings by $1.35 billion.

In a written response to the audit, URS said it has followed a conservative strategy designed more to protect its assets during the recent tough economy than to seek the biggest returns possible.

“Those who try to hit home runs in their investment portfolio will often strike out,” the agency wrote. “The URS asset allocation is designed to minimize losses in down markets, allowing URS to take advantage of compounding returns.”

[…]

The audit also said the agency could be more transparent with its administration board meeting notices to the public and should designate a records officer to manage information requests.

“Transparency,” the study said, “helps to promote accountability, public confidence, informed participations by stakeholders and acts as a check against the possibility of mismanagement.”

Read the full report here.

Photo by  vxla via Flickr CC License