Retirement Monitor, Volume III, January 28, 2004

Investing the pension dollars of North Carolina’s public employees is one of the primary duties of the Department of State Treasurer.  State and local government retirement systems earned investment returns of 7.6 percent during fiscal year 2003, ranking second in the nation, despite the market turmoil of the last few years.  But the Division responsible for North Carolina’s success is in crisis, stymied by a lack of resources from the General Assembly.  State Treasurer Richard Moore has asked legislators for the additional funding needed to maintain strong investment growth.    

The Investment Management Division inside the Department of State Treasurer has been reeling since October 2003 when Andy Silton, chief investment advisor and Division leader, resigned citing inadequate resources to manage the State’s $60 billion pension fund. 

“It is the sheer lack of resources that finally drove me to the conclusion that I cannot continue to act as your Chief Investment Advisor,” Silton wrote in his resignation letter to Moore.  “In my 25-year professional career I have never seen an investment organization so inadequately staffed or compensated as the Investment Division.”

Silton, who led the Division to investment returns which outpaced 48 other states, will step down at the end of January 2004.  His assertions are justified according to a study conducted late last year. 

A comparison to other states illustrates that North Carolina is dead last in the resources dedicated to managing the 9th largest public pension fund in the country. Where other states average a staff of 50, North Carolina employs a staff of 14. 

The wages paid to North Carolina’s investment staff, who are highly skilled financial industry professionals, are far below competitive wages and salaries paid in other states.  North Carolina spends a total of $950,000 on salaries for those who work in the investment shop – the comparable figure for other states averages $4.4 million. 

In addition, other states spend an average of $856,000 on consultants to help shoulder some of their investment shops’ workload.  North Carolina spends zero dollars hiring outside help. 

In an attempt to close this gap and to provide the level of resources needed to keep North Carolina’s pension funds as strong as they are today, Moore has asked the General Assembly for permission to spend additional funds beefing up the Investment Management Division. 

“Achieving solid investment returns for North Carolina’s public employees is one of the most important functions of this Department,” said Moore.  “It is our duty to ensure we have the resources to do it right.”