San Diego County Faces Concerns Over Conflict of Interest

The $6.9 billion association has already approved the idea of outsourcing its investment staff, but will scope out other alternatives and look at the cost difference between the in-house and outsourced models.

(April 2, 2010) – While a new outsourcing plan was designed to help the San Diego County Employees Retirement Association (SDCERA) boost performance and efficiency, the SDCERA board will not outsource the rest of its investment staff to Integrity Capital Services due to concerns over conflicts of interest.

Lee Partridge, founder of Integrity Capital, was appointed by SDCERA as its outsourced CIO last year. The association, which oversees pensions for about 37,000 members, was planning to replace its entire investment management staff to what it calls a dedicated adviser. While the SDCERA Board of Retirement has been considering a plan to outsource its investment team to the private contractor, attorneys have warned the board to watch out for conflicts of interest.

Janet Levine, partner with law firm Crowell & Moring representing SDCERA, said hiring Integrity would be a conflict of interest as the firm, which now performs the CIO role, was involved in recommending the outsourcing of the staff, according to Pensions & Investments. “I think we should look at other alternatives,” said Douglas Rose, board chairman.

Partridge, formerly deputy CIO of the Texas Teachers’ Retirement System, told the county it could save $25 million by outsourcing the whole investment department and offered his own company, KPBS reported.

According to a recent report by FINalternatives, SDCERA will redeem all of its investments in multi-strategy and credit hedge funds, revising its portfolio by allocating 10% to strategies that include relative value, global macro, commodities, market-neutral and volatility.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href=''></a>; 646-308-2742