Comptroller Peter Franchot will be in Chicago Monday morning at a press conference with the Rev. Jesse Jackson and Illinois Gov. Rod Blagojevich to discuss ways to increase the number of minority investment managers for public pension funds.
The event is part of the annual conference of Jackson?s RainbowPUSH Coalition.
Minority business advocates consider Illinois a model state for opening up huge public pension and insurance funds to African American and women financial advisers. Franchot, who serves as vice chair of the $37 billion Maryland pension system, strongly backed legislation sponsored by black lawmakers this year and signed by Gov. Martin O?Malley last month that would require Maryland to use more minority investment firms.
The bill creates “a whole new classification for minority business enterprise,” said Wayne Frazier, president of the MD. Washington Minority Contractors Association. “The comptroller is hot and heavy for inclusion, where others want to keep it the way it is.”
State Treasurer Nancy Kopp, chair of the pension board, and pension system director Dean Kenderdine also supported the legislation, but asked that the measure not require the investment firms to be “certified minority business enterprises,” since smaller firms often did not qualify for that status because of insufficient net worth. The bill was amended to remove the certification requirement that applies to most MBEs.
In March 12 testimony on the bill, two executives of Baltimore minority firms told legislators why the bill was needed to break down barriers.
Calvin Baker, managing director of Brown Capital Management, said, “Rarely, in our soon-to-be 25 year history, have we seen consultants include minority owned firms in manager searches with the larger ?brand name? investment management firms without explicit direction from the client.”
Baker, who declined to elaborate on his testimony on Friday, said consultants consider it too risky to recommend minority and emerging firms “despite empirical evidence that demonstrates smaller firms consistently outperform the largest investment management firms.”
Stanley Tucker of Meridian Management Group said clients are hesitant to reject their consultants? recommendations, and plans with billions in assets try to limit the number of asset managers they need to monitor, further restricting the addition of smaller minority firms.
