Bringing state pension fund assets in-house, and fees that might be saved through such a move, are issues in the Democratic primary for the state treasurer's job in North Carolina.
Ron Elmer, a former investment manager and finance professor, is challenging Treasurer Janet Cowell, in the May 8 election. The state treasurer is sole trustee of the $71.8 billion North Carolina Retirement Systems, Raleigh.
Mr. Elmer is campaigning on the argument that the state pension fund can save $300 million or more each year in fees paid to more than 240 external investment managers by managing those investments in-house.
“The management should be in the treasurer's office,” Mr. Elmer said in an interview. “The fees are more than we take in in corporate income taxes. We have this bleeding in the pension fund.”
Mr. Elmer is also critical of the pension fund's performance in recent years. “A big part of it (the alleged underperformance) is this explosion in fees and moving into alternatives. I'd fire as many external managers as possible, and move index funds in-house as much as possible,” Mr. Elmer said. He notes that more than half of the campaign contributions for Ms. Cowell are from out of state, and many are from Wall Street firms.
In the year ended Dec. 31, the pension fund returned 2.12%, vs. its benchmark's 3.12%, according to fund data. Longer term, the fund returned an annualized 9.46% for three years, vs. the benchmark 10.05%; 2.67% for five years, vs. 2.78%; and 5.42% for the 10 years ended Dec. 31, vs. 5.36% for the benchmark.
Mr. Elmer ran the equity division for First Citizens Bank in Raleigh from 1999 to 2003 and an equity fund for NCM Capital Management from 2005 to 2010.
If elected, Mr. Elmer has pledged to work for free for a year if he fails to shave management fees by at least $50 million in the first year. “That's how confident I am that we can cut fees,” he said.
Ms. Cowell's campaign office did not return calls, but several political observers said her well-funded campaign enjoys a strong advantage.
“I wouldn't anticipate her having any trouble,” said Jonathan Kappler, research director for the North Carolina FreeEnterprise Foundation, a non-partisan political research and education group.