SDCERA Backpedals, Seeks Competing Bids for Investment Outsourcing

(March 18, 2010) – The San Diego Country Employees’ Retirement Association (SDCERA) Board of Retirement has overwhelmingly approved a measure to request proposals for the outsourcing of their investment team, backpedaling from a previous proposal to externalize the pension’s management via a no-bid contract.

The turnaround came after various Board members and the Board’s legal council expressed worries over potential conflicts of interest with the no-bid proposal made on March 4. In lieu of accepting that proposal (which would have awarded Integrity Capital and Lee Partridge – currently the fund’s outsourced CIO – the contract with no competing bids), SDCERA approved “in concept” the idea of outsourcing its investment staff if the responses from a request-for-proposal (RFP) were adequate.

The creation of the RFP does not necessarily mean that the Board will outsource its internal investment management team, it was made clear during the March 18 meeting. Board member Dianne Jacob was especially adamant that the opening up of the process to competing bids does not imply that the Board will be required to take action, but that the process is meant to “evaluate through an RFP process whether this is the best way to go.” Board member James Feeley also expressed concern, stating at the public meeting that “six months ago, we hired and started a relationship with Integrity Capital…and I think the market has been good. We haven’t taken [the] time to take full measure of the abilities of [Lee Partridge]…Why the rush?”

The fund will now embark on a multi-month process of creating the proposal, accepting bids, and deciding on the best candidate. SDCERA does not expect “dozens and dozens” of responses, according to the Board’s consultant, Steve Voss of EnnisKnupp, because of demands for customization and the absorption of SDCERA’s staff. The timeline, while scheduled to conclude in early May, also came under fire at the Board meeting, with some members suggesting that it was overly aggressive. However, the timeline – which would create an ad hoc committee that would ultimately make a recommendation to the entire Board – passed unanimously, with one member in absentia.