The 18-minute test: State treasurer presses investors to share data, cut costs
In his first weeks in office, North Carolina State Treasurer Dale Folwell is taking advantage of his responsibility running a $90 billion pension fund to rattle the cages of some of the nation’s biggest investors.
Starting with the companies that manage the most money for the state — 175 investment firms have contracts with the North Carolina Retirement Systems, including 41 that manage more than $250 million — Folwell says he’s set up telephone calls on 18-minute intervals to ask basic questions about performance and charges.
In a conference room joined by Chief Investment Officer Kevin SigRist and a couple of colleagues, Folwell says he and his staff write down the responses and then check how they compare with the State Treasurer’s internal reports. In several instances, he says there have been significant differences.
The treasurer isn’t disclosing names of those he’s contacted, but emphasizes he’s talking directly with company owners. And some of the world’s most elite investors manage some of the state’s money. It’s not unusual for hedge-fund and top fund managers to earn more than $10 million annually, while the most successful often top $100 million. Folwell’s salary is $125,000.
The largest public equity managers include Longview Partners; Wellington Management; Baillie Gifford; and Hotchkis & Wiley.
Among the largest real-estate portfolio managers for the fund are BlackRock, BREP Edens Investment Partners; JP Morgan; North Rock Fund and UBS.
The biggest private-equity managers include Avista Capital Partners, GCM Grosvenor; StepStone Pioneer Capital and Warburg Pincus.
In his talks, Folwell says he always mentions his campaign promise to cut $100 million in costs, or about 20% of the annual spending in recent years — and asks each investor how much they will cut immediately.
Some of those contacted by Folwell have agreed to reduce their charges, though he said it’s too early to estimate total savings.
North Carolina’s cost of investment operations is less than the national median average, while returns are better than the median, according to the treasurer’s 2016 annual report.
In the campaign, Folwell promised more transparency in investment-management spending than predecessor Janet Cowell, who retired as treasurer after two terms.
Folwell says he’s asked the funds to not send him written reports because he wants to rely initially on the oral responses. Investment managers for pension funds, and their consultants, are known for flooding clients with data, including comparisons to arcane indexes.
In November, Folwell defeated Democrat Dan Blue III by about 270,000 votes. He also outpolled President Donald Trump by about 11,000 votes and Gov. Roy Cooper by 63,000.
North Carolina’s state pension, mainly split between a fund for teachers and state employees and one for local-government workers, had about 905,000 members as of June 2016. The fund’s annual return has averaged 5.5% over the last 10 years, according to the treasurer’s annual report.
While most state pension funds are managed by boards of various sizes, North Carolina gives sole fiduciary responsibility to the treasurer.