State Pension System Defends Investment Policies

On the Maryland Reporter site today, a rebuttal from the state’s pension system, resisting suggestions to reform the state’s system for investing pension system assets. From the coverage online:

Jeff Hooke of the Maryland Tax Education Foundation testified before the Senate Budget and Taxation Committee after the State Pension and Retirement System had finished its hearing. Officials from the retirement system left the committee room and were not present to hear Hooke’s presentation.

Hooke asserted that the system does not have the investment returns it should, and is missing out on about $30 million in returns each year because of poor investment management. According to Hooke’s figures, Maryland makes about 1% below comparable states in its investment returns.

Retirement System spokesman Mike Golden said that Hooke seriously overstated investment management fees paid by the pension system.

“Fees are aggressively negotiated at the time a manager is hired, and closely monitored on an ongoing basis to ensure market competitiveness,” Golden wrote in an email. “The suggestion is made that the system should fire all of its active investment managers and index the entire portfolio. This would require the elimination of five of the eight asset classes the System currently utilizes in its asset allocation, which cannot be invested on a passive basis.”

The Governor’s widely cited proposal to shift costs of teacher pensions into county governments has met with sharp resistance, including many objections that factors fully outside county control (such as investment oversight and performance) has driven cost increases.

Michael Sanderson

Executive Director Maryland Association of Counties

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