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Two hurdles emerged this morning for the county pension fund as it considers forming a nonprofit investment company that would allow it to avoid county salary limits.
The bottom line: Finding ways around those salary limits won’t be simple. And it’s not yet clear exactly what route the San Diego County Employees Retirement Association prefers going forward.
Continuing conflict questions: If the San Diego County Employees Retirement Association created a new nonprofit or separate firm, it’d still be subject to the same state conflict-of-interest laws that apply today. That means it could be tricky or potentially illegal for the new firm to hire Lee Partridge, the association’s investment consultant who’s recommended outsourcing those jobs.
If conflicts exist now and a new organization is formed, “you’d potentially still have a problem,” said Matt Mangan, an outside attorney the association has hired.
Legislation: The San Diego County Employees Retirement Association would need state legislation to create a nonprofit. Board member Marc Doss said “political realities” make it unlikely the association would be able to push that through.
As another option, the association could find a partner and take a minority interest in an investment advisory firm. But that might require legislation, too.
The association now has three options in front of it for managing its investments:
- Doing it in-house.
- Trying to establish a nonprofit or other firm.
- Hiring an outside firm.
A board committee this morning urged an equal comparison of the costs and benefits of each of those.
The association has bids from nine outside firms already, though they’re not yet being released publicly. They were provided to the board today. CEO Brian White said releasing the bids, which were discussed at the meeting, could “distract the process.” He said they’d be released publicly once a decision had been made on them.
— ROB DAVIS