The Oct. 25 editorial in The Baltimore Examiner, “City pension fund needs better oversight,” accuses the Baltimore Employees? Retirement System of indifferent, if not complicit, practices regarding staff and trustees? allegedly extravagant travel activities, and provides misleading and false statements on the performance of selected funds.
The editorial relied on two reports issued by the Calvert Institute for Policy Research, a Baltimore-based conservative organization.
The reports were based on information from Maryland Public Information Act requests and were geared to mislead the public through the omission of essential performance data, deviation from industry accepted analysis, and false information.
In response, the Baltimore City Employees? Retirement System contests assertions outlined in the editorial.
The editorial would lead readers to believe that the financial health of the Fire and Police Retirement System is superior to that of the ERS. In fact, the actuarial funding ratio for 2005, a key statistic that measures the ability of a pension system to cover its outstanding pension obligations, shows that they are about the same, with ERS at 95.7 percent and F&P 95.9 percent. On a market value basis, the ERS is better funded. An independent survey of other public funds places ERS? funded ratio well within the top quartile nationally.
Worst of all, the report and the editorial presents misleading information on the hiring of minority managers by ERS, inferring that the inclusion of minority-owned firms have compromised investment performance.
ERS has a policy that all managers are hired based on performance ? regardless of gender, race, or locale. Every manager must meet specified qualitative and quantitative criteria as part of a comprehensive search and selection process.
Further, in its zeal to falsely demonstrate inferior performance by minority investment firms, Calvert referenced five firms; two of which are not minority or women-owned; one, by Calvert?s own admission is performing well; and a fourth has performed well in all but the most recent quarter (an overall down market).
The Calvert Report and the editorial also misrepresent the performance of ERS? fund-of-funds manager, Fiduciary Investment Services. Since 2003, FIS has in fact, increased its allocation of $33.2 million dollars, to $57.5 million dollars. This represents a return of 18.5 percent versus the Russell 3000?s 16.83 percent, a return well over $1 million in investment returns net of fees.
Overall, ERS? one-year performance as of June 30, 2006, was 10.99 above the actuarial assumption and above its benchmark. This places ERS in the 38th percentile of the Callan database. The fund is strong financially, and Callan has been instrumental in assisting the fund to meet its goals.
Finally, the characterization of the Board?s education policy is both inaccurate and shortsighted. As fiduciaries for a $1.3 billion retirement system, it is appropriate and indeed an obligation for ERS trustees to obtain education and to remain current on market and retirement trends.
Independent Counsel from the Groom Law Group ? a highly respected law firm with expertise in the federal Employee Retirement Income Security Act and other fiduciary matters ? produced a comprehensive education policy for ERS that is both legally compliant, and consistent, (in a positive way) with accepted industry trustee education practices.
Ignoring data is bad. Knowingly misrepresenting the data is worse.
The city funds are financially sound, invested prudently, and are capable of paying benefits to every qualified retiree.
Editor?s note: The Examiner stands by its reports on the Baltimore Employees? Retirement System.
Roselyn Spencer is executive director of the Baltimore Employees? Retirement System.
