N.C. Pension System May Move from Sole Trustee Amid Allegations

By Fred Barstein • May 03, 2014 • 0 Comments

Reacting to a forensic investigation initiated by state employees, North Carolina’s $87 billion state pension system may be moving from a sole trustee to a board soon. As reported in P&I, a panel convened by State Treasurer Janet Cowell (D) is recommending the change amid allegations set forth in a forensic investigation commissioned by the State Employees’ Association of North Carolina. The report cites alleged high fees paid to private equity and hedge fund firms, under-performance and lack of transparency that Siedle claims have hidden a majority of the fees paid.

With all the scrutiny and concern about the funding of state and local pension plans, the situation in North Carolina raises issues about whether one person should have the power to hire and fire investment managers. 

Though the state’s consultant stated that the fees were reasonable, Siedle criticizes the state for hiding fees in the fund of funds, which he claims could double the amount paid to more than $1 billion. Five-year performance of private equities was half of its benchmark, while the performance of the state’s investments in hedge funds was 0.9 percent compared with 3.1 percent over five years. Siedle also criticizes the state for lack of audited financials. As a result, placement agents may be required to register as lobbyists — perhaps supporting Siedle’s concern about undue influence.

Fred Barstein is the Portal Conductor of the NAPA Service Providers station. He is also NAPA Net's Editor in Chief.