Cincinnati Councilman Proposes Changes to Pension Investment Strategy

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Cincinnati City Councilman Christopher Smitherman has proposed a series of changes to how the city’s pension money is managed.

The proposals stem from concerns about transparency and high money management costs. Smitherman also wants to change the makeup of the investment board.

The fund returned 16 percent in 2013.

From the Cincinnati Enquirer:

Specifically he is proposing:

* Adding an elected official to the 11-member board that oversees the pension. Up until 2011, an elected official was part of the board, but the previous city council changed the make-up. Of the 11 members: six are chosen by the mayor with approval from City Council; four members are chosen by current employees and one member is chosen by retirees. Smitherman, whose day job is financial planning, is seeking guidance from his broker about whether he can serve on the pension board.

* Changing how the money is invested to take advantage of the market

“I do not share the general consensus that the assets are being managed properly,” Smitherman wrote in a Jan. 13 letter to current employees and retirees. “The mind set ‘everyone else experienced a downturn’ allows a pathology that mediocre investment returns are decisions that are acceptable.”

Smitherman is concerned about the overall market, but said there are natural head winds that a prudent investment adviser should be able to recognize.

“I am unconvinced that the current investment team is being preventative with their asset allocation for a short or long term down turn in the overall market,” he added in the letter. “The bottom line is I am concerned that City Council will turn over $238 million and get the same investment result.”

Smitherman has also proposed keeping more pension assets in cash form, as well as investing in securities directly instead of through hedge funds.

The proposal was shot down on Wednesday, but Smitherman said he will re-introduce the measure with some key changes.


Photo by Andreas Poike via Flickr CC License