Exclusive: New Connecticut CIO Leaves after 10 Days

Sean Crawford

There have been more changes at the chief investment officer helm in Connecticut. Sean Crawford is “no longer there,” according to state employees, “he departed last Wednesday” after only 10 days, CIO has learned.

Crawford, who left his post as New York Metropolitan Transit Authority’s first and only CIO on May 4 to take the CIO job for Connecticut’s Retirement Plans and Trust Funds on May 14, left May 23.

A source at the state said the reason of his departure has not yet been filed with human resources, and that “it is between the Treasurer and Mr. Crawford.”

On paper, State Treasurer Denise Nappier is the sole trustee of the pension assets, and she functions as the main manager rather than funneling decisions through a retirement board.

In February 2017, CIO Deborah Spalding resigned, and deputy CIO Laurie Martin stepped into the role after being on the job for four months. Martin is stepping up again as Connecticut’s CIO.

The Office of the Treasurer confirmed the departure of Crawford from his position. Treasurer Nappier commented through an email to CIO, “This is an unfortunate situation. Going forward, I wish Sean the very best in his future plans.”

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Treasurer Nappier continued, “I am pleased to announce that I have appointed Laurie Martin to serve as Chief Investment Officer of the CRPTF with the unanimous consent of Connecticut’s independent Investment Advisory Council. This is an appointment well deserved.”

Martin joined the Treasury in October 2016 as Deputy Chief Investment Officer, and served as interim CIO for 15 months. Prior to her arrival at the Treasury, she managed investment programs for Baystate Health, Inc. for 20 years and held investment accounting positions at ITT Hartford and Mass Mutual Life Insurance Co. She is a Certified Internal Auditor, a Certified Public Accountant, and holds an MBA from the University of Massachusetts.”

The full details of Crawford’s sudden departure are not yet known, but Connecticut’s cash-strapped status has created some challenges.

In 2008, the state issued $2 billion in pension obligation bonds to pay down the Teachers’ Retirement System’s (TRS) unfunded liability. Stipulated in the bond agreement was a requirement that the state begin paying 100% of its required pension contributions, and the governor and treasurer have been at odds with breaking the bond’s covenants. Gov. Dannel Malloy is in favor of re-amortization, which would violate the covenants, a move Nappier has argued would cause reputational damage, which could affect the state’s credit rating.

A year ago, Fitch Ratings downgraded the state from AA- to A+, citing “reduced expectations for economic and revenue performance over the medium term,” following a decline in personal income tax. This year, Fitch maintained its rating and S&P Global Ratings downgraded the state to A from A+. Despite the ratings, the state completed a $276.1 million bond sale in April that attracted almost $100 million in retail orders and an overall true interest cost of 3.65%.

Facing an overall state budget shortfall of $244.6 million, Malloy has also proposed requiring towns to contribute to the TRS.

Prior to the bond covenant, TRS had consistently received much less than its full required contributions. In 2016, Connecticut State Employees’ Retirement Fund (SERF) was 36% funded, and the teachers’ plan was 56% funded, according to publicplansdata.org.

Despite the challenges, the Connecticut Retirement Plans and Trust Funds (CRPTF) posted a net investment record return of 14.2% for the fiscal year and the overall portfolio grew by over $3 billion in value during the year. The two largest plans, SERF and the Teachers’ Retirement Fund (TRF), reported 2017 investment returns, net of expenses, of 16.51% and 16.33%, respectively.

Crawford was not available for comment.

Tags: CIO, Pension, Sean Crawford, The Connecticut Retirement Plans and Trust Funds

A $1.4 trillion-plus group of North American asset owners is supporting the SEC’s proposed transaction fee study for stock exchanges, which is aimed at incentives that the big investors say lead to higher prices for them.

The group, led by the $189.5 billion Ontario Teachers’ Pension Plan and the $351.8 billion California Public Employees’ Retirement System (CalPERS), submitted a letter to the commission, endorsing its proposed rule changes in regulating the national market.

The commission floated the proposed study in March and now is soliciting public comments. Later this year, it will vote on whether to create a study that will last up to two years and test curbing fees and rebates for brokers. The commission wants to examine “transaction fees and rebates and their impact on order routing behavior, execution quality, and market quality in general,” said SEC Chairman Jay Clayton.

Under the current setup, critics say, there’s a conflict of interest for brokers, who will choose an exchange that offers the best incentives, not the fastest or best trade executions. The study intends to create different collections of stocks and impose fee limits to see how they fare under different fee schedules, such as 15 cents per 100 shares or 5 cents.

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In their letter, the CalPERS and Ontario-led group called on the SEC to go beyond its limiting rebate payments to brokers, and simply eliminate them. Otherwise, its letter read, the pilot program “will be of limited use to long-term investors who question the importance of rebates to overall market quality.”

The test, which is under fire by exchanges like the CBOE and Nasdaq, should be allowed to wind on for its full two years, the pension group wrote. Keeping to the SEC timetable would “prevent certain participants from attempting to influence behavior and distort the results,” it contended.

Further, the SEC should ensure that all national market exchanges are in the pilot to avoid skewing the data. In addition, the consortium asked that companies not have the option to opt out of the pilot.

The pension plans “encourage the SEC to take the necessary steps to implement it as soon as possible,” the letter said.

Additional letter signatories include the $224.8 billion California State Teachers’ Retirement System (CalSTRS), the $194 billion New York City Retirement Systems, and the $117 billion State of Wisconsin Investment Board.

Tags: CalPERS, National Market System, Ontario Teachers' Pension Plan, SEC, Stocks