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A month ago, the county pension fund’s top official proposed a public position that would’ve paid $886,000 annually, as well as several others that would’ve become the San Diego County government’s highest-paid jobs.
Since then, the agency has been strongly criticized by county Supervisors Pam Slater-Price and Dianne Jacob, also a pension trustee. Jacob has questioned the agency’s trustworthiness and credibility.
Now, the pension board is firing back. Kind of.
In a statement posted on its website, the San Diego County Employees Retirement Association tackles what it calls myths about the organization — and draws some questionable conclusions.
Most notably, the agency says people should stop comparing how much it pays consultant Lee Partridge — his contract is worth a maximum $4.5 million over three years — to the $209,000 annually his predecessor earned. The agency says:
Partridge is paid a fee for the services he provides to SDCERA. He is not an employee of SDCERA; therefore, it is incorrect to compare his fees with the salaries of previous SDCERA employees or employees of other pension systems.
Except, of course, that his predecessor was the chief investment officer. That’s the job Partridge applied for, the role he was hired for and the title he’s called himself. And he’s carrying out many of his predecessor’s duties.
In other words, he’s the chief investment officer — just paid a monthly fee, not a salary. But, the agency says, you shouldn’t compare his higher fee to the lower salary.
The point it may be trying to make (but doesn’t): His predecessor’s total compensation would be higher than $209,000 if benefits were included. But even then, it’d still fall millions short of Partridge’s three-year deal.
SDCERA’s statement also says Partridge saved the pension fund $10 million annually in implementing a new investment strategy.
But a Monday story in Pensions & Investments, a trade publication, notes that Partridge actually cost the fund $54 million in one month by not fully implementing the new strategy. In one instance, he did the opposite of what the strategy calls for: Buying U.S. Treasury futures. He sold them instead.
The agency’s claim doesn’t factor that in.
From the P&I story about the bad bet:
The Treasury futures are a linchpin of the new allocation. About $3 billion was earmarked for Treasury futures. Of that, Mr. Partridge invested only $500 million between July 1 and the Aug. 19 SDCERA board meeting. As a result, the fund returned 3.89% for the month of July, vs. 4.63% for its custom benchmark.
Indeed, Integrity Capital sold U.S. Treasury futures on behalf of SDCERA, rather than buying them.
Three-quarters of a percent may not sound like a lot, but it is when you’re investing $3 billion.
Update: Partridge e-mailed after this was posted to question the P&I story. He said the agency did not sell Treasuries as the trade publication stated.
“We actually increased our exposure to treasuries throughout the transition,” he wrote. “Ironically, you may recall how controversial my allocation to treasuries was to begin with now the criticisms are that we didn’t by enough of them. As I’ve always stated (which Seth Hettena wrote about) treasuries remain an important element of a diversified portfolio.”
Please contact Rob Davis directly at email@example.com or 619.325.0529 and follow him on Twitter: twitter.com/robwdavis