New fund advisor to cost state ERS less
Pension Consulting also gives investment advice to CalPERS and CalSTRS
The Hawaii Employees' Retirement System, which administers the state's largest pension fund, has hired one of the nation's top investment consultants for nearly $600,000 less than the total amount paid to the ERS board's previous adviser.
Pension Consulting Alliance Inc., based in Portland, Ore., took over consulting duties for the ERS on Jan. 1 in a three-year contract worth $975,000. The company was chosen via a procurement process conducted by the ERS and replaced longtime adviser Callan Associates Inc., a San Francisco-based company overseeing $898 billion in assets that had been advising the ERS for the last 30 years. The ERS, which has $10.7 billion in assets, paid Callan $1.56 million for a three-year contract that ended Dec. 31.
Pension Consulting is one of the general consultants overseeing the nation's largest public pension fund, the California Public Employees' Retirement System (CalPERS), and is the lone general consultant for the California State Teachers' Retirement System (CalSTRS), the nation's third-largest public pension fund.
Last November, Callan agreed to pay the city of San Diego $4.5 million to settle a lawsuit accusing Callas of steering business to money managers that paid it for consulting. Under the settlement, San Diego said it had no proof that Callan engaged in so-called "pay-to-play" or unfair business practices. By settling, Callan got the city to drop the allegations while avoiding the cost and time of going to trial. Callan had been adviser to San Diego's pension fund for more than two decades.
ERS administrator David Shimabukuro said Callan was one of three finalists, but that Pension Consulting, which oversees $750 billion in assets, was chosen based on receiving the highest score in its five-category rating system.
Shimabukuro said board members were aware of the San Diego case, but didn't know whether it was a significant factor in their decision.
Criteria in the ERS rating system included ability, including resources, knowledge and independence of judgment, to perform the services (worth 30 points); fees (25 points); philosophy, process, soundness of approach and understanding of the ERS needs (20 points); stability and relevant history and experience of the firm and the individual consultants (20 points); and client references (5 points).
In addition to bringing in a new adviser, the ERS also is searching for a new chief investment officer after Kimo Blaisdell stepped down on Jan. 31 to accept a position as senior vice president in the Honolulu office of New York-based Robeco Investment Management.
Blaisdell had been with the ERS since September 2000.
Robeco Investment Management oversees more than $350 million in assets statewide and has nearly 20 clients, primarily consisting of unions.
Robeco is the U.S.-based asset manager for the Robeco Group, a $187 billion global asset management company based in Rotterdam, the Netherlands.
The ERS provides retirement, disability and survivor benefits for more than 100,000 people.