There’s no place for politics
An article in the New York-based International Business Times alleging Gov. Susana Martinez influenced investment decisions at the N.M. Educational Retirement Board is simply false. The governor does not initiate, suggest or influence NMERB investment decisions.
Staff and trustees are solely interested in making investments in the best interest of NMERB and its beneficiaries as required by fiduciary duty. Members can be confident politics does not play a role in management of fund resources for their retirement.
Laws passed following New Mexico’s prior “pay-toplay” issues focus on placement agents, not campaign contributions. Not only is NMERB in compliance with state law on placement agents, but our policy exceeds the standards.
Of the hundreds of investments made by NMERB, the International Business Times found only one that may or may not be in violation of SEC rules regarding a two-year “blackout” period on contributions. NMERB has asked the manager, EnerVest, for a thorough explanation.
This is NMERB’s process: While the governor appoints three trustees, there has never been any influence on investment selection by her appointees or any trustee. The trustees who serve on the Investment Committee have final approval of investments, but they do not influence the manager selection process. In 2015, only one gubernatorial appointee served on the four-member Investment Committee.
The manager selection process is conducted and controlled by the NMERB staff and consultants, until one or more finalists are presented to the Investment Committee for approval.
The trustees do not know which managers are under consideration until the final approval at the Investment Committee. Whether a manager has made or will make a campaign contribution to anyone is irrelevant to NMERB’s selection process. The board and staff gather that information as part of their due diligence process. The information is made public but does not influence the decision.
Although we are not required to do so by state or federal laws or Securities Exchange Commission regulations, ERB has voluntarily adopted a transparency policy requiring managers to disclose and make public contributions.
One of the contractual provisions for NMERB managers is a representation they are in material compliance with SEC regulations. NMERB doesn’t police campaign finance laws as it has neither the enforcement authority nor the resources or expertise.
Our campaign contribution disclosure requirement is based on the New Mexico procurement code requirements for state contracting. Those requirements do not include what the article calls “independent expenditure” groups such as the Republican Governors Association and other third-party political action committees (PACs).
The increased allocation to alternatives is part of our long-term strategy since 2007 to reduce risk and volatility. Our alternative assets have performed very well; many public pension plans follow this strategy.
Three investment groups were singled out by the article: Enervest, BP Capital and Crow. In all cases, these investments have generated positive returns for ERB. Since inception through March 31, the one EnerVest investment has returned just short of 10 percent in income and capital appreciation, net of fees, the BP investment has returned 99 percent. NMERB has invested in three Crow funds. The first has returned almost 10 percent, the second just over 8 percent. The third has not drawn any capital so there is no relevant performance information to report.
Board Chair Mary Lou Cameron said she is very comfortable that all investments are in the best interest of members. “The board’s role is to ensure sustainability of our pension benefits for our members. Our staff’s responsibility is to recommend the best investments to us, while informing us of any political contributions made by investment managers.”
In short, all NMERB actions comply with all relevant legal, ethical and fiduciary standards and have grown the fund to over $12 billion for our members’ retirement.