“Hundreds of millions” of dollars in fees paid to alternative money managers by the $86.1 billion North Carolina Retirement Systems, Raleigh, are not being disclosed by state Treasurer Janet Cowell, the sole trustee, according to forensic investigator Benchmark Financial Services.
The company was hired in January by the State Employees Association of North Carolina to conduct a forensic investigation of money manager contracts with the state. The investigation is ongoing.
In a letter sent to state auditor Beth Wood on Monday, Benchmark President Edward Siedle asked the auditor to “immediately investigate” and compel the treasurer to disclose all direct and indirect fees. Such disclosure, Mr. Siedle noted, was required in a 2013 state law that also granted the treasurer the right to increase allocations to alternative asset classes.
“I think this is getting to the point where we have some concrete violations, like we did in Rhode Island,” Mr. Siedle said in an interview. His firm conducted a similar review of fees paid by the Rhode Island retirement system, which indentified higher fees and special treatment given to some alternatives managers. “The treasurer will be compelled to disclose fees that are hundreds of millions greater annually than the ones disclosed at this time,” Mr. Siedle added.
While most of the undisclosed fees Benchmark has identified so far in North Carolina are related to funds of funds, “she's not disclosing any of the underlying fees and expenses” including fees for (placement agents and referrals), asset management and performance,” Mr. Siedle said.
In a statement, SEANC Executive Director Dana Cope called on Ms. Cowell to disclose all fees related to the pension fund's investments, as dictated by the law, which calls for quarterly reports to several legislative committees and offices. “It shouldn't take an investigation to make her do the right thing,” Mr. Cope said.
Calls to the treasurer's office were not returned by press time.