Saturday, June 18, 2011

Dear Bruce

Open Letter to Maine's State Treasurer:

Treasurer Poliquin--

I am dismayed to read in this morning's Lewiston Sun Journal about the progress of LD 1524, a bill that, if implemented, would pull a veil over some of the state's investments on behalf of MainePERS beneficiaries. If I were a state employee coerced into mandatory pension contributions, I would sure as hell want to know where my money was.

I have already communicated to you that I believe the state should be out of the retirement-planning business altogether. The projected returns of 7+% per annum are totally unrealistic given the current trends of an aging population, growing structural unemployment, and collapsing credit. Liquidate MainePERS. Let beneficiaries get their money back (with a reasonable return and, if necessary, a cash-out bonus) while they can, before the looting runs its course.

And if we're going to continue playing the markets, let's dispense with the "passive" management approach. There will be more losers than winners in the next 5-7 years, so buying the indices practically guarantees poor performance. A good place to start would be culling the zombie banks from the MainePERS portfolio. Every hedge-fund manager on the planet worth his salt is doing exactly that. The financial sector can only shrink from here.


Bill Hine, Peru, ME

[update 07-06-11:]

Treasurer Poliquin referred my letter to MainePERS, from whom I have received the following reply:

Thank you for your email inquiring about the MainePERS investments. Treasurer Poliquin requested that we respond. I apologize for the delay in my response. It was very busy closing up the fiscal year.

Hopefully we can ease your concern about LD 1524. MainePERS is committed to transparency because we are a public fund. Our investments are fully disclosed in a number of venues, our website and investment reports being two. Also, our investment process has multiple layers of checks and balances to ensure ethical investing including regular reviews by both internal and external auditor who have access to all confidential data.

LD 1524 is not intended to limit any information that assures the public about the propriety of our investments. Its’ primary purpose is to limit other investors (e.g. competitors of MainePERS, hedge funds, money managers) from using the public disclosure process to obtain competitive information, sensitive financial information, and trade secrets which may disadvantage MainePERS and the funds with which we are investing.

The exemptions in LD 1524 were drafted to be as limited as possible to provide the public with a clear view of our investments and to allow MainePERS to make the solid investments on behalf of its beneficiaries. These exemptions are similar to exemptions provided to the Finance Authority of Maine (FAME) and Small Enterprise Growth Fund of Maine (SEGF) for their private party transactions. Similar exemptions are also found at numerous other state pension funds and university systems.

Your second concern is one that is most appropriately directed to the Legislature, the sponsor of state pension plans. The Legislature has created a work group to develop a new plan based on Social Security participation for all new hires after 2015.

Managing a $10.5 billion dollar portfolio takes a significant amount of work to develop an asset allocation strategy. We always welcome thoughts and perspectives such as yours when we are going through the allocation process.

I know I can’t directly answer some of your concerns, but I hope this information is helpful.

Sandy Matheson, Executive Director
Maine Public Employees Retirement System

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