The MOSERS website reports that its investment policy is to have 25% of the pension portfolio invested in “alternative investments” in the published annual report they are referred to as “limited partnerships”. Even though the balance sheet in the annual report uses the term “fair market value” assigned to these limited partnerships by definition there is no ready market for these investments. As citizens shouldn’t we be asking some tough questions?
With no market for these limited partnerships where do these fair market valuations come from? Does anyone on the payroll at MOSERS have the authority to determine these fair market values? How could the fair market value determination be anything but arbitrary? What would the margin of error be between fair market value and actual value? Should Missouri citizens pay for performance on something that can not be accurately measured? How can MOSERS or any party report investment performance to the first decimal point when there is no way to accurately value 25% of the entire portfolio?
On the MOSERS website the director says “What Gets Measured Gets Managed and What Gets Managed and Rewarded Gets Done”. Shouldn’t we be asking MOSERS exactly how they measure the value of these limited partnerships? One of these partnerships was called Silver Lake Partners – described as a fund of funds. The Post Dispatch reported this past January that buried inside Silver Lake Partners was an investment into Madoff’s hedge fund. MOSERS lost over $3.5 million because no one on their staff or their hired consultants was able to detect this fraud. Also last years the MOSERS staffed approved of investment fees of $2.9 million paid to Silver Lake partners. What other surprises are lurking for the Missouri citizens in these so called alternative investments? Aren’t we lucky to have these talented and dedicated managers working for us?
Now the MOSERS board wants to study its pay practices compared against other public pension plans. Does this make sense? All of the other states’ pension plans incurred big losses also. If these other states are stupid enough to pay bonuses on investments that can not be measured does that mean that Missouri should be just as stupid? Wouldn’t it be wonderful to get a job where you can bet others people money on unpredictable market behavior to earn a bonus on immeasurable outcomes and have no downside? Wouldn’t you be swinging for the fences all of the time? It’s no wonder they are being so protective about this murky pay scheme.
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