The board of the San Diego County Employees Retirement Association (SDCERA) declined to terminate its contract with outsourced-CIO Salient Partners at a meeting on Thursday.
As predicted by those close to the $10 billion fund, the vote came down to the wire. After nearly five hours of discussion, a motion brought by trustee Dianne Jacobs to fire Salient was blocked by five trustees, including Chairman Skip Murphy, and backed by four.“We don’t think you’re prepared to make major changes, and we urge you not to cancel the Salient contract…” Susan Mallett, Retired Employees of San Diego County
Several stakeholders presented formal recommendations about the action before
the board’s vote. The majority of these representatives urged the fiduciaries
not to reverse their course—a risk-parity oriented portfolio overseen and
invested by Salient.
“We believe your board is at a serious juncture,” said Susan Mallett, president of the county’s retired employee association. “You are suddenly and unexpectedly considering a reversal from an investment strategy you had agreed on after years of considered discussion. As a representative of thousands of members who absolutely depend on their pensions, I have received as many worried letters about leverage as I have about the actions of this board.”
Mallett, who opened the meeting, expressed a position later echoed by the fund’s chief legal counsel, primary consultant, and several other stakeholders. Speaking on behalf of retirees, she said: “We don’t think you’re prepared to make major changes, and we urge you not to cancel the Salient contract… Please return to cohesive, mutually respectful conversation. If you ultimately decide to cancel the contract, please direct your staff to come up with a well thought out plan for transitioning.”
The trustees in support of terminating Salient’s contract pushed back against the notion that firing the provider would be impulsive, and a break with the board’s legacy of measured decision making.
“Any characterization of what’s happening here—which is democracy at work—as knee-jerk reactions is inappropriate,” said Trustee Samantha Begovich, a recent addition to SDCERA’s board and vocal critic of its OCIO arrangement. “To say, ‘Samantha’s position is knee-jerk while mine is reasonable’ is, frankly, inappropriate.”
The board continues to have the capability to terminate Salient’s contact with a majority vote and 30 days’ notice.
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