As has been the case with other state pension plans, when the performance numbers are released each year, the fingers go pointing.
And in the case of the Maryland State Retirement Agency, several outside think-tanks have begun to question the value and cost of the retirement advisor input being provided to help guide the $37 billion system – while the agency itself says those advisors have done plenty to make the system a success.
According to the online Maryland Reporter, the Maryland Tax Education Foundation and the Maryland Public Policy Institute both announced this week that management fees associated with the pension fund totaled some $229 million during the fiscal year ending in June 2012.
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The organizations note that those fees exceeded the pension fund's actual earnings by more than $100 million, as 2012 returns were just 0.36 percent.
Jeff Hooke, chair of the MTEF and an investment banker himself, decried the costs as excessive and suggested the pension fund instead invest in passively managed index fund investments to save the state's citizens more money.
"Despite the trustees' best efforts, the fund's sizable commitment to hedge funds and private equity hasn't worked out," he said. "Maryland's pension fund continues to underperform its peers at the expense of taxpayers and the system's 350,000 members."
Robert Burd, the retirement agency's deputy CIO, said that the fund has actually performed much better since last June, with earnings that have reached 12.94 percent – boosting the retirement coffers to $39.3 billion in just a few months.
"Active management has made us money," Burd said. "We have added value over our benchmarks. We cannot passively invest in all asset classes. For someone to say that active management has not worked for us is totally wrong."
Christopher Summers, president of the Maryland Public Policy Institute, also added a doubtful sentiment to the retirement fund's investment objectives.
"The investment earnings lost to overpaid money managers could have helped solidify the pension fund's financial condition," he said. "Instead, the state is subsidizing Park Avenue penthouses and Palm Beach getaways. Maryland's retired state employees and taxpayers deserve a simpler, more effective investment strategy for their retirement savings."
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