Pension Funds Under New Management

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Thursday June 06, 2013

The Pension Advisory Committee came before City Council at the Monday night meeting with good news: the investment firm SEI has just been named to manage the city’s pension funds. 

The Pension Advisory Committee (PAC)--which consists of the City Manager, Deputy City Manager, one councilor, a city resident, and a member from each bargaining union ­— came together well over a year ago in search of an investment firm to administer and manage the city’s pension fund.

After careful search, SEI was chosen as the best match for the city.

Spencer Baker, citizen representative for PAC, reflected on the need for new management. The city formerly used Prudential for many years, and although it served its time, there were factors that indicated that a management turnover was needed. Some of these factors included lack of communication with advisors, investors and actuaries; constant under-funding of the pension plan; and lack of relevant investment policy, Baker explained. 

In its search, the city felt it would be beneficial to involve the school district in the process. The School District team consisted of Business Manager John Stewart, School Board Member Julie Beatty, and District Citizen’s Budget Committee member Brenda Balon, with assistance from Christa Chambers, District Business Office Coordinator, who helped with research. Stewart and Beatty were in attendance at Monday night’s meeting.

Baker continued to outline noteworthy facts that gave SEI an edge:

• SEI has $195 billion under management

• Client investment ranges from $20 million to $2.5 billion

• Ability to pool funds with other clients and give the city access to investment opportunities that would otherwise not be available

The city just barely qualified with its initial account of $25 million. Collaboration with the school district solidified the qualification. 
“We just felt this opened up a lot more opportunities for us and more communications,” Baker said.

During the interview process, concern was expressed about continuity, if the person were to leave the company. With SEI, the city wouldn’t have to worry as there are plenty of people who could step up for the city. 

SEI however does not provide actuarial services or third party administration, which is something the PAC or another ad hoc committee can address in the near future, Baker said. 

Baker is the only committee member that has served on the committee from the beginning, he said. The city has a new Interim City Manager (Kevin Dorn), a very recent new Interim Deputy City Manager (Tom Hubbard), and a new Councilor appointed to the group, Pat Nowak. Former Councilor Paul Engels was the previous councilor representation. 

There were a number of good proposals, some from local people, Stewart added. They received proposals around November, and met with several organizations face-to-face shortly thereafter. It came down to three options: SEI, Fiduciary, and Morgan Stanley. 

When the committee pitched questions to SEI, that’s when the right choice became more apparent.“The depth and thought that went into their presentation was great. It was a little superior to the others,” Stewart said. 

A large determining factor for the school was that SEI could perform the same investments, custodial work, paying of benefits, and future planning that’s been provided by their current management, People’s United. SEI’s investment depth and available funds are for large institutions, something the school could otherwise not access on its own.

Pat Nowak also mentioned that cost was a factor, but that the city was willing to spend more if needed to accomodate the employees’ pension. Fortunately, the price was very suitable for the advice they will receive.

Councilor Riehle moved to direct the Interim City Manager to sign documents on behalf of the city, subject to confirming by legal counsel that they are in correct order. The vote was unanimous.

SOURCE: Miranda Jonswold, Correspondent