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Retirement fund managers react to criticism

Alaska Retirement Management Board discusses legislative comments at Juneau meeting

Posted: Sunday, February 13, 2011

The Alaska Retirement Management Board manages $18 billion in pension funds and has strong investment returns, but board members think they’re not getting fair recognition for what they do.

They’re bristling at recent criticism from the house speaker, criticism they say unfairly portrays their performance.

“We’re not a sexy fund, like the Permanent Fund is,” said Gail Schubert, who chairs the board.

Among those who board members think isn’t giving the them a fair shake is House Speaker Mike Chenault, R-Nikiski. At a recent press conference he noted the big — and growing — retirement debts and said the board and its sharp investment losses might be to blame.

“Part of the problem we see today, and some of the spikes, is investments made by the ARM Board have lost about $4 billion, if my memory is correct,” he said.

That came just as the Alaska Permanent Fund Corp. was touting its investment gains of more than 14 percent for the first half of the current fiscal year.

Chenault suggested that the ARM Board could be abolished.

“Should we maybe consolidate all of the investment boards across the state into one that’s actually investing money right and showing a return?” he said.

As the ARM Board met in Juneau last week, its members said many of the public and employees they represent saw Chenault’s comments on TV.

Schubert called the comments “damaging and detrimental.”

State financial managers said the comparison was incorrect, and two different items were compared at two different time periods.

Deputy Revenue Commissioner Jerry Burnett said the state’s actuarial valuation, which estimates the state’s retirement debts was incorrectly compared to permanent fund earnings.

The actuarial valuation, which does not exist for the permanent fund, was for 2009, he said. It included both stock market losses of previous years and estimates of rising health care costs for the future.

Chenault and other legislators have been provided with financial data for both the retirement savings accounts and the permanent fund, said Burnett.

“I provided him with 10 years of returns for both,” Burnett said.

Misinformation is difficult to correct, Burnett said

“It gets fixed as soon as it can, but some people never hear it,” he said.

The ARM Board’s returns compare well to other pension funds in how its investments were able to weather the 2008 market collapse, when the U.S. stock market lost 37 percent, said Michael O’Leary, an investment advisor to the fund.

“The permanent fund during that time period lost $10 billion or $12 billion, whatever it was,” Burnett said.

Board Vice-Chair Sam Trivette of Juneau said he got calls from members about Chenault’s statements and tried to figure out what the comments were based on so he could respond.

“I went to the website, looked at the returns, and said ‘What’s going on with this?’” he said.

“It wasn’t until just now that I learned what happened,” he said.

Some board members suggested they should do more to tell the ARM Board’s story, and possibly put out press releases with their results.

Gayle Harbo, board secretary, said it would be good to “see us get some good press for the work we do.”

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com.



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