Here’s a bit of interesting news. The head of the Teachers Retirement System, Illinois’s largest public employee pension fund, has resigned. Crain’s Chicago Business reports:
An investigation by led by former U.S. Attorney Zachary Fardon has led to the ouster of the head of the state’s largest government pension plan.
The huge Illinois Teachers’ Retirement System confirmed this afternoon that Executive Director Richard Ingram resigned after the board received results of a review into “performance-based issues†from Chicago law firm King & Spalding, where Fardon is now a partner in the firm’s government investigations practice.
TRS spokesman Dave Urbanek said the probe was headed by Fardon and results were presented to the board late last week.
TRS earlier today had announced that Ingram resigned on Aug. 3, three days after the TRS board placed him on administrative leave “due to performance issues covered by his employment contact.â€
Urbanek said he did not know whether the investigation presentation was oral or written, or whether it has been completed. And he said he is not authorized to say whether the review involved any possible financial impropriety or alleged failures of leadership.
Ingram has not been available for comment.
A TRS statement said the vote to place Ingram on leave was unanimous, and TRS Chief Investment Officer Stan Rupnik will take over as interim executive director.
TRS covers pensions for 124,000 working and retired public grade and high school teachers in Illinois, including all districts except Chicago Public Schools.
According to the agency’s last annual financial report, it concluded fiscal 2019 on June 30, 2019, with $53.3 billion in assets but $134.4 billion liabilities, leaving it with a funded ratio of just 40.6 percent.
In a preface to the report, Ingram openly discussed the possibility that TRS could go “insolvent,†a development he blamed on consistent underfunding by state government. The same report, however, disclosed TRS’ return on assets in fiscal 2019 plummeted from $4 billion to $2.6 billion.
Should the fund become insolvent, the teachers should not concern themselves. One way or another the state is on the hook for the pensions. The ones who should be worried are Illinois residents.
Illinois’s public pensions have many, many problems. For years the state deferred its notionally mandated payments into these funds. That creates a hole hard to dig out of. Poor returns on investments are just the icing on the cake.
In the particular case of the TRS its structure, in which the individual districts set pay rates while the state is on the hook for the pensions, creates some very perverse incentives. But, as I say, it’s not the teachers’ worry—it’s the taxpayers’.
For the record, Mr. Ingram’s pay as head of the TRS was $300,000 per year for which he is eligible for a $225,000 per year pension. The taxpayers are on the hook for that, too. Sweet gig.
That $300,000 sounds like a lot, but then hedge fund portfolio managers average over a million dollars a year. That was from a survey where $5billion was the largest fund.
https://www.institutionalinvestor.com/article/b1bm09m9p5mf1g/Hedge-Fund-Paychecks-Revealed
Steve
He doesn’t manage the investment fund. That’s done by Carlyle and they get a sizeable fee for doing it.
He’s being paid handsomely for non-performance and will potentially be paid millions more in the years to come.
Wonder what the details are. Could be anything from padding the expense account, skipping out on work, denying a pension or the grievous error of telling a legislator and/or the press the truth.
Is he a Madigan ally? That might explain much, Pritzker cleaning house of now-expendable former problematical allies.
That doesn’t sound right, Dave. At least that’s not really the way to think about it. Ingram, the CIO and other investment professionals do indeed manage the fund. However, they choose money managers and the portfolio allocations from basically three flavors, public equity, fixed income and alternatives. They will be limited partners in various Carlyle investment funds. That’s how any pension or endowment works.
I don’t know how much they have with Carlyle, but with alternatives generally capped at 5-10% of allocations it should be small. (If it’s not, that alone would be cause for dismissal).
As for returns, I don’t know what current benchmarks are, and beware short term measurements. But with no fixed income yield available due to the fed, and public and private equities depressed due to COVID, I would expect an ugly picture. The real crime with all the pensions are the silly actuarial assumptions of 8-8.5%.
I can’t vouch for this guys long term results, but local performance is really not on him. And note the CIO was not ousted. I expect malfeasance will be the ultimate story here.
PS – the last return figures I saw for Carlyle, very dated at 10 yrs ended 2011, were about 15% net of fees.
The Illinois TRS has a number of different investment portfolios. Carlyle manages 40% of its Real Assets Portfolio, RhumbLine Advisors manages 25% of its Public Equity Portfolio, other portfolios have various other managers.
That sounds more like it. Without bothering to look it up I’ll bet the real assets allocation is a couple percent of total. Real assets are usually lumped in with alternatives: PE of various types, commodities, including forest land, RE.
I must say, Rhumbline at 25% of public’s is a pretty hefty weighting.