The San Diego County Employees Retirement System (SDCERS) voted 5-4 last week to retain its controversial CIO, Lee Partridge.
The vote was close, and nearly every trustee had something to say about the decision. From Bloomberg:
“All the sudden we found out we have $22 billion in exposure,” [trustee Dianne] Jacob said by telephone prior to the vote. “That should have never happened. The process is flawed. The hiring of Partridge in the beginning was flawed. Let’s get back to basics.”
“This is an exorbitant amount of taxpayer dollars being spent and is unprecedented in any other county in California,” [County Treasurer and trustee] McAllister said by e-mail before the vote. “I have strongly opposed the adoption of an outsourced government structure.”
McAllister went on, according to the San Diego Union-Tribune:
“The CEO, Brian White, has put SDCERA in the spotlight for all the wrong reasons,” said County Treasurer Dan McAllister, who serves on the pension board as part of his elected duties. “This is not the behavior we should expect from the CEO of one of the largest public pensions in the state.”
Those trustees were echoing the sentiment of city employees, many of whom had shown up to previous board meetings or written the trustees to express their insecurity with the pension fund’s investment strategy. From the San Diego Union-Tribune:
“You have a responsibility to represent hard-working San Diego County employees,” county employee Tracey Carter, a member of Service Employees International Union 221, told the board prior to the vote. “We have done our due diligence. We have separated headlines from facts. It is time to change direction with the management of the fund.”
But the majority of trustees voted not to fire Partridge. From the San Diego Union-Tribune:
“For those who continue the fear-mongering, shame on you,” said [trustee and board vice-chairman David] Myers.
More of Myers’ reaction from Bloomberg:
“Going forward with the contract is in the best interest of this organization and its members — it saves money,” David Myers, the board’s vice chairman, said at a Sept. 18 meeting. “The dysfunctionality of what is going on right now is, in my opinion, a breach of our responsibility to this organization.”
Salient Partners LP, the firm that employs Partridge, released this statement to Bloomberg:
“ [We] delivered $4.4 billion to SDCERA plan members at a lower cost and with less risk than 80 percent of similarly sized pension plans,” said Chris Moon Ashraf, a spokeswoman for the company at Jennifer Connelly Public Relations. “The average SDCERA plan beneficiary realized more than $111,000 in gains under Mr. Partridge’s stewardship for a total fee over five years of $414.”
The fund’s investment strategy was controversial because the CIO was allowed to use up to 500 percent leverage on certain parts of its portfolio, without seeking approval from the board or the fund’s director.
SDCERS returned just over 13 percent in 2014.