A dozen state employees spent nearly $200,000 in taxpayer dollars last year flying across the country and beyond to distant cities including Hong Kong, Tokyo, Paris, Frankfurt and Athens to size up investment managers interested in the state’s ailing pension system.
“This is a good example of bureaucracy gone wild,” Sen. George W. Della Jr., D-Baltimore, told Maryland lawmakers. “People beat on my door — from right here in the state — saying ‘please invest your money with us.’ And they spend 137 days of travel to all these cities being wined and dined, burning a hole in our pocket?”
Travel expense reports show the State Retirement Agency’s 11 investors hit the road 61 times in fiscal 2009. Documented reasons for more than half of those trips are limited to “meeting with existing managers” or “meeting with prospective managers.” The rest are attributed to conferences.
Della criticized the agency’s vague documentation.
“The only explanation given is to pursue prospective people to do business with?” he asked. “You read something like this and you are outraged.”
Michael Golden, spokesman for the State Retirement and Pension System, said meeting with the state’s prospective investment managers is essential.
“We’re investing hundreds of millions of dollars with these investment managers and we would be negligent if we didn’t visit them to see that they are doing what they are supposed to be doing,” Golden said.
He said the agency works with nearly 200 investment managers, all of whom they visit at least once every two years. He did not provide information on how many new investment managersthe agency recruits each year. He said every trip must be approved by R. Dean Kenderline, the system’s executive director.
“We meet with investors, look over operations, sort of scrub the whole place to make sure it meets all the requirements,” Golden said. “There have been instances where we have looked at prospective investors and learned they aren’t up to snuff.”
Robert Benjamin, a spokesman for T. Rowe Price, one of the nation’s largest investment firms, said it is common for institutional investors — such as pension funds — to interview potential fund managers. He declined to discuss Maryland’s pension-related travel expenses.
Calls to Virginia’s pension system were not returned.
Taking extra care with Maryland’s $30 billion pension fund may not be such a bad idea, considering its precarious state, said Sen. James DeGrange, D-Anne Arundel County.
The pension system is underfunded by $19 billion, which makes it one of the worst systems in the country, according to a report from the Pew Center on the States.
“I think the trips are necessary,” DeGrange said. “As far as how much they are spending, I would like to see them cut back.”
Rick Biniak, president of RLMS Business Consultants in Baltimore, said the state is ignoring local investment managers.
“It’s pretty obvious this is not necessary — especially in this economic climate — when there are guys right in our back yard wanting to do the job,” Biniak said. “This shouldn’t be the practice.”
Baltimore’s Technomart Investment Advisors has been rated as one of the top 400 investment firms in the country for six years, but President Joseph Parnes said the state retirement agency “has never come knocking on [his] door.”
After all the money spent on recruiting money managers, Maryland’s pension fund is still losing money, Parnes noted. “The action is fruitless in totality.”
