(February 12, 2013) – Chief investment officers and their teams need to have many talents, but let’s be honest here: Graphic design is typically not one of them.
One CIO, at least, has owned up to that—much to the delight of his board. Don Pierce, CIO of the San Bernardino County Employees’ Retirement Association (SBCERA), recently began outsourcing its performance reports, and now has some of the snazziest (and most efficient) documents around. Apparently, they are worth the money.
“Like many people in the public plan space, we would prepare the monthly performance reports on an interim basis when the consultant wasn’t doing it,” Pierce told aiCIO in a recent interview. “Suffice to say, the performance reporting we were doing was not meeting our overall objective to communicate clearly.”
Outsourcing was the obvious solution to this issue, Pierce indicated. He approached the firm in charge of administrative services for SBCERA, Maples Fund Services, to find out if their team could help. “The initial conversation stemmed from risk reporting, which they were doing for us, and became, ‘Can we just translate that into an overall board report on performance, risk factors, asset allocation—the whole thing’? At the time,” Pierce said, their service provider “did not have a product that did that, but they were very keen to address a client concern. And to their credit, they’ve delivered.”
Lots of public plans have nowhere to go but up in the quality of their performance reporting. In December, for instance, aiCIO reported from an investment board meeting of the New York City Employees’ Retirement System, and calculated that it would take 9.5 hours to read everything distributed to each attendee. (That is at a minute-and-a-half per page, and is substantially less than what board members, who are privy to the bulkier Executive Agendas, would be responsible for.)
At the same pace, reading SBCERA’s December investment report would take 30 minutes.
To reach this finished product—the first of many—Maples began by consolidating all manner of data from the fund and its consultant into a prototype report. Pierce made what he said is a crucial decision to not assume to know what the SBCERA board wanted. Instead, he asked them. “My colleagues and I worked collaboratively with Maples, then we took a longer initial report to the investment committee,” Pierce recounted. “They put their own stamp on it, expanding some sections and eliminating others. On the document itself, we [the investment staff] had our own views on the subject, and the board had theirs. It was key in the development process to include the investment committee—not from the very beginning—but at a stage where it’s still malleable.”
Just as with outsourcing asset management, the CIO’s job doesn’t completely end with selecting a firm and format for its performance reports. External designers may be wizards with data, but it has to be good data to begin with. Pierce stressed the importance of not only providing solid data, but ensuring it’s being used correctly. “Once that reporting aspect has been outsourced,” he said, “the beauty is that the third party is largely at arm’s length. We just have to make sure the data integrity remains. No matter how effective a firm is with modeling, if the data is not clean, the research—however good it is—is suspect.”
Pierce does not feel the need to micro-manage, however, and check every figure Maples uses. “Our oversight tends to be much more global than that,” he said. “I am extremely confident that the data has integrity.”
All of this does not come cheap, although Pierce declined to reveal the price tag. “Every client I imagine would be a different pricing level,” he said. “But I will say, it is not de minimis. This does involve a cost. On the plus side, from an opportunity cost standpoint, we can our spend time doing other things.”
