Texas ERS Terminates Decade-Old Relationship with Investment Consultant

The Texas Employees’ Retirement System (ERS) hired a new general investment consultant after having held an almost decade-long relationship with its current advisor, Aon Hewitt.

Aon Hewitt had provided general investment consultancy services to the ERS since 2009.

The system’s investment committee voted to hire NEPC after a competitive tender process launched on July 6.. The RFP provided that the selected consultant will hold several key responsibilities, including asset allocation and asset liability modeling, review and evaluation of the trust’s portfolio, policy review, and manager advisory services.

More than 30 unique firms requested access to partake in the solicitation, and six firms provided official submissions by the solicitation’s deadline, including Aon Hewitt, NEPC, Meketa Investment Group, Pension Consulting Alliance, RVK, and Verus Advisory.

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After grading the respondents based on qualifications, price, methodology, and other means, the retirement system shortlisted the list of respondents to three; Aon Hewitt, NEPC, and Verus Advisory.

“We felt the NEPC’s take on the way they are looking at asset allocation, and the combination of their resources with this firm, the team that they were providing, as well as the opportunity to have new insight,” led to the decision to hire NEPC, Deputy Chief Investment Officer Sharmila Kassan said. “I think any of the finalist were just fine—we were talking very tight evaluations scores.”

NEPC will begin with the ERS on January 1.

The ERS also hired a new infrastructure private equity consultant, CBRE Caledon, replacing Pavilion Alternatives Group in the process.

Pavilion had served as the ERS’ private equity consultant since August 2007, but its contract was amended in August 2013 to implement infrastructure-related services as part of Pavilion’s scope of work.

CBRE Caledon will be responsible for assisting in the analysis and assessment of funds, co-investments and infrastructure investments, monitoring portfolio performance against the designated benchmark, and assisting in periodic review for ERS’ existing policies and benchmarks for the infrastructure program.

Albourne America, Pension Consulting Alliance, StepStone Group Real Assets, Hamilton Lane Advisors, Townsend Holdings, Meketa Investment Group, and Pavilion Alternatives Group bid for the contract.

Tags: Aon Hewitt, NEPC, Pension, Texas Employees Retirement System (ERS)

The $207.4 billion New York State Common Retirement Fund has reached agreements with Microsoft Corp., CVS Health Corp., Macy’s Inc., The TJX Companies Inc., and Salesforce to revisit their CEO and executive pay, and adopt policies that take into account the compensation of the rest of their workforces.

As a result of the agreements, the fund has withdrawn shareholder resolutions with the companies on the matter.

New York State Comptroller Thomas DiNapoli, who oversees the state’s retirement fund, said it was common among US companies’ compensation committees to use peer group benchmarks to set their target CEO compensation. He said that although many companies target CEO compensation at the median of their peer group, certain companies have targeted their CEO’s pay well above the median. He added that these peer groups can also be “cherry-picked” to include larger or more successful companies that have higher compensation rates for their CEOs.

“We’ve seen a growing disparity in corporate income in the United States for years, with CEO pay rising dramatically while wages for most other company employees have remained flat,” DiNapoli said in a release. “We are encouraging companies to adopt policies that take their entire workforce into consideration rather than setting CEO pay solely by benchmarking it against other CEOs.”

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The New York state comptroller’s office cited statistics from the Economic Policy Institute that found that the wage gap between workers has been rising sharply over time. It said that the CEOs of the largest companies in the US earned $271 for every dollar their employees earned in 2016. This gap was more than twice as much as it was in 1995, when the CEO-to-worker pay ratio was 123-to-1. In 1978, it was 30-to-1; and in 1965, it was 20-to-1.

Disclosure of companies’ CEO pay ratio was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act and implemented by the SEC in 2015. Companies may disclose supplemental information about their workforce to provide context and explain their company’s pay ratio data.

In addition to the five companies that have agreed to the requests in 2018, the fund already has similar agreements with bank BB&T Corp.,

Discovery Communications Inc., and Regeneron Pharmaceuticals Inc. The fund said it currently has issued a similar proposal with food processing and commodities trading company Archer-Daniels-Midland Co. and will file with several other companies in the coming year.

“Overall employee compensation and executive pay has been and will continue to be a key factor for how we engage with companies going forward,” DiNapoli said.

Tags: CVS, Executive Pay, Macy's, Microsoft, New York State Common Retirement Fund (NYCRF), Pension