North Carolina Retirement Systems, Raleigh, should end its sole trusteeship and instead create a board of trustees to oversee its investment program, a governance review panel said Thursday.
The Investment Fiduciary Governance Commission, convened by state Treasurer Janet Cowell, the current sole trustee of the $86.1 billion pension fund, recommended by a voice vote creating a board of trustees, on which the treasurer would serve as statutory chair and a voting member. The board should have nine members, with three appointed by the governor and legislators, three appointed by the board and one appointed by the treasurer. The retirement system director would serve as an ex-officio member.
Commission members agreed that North Carolina's investment program should increase external investment oversight, with an independent expert conducting periodic assessments of the investment program, “including the related investment management fees and trading costs to ensure reasonableness with industry norms,” commission members said in their report, which they approved Thursday. Balancing the need to keep some investment information confidential initially, commission members called for disclosure “after some period of time” to serve the public interest.
Ms. Cowell will use the commission's work to make specific recommendations for the Legislature to enact the necessary legal changes. The legislative session starts in May. In a letter to commission members at the start of the review process in January, Ms. Cowell said that managing the pension fund “has changed dramatically in recent years, creating greater volatility, complexity and risk.” While the pension fund is one of the country's best-funded and cost-efficient ones, she said, “It is best to consider reform while in a position of strength.”
The State Employees Association of North Carolina has pressed to end the sole trustee structure and provide more public disclosure of investment practices. “This is a great first step in the right direction,” said SEANC spokeswoman Toni Davis. “As always the devil is in the details, and our members will continue to press for a retirement board that makes its records open and its fees transparent to the employees who fund the system and the public.”