PHOENIX — The proposal to completely revamp the Arizona Public Safety Personnel Retirement System's investment portfolio follows a turbulent decade of investment highs and lows that left the $7 billion fund only 69% funded.
In 1999, the Phoenix-based system was overfunded and topped a national survey of public pension funds in terms of one-year and five-year annualized returns, according to a news report at the time.
But the fund was heavily invested in tech stocks, and that risk wasn't being monitored by staff or its consultant, Standard & Poor's Investment Advisory Services, New York, said James Hacking, the plan's current executive director. The bursting of the tech-bubble in March 2000 caused losses of about $2 billion, he added.
“Over the long term, we think our relative outperformance was an asset to (the system),” S&P spokesman Ed Sweeney said.
Assets nosedived after a peak of $5.6 billion in 2000, not to return to that level until 2006. By then, the plan's liabilities had almost doubled, rising 90% in six years, he said.
“We were handed a very unhappy situation here,” said Mr. Hacking, who joined the plan in August 2005. “Obviously it behooves us to be open to new ideas.”
In 2007, the board directed staff to bring it proposals for as many investment options as possible, and to “leave no rock unturned,” said Mike Galloway, chairman of the plan's investment committee.
On Jan. 7, Chief Investment Officer Rob Brown joined the retirement system from Genworth Financial Asset Management, Encino, Calif., where he had served as CIO, and quickly produced the index-plus master manager program for the board's consideration.
The proposed program would accomplish two goals, plan officials say — improved returns and lower risk.
“We're not trying to hit a home run, but we're not trying to strike out,” Mr. Galloway said, using a baseball metaphor. “We're trying to hit some doubles and triples and drive some runs in.”
Mr. Galloway is confident some decision on the proposal will be reached during a board meeting April 16-18.
“We've had a ton of meetings leading up to (this),” he said. “We're going into the seventh inning here.”—Drew Carter
