This kinda got lost in the wake of Speaker Jill Krowinski’s retreat on pension reform, but Treasurer Beth Pearce has taken a curious stand on fund management. She seems dead set against a legislative review of the pension funds’ track record.
Normally she’s a fiscal bloodhound, whenever shy about exploring any and all financial issues to the last decimal point and sounding the alarm when she sees fit. But not this one time.
As a reminder, the state treasurer occupies one of seven seats on the Vermont Pension Investment Committee, which makes the investment decisions.
I’d been wondering how the pensions underperformed badly during a historically long bull market. I mean, couldn’t a roomful of monkeys with Bloomberg terminals make money on Wall Street these days? Now, Seven Days’ Kevin McCallum has put numbers to my feeling.
Over the last decade, the S&P 500, a benchmark for the U.S. stock market, enjoyed an average annual return of 13.6 percent. Over that same period, Vermont’s public pension funds earned an average of just 7.2 percent a year from its investments.
That’s not an entirely fair comparison, as McCallum pointed out, since pension funds can’t take chances with their investments. But then he compared Vermont’s funds to other similarly sized public pension funds, and found that Vermont ranked 69th out of 100. Not exactly sterling.
Members of the House Government Operations Committee, who risked political suicide by exploring Krowinski’s reform plan, aren’t happy with the funds’ performance. Committee vice chair John Gannon, who has financial credentials to rival Pearce’s*, called the funds’ performance “horrendous.” Yikes.
*Eleven years at the Securities and Exchange Commission and several at the Financial Industry Regulatory Authority.Continue reading