Oregon State Treasury Needs More Staff, Audit Says

Auditors recommend structural and staffing changes at Oregon's Treasury investment division.

(January 25, 2013) — An audit of the Oregon State Treasury— which together with the Oregon Investment Council (OIC) oversees roughly $73 billion in public money–recommends additional staff.

In the same vein, it asserted that the Oregon Treasury investment division compares favorably to peers in terms of prudent management and adherence to fiduciary standards.

The audit said the Treasury has roughly a quarter of the staff of similar-sized public pensions. “Overall, we commend the Oregon Investment Council and Oregon State Treasury staff for seeking to be a leader in public pension fund management,” the audit said. The review showed that the treasury fully conforms to standards that protect public funds, including sufficient legal review of contracts and establishment of a custodian bank to hold funds in trust.

The review also discovered that the due diligence process to select external managers conforms to “applicable standards.” It found the investment fees paid are consistent with agreements and applicable laws, and chosen investments are appropriate for Oregon’s portfolio size.

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Auditors made a series of recommendations: additional training for members of the OIC, which oversees state investment policy; more autonomy for the OIC to perform its fiduciary functions; establishment of an internal risk management function at treasury; better data management; better documentation of cash flows; periodic evaluation of the reasonability of fees paid to investment managers and service providers; improved conflict-of-interest policies; and a formal periodic review for work performed by hired managers, custodians and consultants.

“The audit is straightforward, and the recommendations are thoughtful and constructive to guide our effort of continuous improvement,” said Keith Larson, chairman of the OIC.

Deputy Treasurer Darren Bond said the office agrees with the findings and will work with the OIC to implement the recommendations, taking into account staff capacity.

Related article:Read aiCIO’s Power 100 profile of Mike Mueller, deputy CIO of the Oregon State Treasury.

Dr. Doom in Davos: Eurozone Health ‘Less Worse’ Than Last Year

Cautious optimism for Europe and the US economies, criticism of US politics, and sparring over financial regulation are themes emerging at the on-going World Economic Forum.

(January 25, 2013) – Economist Nouriel Roubini added to the tone of cautious optimism emerging the World Economic Forum in Davos, calling circumstances “less worse than last summer in the Eurozone.” 

Dubbed “Dr. Doom” for forecasting the financial crisis pre-2008, Roubini remarked in an interview with Bloomberg that tail risk has declined over the last six months. However, he stayed true to his nickname when discussing Europe’s job situation: “Look at the unemployment numbers in Spain today; [they are] rising even further. They are really shocking numbers. The fundamental problems in the Eurozone-the lack of growth, continued recession, debt sustainability, lack of competitiveness-remain.”

Roubini also spoke on a topic that’s been hot among the global elite gathered in the Swiss mountain town: international policy and regulation coordination. “We live in a balance of power,” he said, where conflicting goals and interests thwart agreements on fundamental economic and geopolitical issues.

“It is a more fragile economy because interdependence implies that problems are global, but policies are national. Coordinating among different countries will be increasingly difficult. It leads to political, economic and financial tensions like currency wars that can lead eventually into protectionism,” Roubini concluded.

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This topic sparked debate yesterday during a high-profile session on “The Global Financial Context.”

Tidjane Thiam, Prudential’s group chief executive and former CFO, argued against global regulation initiatives by recounting the struggles over Solvency II.

Thiam said: “Take the example of insurance: we have Solvency II in Europe. It’s been going on for 11 years. Someone said, ‘Let’s come up with one solvency regime for 27 European countries.’ The only problem is, they forget these 27 different countries have 27 different starting points which they reach through their own history. The way insurance is distributed is completely different…If someone thinks that they can come up with one answer, one goal that is going to work for all of those 27 systems, so far it has failed.”

The World Economic Forum wraps up on Saturday, January 26. 

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