As the chairman, vice chairman and secretary of the San Diego County Employees Retirement Association's board of retirement, we have firsthand knowledge of the discussions that resulted in the decision to hire portfolio strategist Lee Partridge, and to adopt and implement the portfolio he designed.
The Sept. 6 page 2 article “San Diego CIO off to a rocky start” and the quotes by board member Dan McAllister so substantially misrepresent the facts they demand a response. We therefore write to supply the factual background regarding the implementation of our new asset allocation.
Despite Mr. McAllister's claims that “nobody knows what is happening,” we were at the same board meetings and can attest that the issues were fully discussed and the board was kept fully apprised. In fact, SDCERA board meetings are streamed live and archived on SDCERA's website for anyone interested in further researching the facts.
The facts are that on March 18, 2010, the board voted unanimously (including Mr. McAllister) to adopt the new asset allocation and to begin implementing the portfolio and using relevant benchmarks effective July 1. Additionally, through written memo and public discussion, Mr. Partridge has kept, and continues to keep, the board fully apprised of the portfolio transition.
The board was informed that the Treasury portion (nearly $2.8 billion) would not be fully invested on July 1; it was discussed at several meetings. At the May 20 meeting, noting that Treasury rates had fallen since March, a board member questioned if the implementation date should be moved up. Mr. Partridge explained that, given the change in interest rates, implementation needs to be “intentional ... sizing the transition to reflect the market environment.” At that meeting, another board member stated that the “Treasury portfolio was more a risk management maneuver,” and going forward the focus should be on “valuation and entry point” with “less concern for full implementation by July 1.”
On Aug. 19, during another transition update, Mr. Partridge reminded the board about pacing the implementation: “As we had discussed with the board on several occasions, we were going to be slow and methodical to dial in that exposure. ... We thought that prudence and being methodical about implementing that particular component of the portfolio was probably warranted in this particular instance.”
The new portfolio has already saved $10 million in annual investment fees. During Mr. Partridge's tenure, the fund has grown by $433 million, outperforming the benchmark by nearly $200 million. Mr. Partridge and SDCERA's investment staff have performed admirably in the transition to the new investment strategy — a strategy that will prove to be very beneficial to SDCERA and its members over the long term.
We hope you see that the examples above belie the tone of the article as well Mr. McAllister's comments. We invite your readers to view our meetings online at www.sdcera.org where they can follow the progress of our portfolio implementation, or view the discussions and handouts for themselves.
San Diego County Employees Retirement
Association board of retirement