The South Carolina Retirement System Investment Commission, Columbia, is in the process of restructuring its $6.7 billion strategic partnership network, shutting down its $3.9 billion portable alpha strategy, and deciding on a new asset allocation, according to information presented at a Feb. 28 meeting.
During a contentious meeting that ran for more than eight hours, the commission also:
- passed a motion condemning and censuring Curtis Loftis Jr., the state treasurer and a commissioner for making public and private statements other commissioners thought was inaccurate and creating a hostile work environment for commission staff;
- averted defaulting on a private equity fund capital call;
- cleaned that the search for a global custodian will be completed within the next few weeks; and
- appointed a new chief operating officer.
The $26.6 billion South Carolina Retirement Systems was one of the earliest public pension plans to adopt strategic investment partnerships that allowed money managers wider discretion to manage the system's money in a variety of asset classes (Pensions & Investments, May 26, 2008). The commission oversees investment of the state employee defined benefit plan.
The initial 2008 allocation of 19% of plan assets has grown to 25% or $6.7 billion of total assets, managed by 13 different money managers.
Suzanne Bernard, a partner at Chicago-based Hewitt EnnisKnupp and the commission's lead consultant, told commissioners on Feb. 28 that the strategic investment relationships are one area of concern for the system.
According to data Ms. Bernard presented at meeting, hedge funds, opportunistic credit and private equity managers handle the bulk of the strategic partnership portfolio.
The five largest partnerships are Lighthouse Investment Partners LLC, which manages $1.2 billion; Morgan Stanley Investment Management, $909 million; Grosvenor Capital Management LP, $692 million; Mariner Capital Group LLC, $681 million; and Goldman Sachs Asset Management, $678 million.
These partnerships in aggregate had become “too large a piece of the overall portfolio. They got a little oversized,” she said, indicating the commission's investment staff had “narrowed” the partnerships, reducing the amount of money managed overall in these relationships; dividing up some of the partnerships into component asset classes; and terminating some managers.
Neither Ms. Bernard nor Hershel Harper Jr., RSIC's CIO, was available for comment after the meeting about specific changes made to individual investment partnerships.