Oregon’s CIO Prepares ‘Snarky Remark’ to Defend Millions in Fees to Fund Managers

Oregon Investment Council (OIC) Chief Investment Officer John Skjervem defended the fund’s practices of paying millions to private equity fund managers to any potential skeptics who may be inclined to criticize the behavior.

“My snarky remark for someone who comes up here and criticizes us for paying a lot of fees to private equity managers or criticizes us for not indexing—we would be billions of dollars worse off as a state and would be billions of dollars worse off as a fund, were we to follow that type of advice,” Skjervem said in a board meeting.

“That we spend millions of dollars on fees, and we spend millions of dollars in carried interest, and we spend millions of dollars in active management fees in the public part of the portfolio. And in exchange, we’ve gotten billions—so that’s a pretty good trade-off. And I can’t emphasize enough the magnitude of that trade-off. Spending millions to get billions seems like a pretty good deal.”

Skjervem was reviewing recent performance figures generated by the OIC’s fund managers, where private equity was the highest by a considerable margin.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

Source: Oregon Investment Council

The $72.5 billion OIC remains active in the private equity space, and just recently approved a $500 million commitment to Blackstone Capital Partners VIII, which was on top of $850 million in existing commitments across Blackstone funds to date, with the partnership dating back to 2011.

The council is overweight to private equity, having a 17.5% target to the class but an actual allocation measured at 22.1%. The portfolio is valuated at $16.04 billion as of the end of last year.

Skjervem joined the OIC in November 2012, after serving over 21 years at Northern Trust as its senior chief investment officer.

Related Stories:

Oregon to Invest Up to $3.5 Billion in Private Equity in 2019

A Bipartisan Plan to Revamp Oregon’s Pension System

Tags: John Skjervem, Oregon Investment Council, Pension, Private Equity

Typically known for touting China, the world’s largest hedge fund is feeling a little bullish on another emerging market as of late.

Strategists working at Bridgewater Associates recently told Reuters the $160 billion Connecticut-based fund sees Brazil’s economic growth potential to be “the strongest in the world” in 2020.

In a letter to clients last week, the firm said Brazil should be well on the path to recovery after a 2015-2016 recession. That’s because of low foreign debt levels, “plenty room for real yields to fall,” and the Brazilian market’s cheapness due to general pessimism about it.

“Given that pricing already discounts extreme weakness and [local political] mismanagement, we think there is considerable room for Brazil’s economy and assets to surprise on the upside,” said the strategists at the titanic hedge fund founded by Ray Dalio.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

Bridgewater did not go into detail on asset performance nor what in Brazil it would allocate to.

After years of corruption and unfulfilled promises by its government, investors are watching Brazil’s new president, Jair Bolsonaro. The right-wing leader is fixated on reviving the debt-stricken country, firstly by fine-tuning its pension system. The firm’s strategists too are banking on Brazil’s social security reform,.

Bolsonaro is scheduled to meet with President Donald Trump, whom he has been compared to, in Washington this week to discuss issues in Venezuela.

Bridgewater could not be reached for comment.

Tags: Brazil, Bridgewater Associates, Hedge Funds, Jair Bolsonaro, Ray Dalio