Treasurer Folwell impressed me by freezing new commitments to alternative investments. He further impressed me by quickly firing a dozen active equity managers. But, I was disappointed that the $7 Billion of equities was liquidated instead of being transferred to index managers. This lowered the equity exposure of the pension portfolio from 44% to 37% at a time that equities rose 10-15%.
However, to be fair, the self-described longterm target allocation to equities is 42% for the NC pension. Thus, liquidating some of the fired manager portfolios made sense as the fund was essentially 2% over-weight equities. And, the current allocation of 38% is well within the self-imposed guidelines of the fund of 37-47% equities.
Treasurer Folwell will likely face criticism from the investment industry for his strategy of moving away from trendy, expensive alternative investments and toward low-cost inhouse indexing. (A strategy I fully support!) Thus, the treasurer can’t really afford the distraction of further criticism for straying from longterm asset allocation targets.
Hopefully Treasurer Folwell will ignore the barking from Monday-morning quarterbacks, continue to resist pressure to make new investments, and resume his intense focus on cutting manager fees by moving toward low-cost, inhouse passive managent of plain vanilla stocks and bonds.
