Choosing a Pension Fund Monitor
Posted 06-10-1996
Oversight of Westmoreland County's employee pension fund is a tremendous responsibility
for the Retirement Board. According to the Third Class County Code, the Retirement Board
is made up of the three Commissioners, the Controller, and the Treasurer. We recently took
action that I personally believe was long overdue and certainly should help us to make
more informed decisions regarding our responsibility to oversee the fund. At a May 23rd
meeting we voted to hire Yanni-Bilkey of Pittsburgh to act as a pension fund monitor.
You may ask why a monitor is necessary. Our
pension fund is currently worth $142 million and according to the County Code, the
Retirement Board has a personal fiduciary responsibility for the fund. That means if it is
determined that we have mismanaged the fund we are personally, financially responsible. I
can assure you our Board collectively does not have a $142 million available to make up
for mismanagement. Therefore, it is necessary for the Board to bring management of this
growing fund into the twentieth century before the century ends.
Hiring the monitor is a step in the right
direction. Yanni-Bilkey will perform a ten-year historical analysis of our fund's
performance compared to market indices and other managers with a similar investment style.
Our current and sole manager is another Pittsburgh firm, C.S. McKee. The monitor will also
provide ongoing quarterly analyses of our fund's performance. The current arrangement
allows C.S. McKee to simply report on their own performance. While adequate, I believe the
Board should have an objective third party review of fund performance.
I believe we undertook an objective,
above-board, process to request proposals (we received ten), review proposals, conduct
interviews (we interviewed four firms), and then made a selection. The final decision came
down to interpretations of the firms' capabilities during the interview process. The final
choice, Yanni Bilkey, has earned an excellent reputation in their business and they serve
several other local clients including, Westmoreland Hospital, Latrobe Hospital, Saint
Anne's Home, and Kennametal. They also have numerous clients across the country.
The decision to hire the monitor did not
come without some opposition from several county employees. While I recognize that change
can be discomforting, I hope employees and pensioners recognize that this decision was
made to enhance fund performance and allow the Board to make more informed decisions. The
current arrangement with one firm managing such a large sum of money and then reporting on
their own performance is one that does not provide the level of objectivity and
diversification I desire. It is my goal to oversee the management of the Retirement Fund
in the most professional, objective manner possible.
Diversity of our fund will not only
maximize performance but protect us from undue risk and market fluctuations. Pension fund
managers all have a particular strength and area of expertise. No one firm can be the best
at everything whether it be stocks or bonds. Also no one style can be producing the best
results each year in the market. By diversifying management styles and areas of expertise
we can receive better performance. We also will protect ourselves from a manager's style
not performing best in a particular market year. I can assure the taxpayers that I will
work to ensure the Fund is managed professionally and a balance is maintained between
maximizing the rate of return and minimizing the risk. |
