Sunday, June 16, 2024

State treasurer taking $12.5B of money management in-house

The North Carolina Retirement System plans to manage passive investments in U.S. stocks on its own, without relying on outside financial-services companies.

Dale Folwell
[/media-credit] Dale Folwell

The goal is to have all $12.5 billion in passively managed U.S. equities be handled in house within a year, says State Treasurer Dale Folwell says. The system manages more than $90 billion.

The department kicked off the program in November with a $100 million allotment and expects to phase in the rest over the next year. (Half of the reallocated money had been managed by Durham-based Piedmont Investment Advisors, one of the nation’s largest minority-owned investment companies.) The state is incurring a $150,000 startup cost to make the switch, while no new employees will be added. Cost savings weren’t estimated, though it’s a relatively small amount because the costs of passive management “are generally pretty low,” Folwell says.

Passive investments in index funds have become popular because research shows “active” managers rarely outperform benchmarks. Expenses also tend to be lower in passive accounts. Under the state’s plan, state employees will be managing the index funds rather than paying outside companies a management fee.

The move, which has been studied for three years, is part of Folwell’s push to reduce fees charged by outside companies. Since he was elected treasurer in 2016, Folwell has helped engineer savings totaling more than $100 million over the next four years on fees assessed by investment firms. Last year, the state spent about $600 million on outside money managers and consultants.

Folwell’s tight-fisted approach was called “a folly” in an April story by the Axios website, which suggested his emphasis should be on performance, not fees. The state’s chief investment officer, Kevin SigRist resigned earlier this year. Folwell says he’s satisfied with the work by interim CIOs Chris Morris and Jeff Smith, both veteran department employees.

More than 900,000 state employees and retirees are covered by the state pension plan, which is among the best funded such programs in the U.S., according to a report by S&P Global.

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at

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