Risk managers from several giant public pension funds may form a trade group to share information on common problems and issues.
The group includes Harris Lirtzman of the $92 billion New York City Retirement Systems; Bruce Hawver of the $100 billion New York State Common Retirement Fund, Albany; Carl Lawrence of the $99 billion Florida State Board of Administration, Tallahassee; Kurt Mattson of the $35 billion Virginia Retirement System, Richmond; and Ted White of the $160 billion California Public Employees' Retirement System.
"We've been doing it on an informal basis for some time," Mr. Lawrence said. "When we get together at meetings, we compare notes. My interest is to see if risk managers at the various funds want to do something more.
"Most of the larger funds feel the commonalities between us; it does cause us to speak to each other a lot more than small funds.
"One of the big issues in risk management is there aren't enough resources to do (everything) we'd like to do."
The Florida system would like to start taking a look at "what we choose to do vs. what the New York Common Fund and the New York City funds decide to do," Mr. Lawrence said.
Risk managers for many public pension funds will be at the October annual meeting of the National Association of State Investment Officials in Boston.
The informal assembly is planning to get together then and discuss forming a more formal group.
"Most of us have been on the job about two or three years and we deal with the same set of issues," Mr. Lirtzman said.
"We find it good to stay in touch and keep each other informed about what we're doing. We've had general discussions about organizing in a more formal way," he said.
"It's a real challenge to find a way to put all the risk management information we're getting together in a comprehensive, flexible and useful way.," he said. "The risk management information system has to provide real-time information about risk and returns for the retirement system for trustees and beneficiaries -- that's the real challenge facing us.
"We have to bring risk and return onto the same page and pull together operations, market and credit risk into an integrated risk and return reporting system," he concluded.
Building a system
Mr. Lawrence, who's been on the job about two years, said that at the Florida fund, "risk management has become more formalized and more centralized. We work with every aspect of the fund."
He's now in the process of obtaining "a total fund risk management system."
Representatives from most of the major firms providing such systems -- including BARRA Inc., Askari, RAROC 2020, Algorithmics, Measurerisk.com and Infinity -- have visted Mr. Lawrence in Florida to discuss their products.
The pension fund "is about eight months away" from picking a new system, he said.
"I need to bounce ideas off people," said Mr. Lawrence, explaining his frequent, casual conversations with people like Messrs. Lirtzman, Hawver and Mattson.
"The general idea of the group is to make sure that those of us looking at the same issues do not have to reinvent the wheel," each time a new problem arises, he said.
"At VRS we're always interested in what our peers are doing," Mr. Mattson said.
One question about a new group is whether it would be a subgroup of another organization or an independent entity, Mr. Mattson pointed out.
A good working definition of risk management is something Mr. Mattson would like to see emerge from any new organization.
"If you ask 10 people what it is, you'll get 11 or 12 answers," he said. "There's no definition that cuts across the industry."
The New York State fund, Mr. Hawver said, "is still trying to decide where we want to go with risk management." Fund officials are "still working on finishing up risk standards and trying to design a risk management program," which is more difficult for him because he has responsibilities at the fund aside from risk management.
Private funds discussed
The possibility of including private pension plan sponsors in the group has been discussed.
"I don't know how private funds would behave in such a setting," Mr. Lawrence said. "They're so competitive."
Some large investment managers -- including J.P. Morgan Investment Management Inc., Goldman Sachs Asset Management and Putnam Investments Inc. -- "have interest in risk management, and we might include them as well," Mr. Lawrence said.