State Treasurer saves millions in investment management

| November 9, 2017 | 0 Comments

Dale Folwell

by Matt Caulder, Capitol Connection, November 8, 2017.

The state is going to handle more of its own investments in 2017, saving more than $60 million this year alone by avoiding paying investment management fees to outside financial advisors.

The intention is for the state to bring management of all $12.5 billion in U.S. passive retirement holdings under in-house management over the next year, North Carolina State Treasurer Dale Folwell said.

Folwell announced Tuesday that $100 million in passive indexing funds are now being managed within the Department of the State Treasurer (DST) to reduce fees, but maintain performance of the retirement system.

“Managing investments internally allows us to reduce complexity and build value for members of our retirement system and keep the money we would have spent on fees in North Carolina,” Folwell said. “It expands the cost-cutting steps we have already taken to ensure the financial stability of the pension plans that protect the futures of 900,000 North Carolinians.”

So far this year the state has saved $60 million in fees, which would represent a savings of about $250 million over the next four years.

The state plans to expand to the entire portfolio of U.S. passive management assets next year, which is estimated to result in the elimination of $2.4 million in fees across the state’s across U.S. and non-U.S. passive equity as Treasurer’s Office brings passive exposure in-house.

The announcement was made during the treasurer’s monthly “Ask Me Anything” conference call.

Folwell also praised Rhonda Smith, the DST Investment Director for Public Equity, Greg Taylor, a DST trader and analyst, and Casey High, DST trader and senior analyst; for their work on the new internal management capability.

“Our investment team was faced with a big goal and a short deadline,” Folwell said. “They met that goal and they are ready to ramp up our internal management capabilities even further.”

Folwell’s office has had much to celebrate over the last few months following Folwell coming into office in January.

Earlier this month the state retirement system was praised in an S&P Global report as being one of the top five highest-funded pension programs in the nation. The state also continues to retain its AAA bond rating from both major bond rating organizations, which speaks well of the state’s financial situation.

The S&P Global report cited proactive management and funding discipline for the success of the state program.

The organization reported that the state had the ability to effectively manage pension liabilities over the long term, and gave the state a AAA rating.

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