Tuesday, September 28, 2010

South Carolina first state in US to manage its own pension

For decades, public pension funds have bankrolled the private equity industry, investing billions of dollars with large firms like Apollo Global Management and the Blackstone Group.

Now, frustrated by what it sees as expensive fees and a lack of transparency at private equity firms, one state has decided on a do-it-yourself approach, Peter Lattman of The New York Times reports.

South Carolina's pension fund is creating an independent firm to oversee the fund's private equity holdings — doing what it would have paid a private equity firm to do. The effort is similar to the direct investment funds created by two of Canada's biggest pension plans — Ontario Teachers' Pension Plan and the Canada Pension Plan Investment Board — but is believed to the first of its kind in the United States.

"It's high time that state pension funds are able to develop structures that have greater transparency and lower costs," said Robert L. Borden, the chief investment officer of the South Carolina Retirement System Investment Commission, which oversees the management of the state's $25 billion pension fund. Mr. Borden will run the new firm under a plan approved late last week.